Alexion Pharmaceuticals riding high despite doubts

Can the company continue to grow off of the success of Soliris?

By Benzinga Mar 26, 2012 5:22PM

Image: Prescription medicine expenses © Don Farrall/Photodisc/Getty ImagesBy Lear Yann, Benzinga Staff Writer


Alexion Pharmaceuticals (ALXN) specializes in extremely rare diseases. Its only marketed drug, Soliris, currently targets paroxysmal Nocturnal Hemoglobinuria, a condition affecting less than 10,000 people worldwide.


At an estimated annual cost of $400,000 per patient, Soliris has seen sharply rising sales. But with most of the target market already identified -- and that sales growth slowing -- analysts are wondering whether the company has enough of an upside to justify its lofty share price.


With sales and profits posting 45% and 50% respective annual growth rates, the company appears to justify compound annual growth of more than 70% in its shares. For 2012 alone, shares have registered a 31% increase, hitting an all-time high last Friday at $94.90. Shares closed Monday at $94.31.


The company has said 2012 revenue should reach between $1.04 to $1.07 billion, up from $783 million in 2011. Per-share profit is expected to come in between $1.60 to $1.70 on a non-GAAP basis, compared to $1.38 last year.


That puts the company's valuation between 55 and 59 times 2012 earnings, as Neil Martin noted in a bearish piece for Barron's on the company. Martin noted that institutional investors, which hold roughly 95% of the stock, have already started to cool towards the company. The article cites StreetSight data indicating reduced exposure to shares for many big names, such as Fidelity.


Such scrutiny has the company indicating no shortage of places where it intends to go dig for a corresponding upside. These include additional uses for Soliris, its development pipeline and outside acquisitions.


Additional uses for Soliris are not a new area for the company. Last September, the FDA gave approval of the drug's secondary use to treat atypical hemolytic uremic syndrome, an even rarer condition than its first indicator. But a recent opportunity for the drug to be used for the treatment of two other conditions, neuromyelitis optica and myasthenia gravis, promises to be more lucrative, with a larger targeted patient space.


Alexion may have added $600 million to its annual sales book with its recently announced acquisition of privately-held Enobia Pharma, which is currently at work on a treatment for hypophosphatasia, a rare and life-threatening genetic bone disorder. The price for this potential sales addition is quite large -- $610 million in upfront cash and another $470 million due upon achievement of certain developmental milestones.


The company's own pipeline consists of four compounds beyond Soliris: Asfotase Alfa, cPMP Replacement Therapy, TT30 and ALXN1007, each of which targets ultra-rare diseases. Barron's Neil Martin notes that these are in very-early stages of developments, some already having established competitors.


Despite this, the track record of Soliris to-date, coupled with the expanded market space associated with its two new indications have analysts reinforcing their bullish stance on shares. JPMorgan (JPM), which valued the drug's neuromyelitis optica opportunity at $1 billion, lifted its price target on shares by $10 a share to $105, while reaffirming its overweight rating.


Goldman Sachs (GS) is similarly upbeat on the expansion of Soliris opportunities, reiterating their own $105 price target and Buy rating on shares on March 21st, following three compelling Soliris case studies appearing on The New England Journal of Medicine.


More From Benzinga:
9Comments
Mar 27, 2012 3:29PM
Mar 27, 2012 3:24PM
avatar
$400,000 is insane. You can buy a house every year.
Mar 27, 2012 3:19PM
avatar
What this article really sheds light on is how the Med companies are more focused on revenue, wall st, and earning reports than they are on helping people stay healthy. Because they are concerned about reaching certain market numbers, they are going to dive deep into trying to dig for more revenue, when in reality they should be focused on improving medicine and research.
Mar 27, 2012 2:52PM
avatar
They will still likely hold the patent as long as they can to keep sales high.
Mar 27, 2012 2:49PM
Mar 27, 2012 2:45PM
avatar
Any time I read Goldman I get sick to my stomach
Mar 27, 2012 2:38PM
Mar 27, 2012 2:33PM
avatar
I think the company can do well, it's got a good drug, and a basket in the pipeline
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.