What happened

Shares of Alexion Pharmaceuticals (NASDAQ:ALXN), a biopharmaceutical company focused on rare diseases, rose 26.3% in January, according to data from S&P Global Market Intelligence. Investors were relieved to see trial results that suggest switching patients from Soliris to Ultomiris won't be a problem.

So what 

Alexion's top-selling drug, Soliris, is getting old, but Alexion still relies on the treatment for 87% of total revenue. The complement inhibitor treats rare blood disorders that include paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). Soliris requires a maintenance dose every other week, and it's also one of the world's most expensive treatments, at around $700,000 every year. 

Happy person wearing a vest and a tie.

Image source: Getty Images.

Alexion would like to transition Soliris patients to a new complement inhibitor called Ultomiris, which can cut the maintenance dose down to once every eight weeks. In December, the FDA granted Ultomiris an early first approval to treat PNH, and in January the company reported clinical trial results that suggest a label expansion to include the aHUS population isn't far behind.

Check out the latest Alexion earnings call transcript.

Now what

Some investors weren't pleased with the 53.6% response rate Ultomiris produced for treatment-naive aHUS patients, because Soliris earned approval to treat the same population after producing a 56% response rate among similar patients. While it would be nice to see Ultomiris outperform the drug it's intended to replace, it's important to remember these were different populations.

Alexion launched Ultomiris at a discount to Soliris. A lower price and a much longer interval between intravenous infusions is probably enough incentive for four-fifths of patients to switch within a few years.

Although there are other drugs in development for aHUS, Soliris biosimilars will probably be Alexion's biggest challenge in the years ahead. Luckily, there's probably enough time to shift patients to Ultomiris. In 2024, Soliris could begin losing ground to biosimilar competition in the EU, and patents granted in the U.S. last year will probably protect U.S. exclusivity until 2027.