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Actelion Ltd. (ALIOF) reported first quarter 2014 earnings of $1.64 per American Depository Receipt (ADR), up 23.6% from the prior-year earnings of $1.32 per ADR. Earnings were well above the Zacks Consensus Estimate of $1.12.

First quarter revenues rose 12.8% year over year to $525.3 million, beating the Zacks Consensus Estimate of $504 million.

Quarter in Details

We note that all growth rates below are in constant exchange rates.

Tracleer revenues were up 7% in the first quarter from the prior year mainly due to U.S. rebate reversal and U.S. price increases. Tracleer sales were strong in markets where Opsumit is yet to be launched. Tracleer sales also benefited from growth in Japan and the digital ulcer indication in Europe.

Ventavis sales were up 5% from the prior year due to U.S. rebate reversal and U.S. price increases.

Veletri, launched in 2010, did very well with sales soaring 134% above the prior year. Growth was largely driven by demand in Japan.

Zavesca sales were up 16% from the prior year. Strong sales of the drug for the Niemann-Pick type C indication in ex-U.S. markets and increasing prices contributed to its outperformance.

Opsumit (pulmonary arterial hypertension (PAH)) is currently marketed in the U.S. (approved on Oct 18, 2013), Canada, Australia, Germany, Swizerland, Denmark and Norway. Opsumit got EU approval in Dec 2013. Opsumit generated sales of CHF 15 million (approximately $16.8 million) in the reported quarter.

Valchlor was launched in Nov 2013 to CTLC Centers of Excellence. Valchlor sales in the first quarter of 2014 were CHF 1 million (approximately $1.1 million). By spring 2014, Valchlor will be widely available to U.S. prescribers.

Research & development expenses (R&D) (excluding stock based compensation expenses, amortization and depreciation) increased 4% due to higher clinical development expenses. Selling, general and administrative expenses (excluding stock based compensation expenses, amortization, depreciation and the impact of doubtful debt provisions) were up 14%.

Pipeline Update

The final data from a phase III study on a PAH candidate, selexipag, is expected in mid 2014. Actelion’s novel antibiotic, cadazolid, to treat Clostridium difficile associated diarrhea is also in phase III. Results will be out by early 2016. The FDA granted Qualified Infectious Disease Product (QIDP) and Fast Track designation to cadazolid in Feb 2014.

Actelion failed to meet its primary endpoint in a phase IV study (COMPASS-2) on Tracleer in Mar 2014. The COMPASS-2 study evaluated the effect of Tracleer on the time to first morbidity or mortality event in patients with symptomatic PAH already treated with Revatio.

Outlook Maintained

For 2014, the company expects core earnings growth in the low single-digit percentage range, above a tough 2013 comparison. Actelion maintains its 2015 outlook of single-digit growth over a higher base.

Actelion carries a Zacks Rank #2 (Buy). The earnings and sales were both above expectations in the first quarter, mainly to price increases in the U.S. markets. We also note that the product sales in the reported quarter included U.S. rebate reversals worth CHF 18 million. Opsumit’s approval in many countries was encouraging. More than 2,300 patients were on Opsumit at the end of Mar 2014.

Other well-placed stocks that look attractive at current levels include Salix Pharmaceuticals Ltd. (SLXP - Analyst Report), Impax Laboratories Inc. (IPXL - Snapshot Report) and Enanta Pharmaceuticals, Inc. (ENTA - Snapshot Report). Salix Pharma and Enanta carry a Zacks Rank #1 (Strong Buy) while Impax Labs holds a Zacks Rank #2.

Read the Full Research Report on ALIOF
Read the Full Research Report on IPXL
Read the Full Research Report on SLXP
Read the Full Research Report on ENTA


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