Soliris the "Go-To" Drug for ALXN

The launch of Alexion Pharmaceuticals' (ALXN - Analyst Report) genetic disorder drug Soliris in Australia and Japan in 2009, coupled with the drug's approval in one or more multiple rare blood disorders, should fuel future top-line growth. Additionally, lower cost of goods sold will provide bottom-line growth. However, with no other candidate in clinical development, we maintain our Hold rating on the stock.

Soliris is the only approved product for the treatment of Paroxysmal Nocturnal Hemoglobinuria (PNH), and we estimate peak sales for the drug in excess of $1 billion. The tremendous revenue potential is sufficient to drive a company of Alexion's size to strong probability. One problem which Alexion is struggling with at the moment is the lack of any pipeline products. The company suffered a major blow when Proctor & Gamble (PG - Analyst Report) terminated the commercialization and development agreement for its phase III candidate, pexelizumab.

We believe that Alexion's future is tied to Soliris. Long-term treatment with Soliris was also found to be associated with significant improvement and stabilization of kidney function. Data presented at the European Hematology Association in June demonstrated that Soliris therapy could result in significant improvement in fatigue in patients suffering from PNH, independent of any improvement in their anemia.

Alexion is investigating the potential of Soliris in a wide range of rare diseases and approval of Soliris for one or more of these indications will further the market potential of this blockbuster product. We arrive at our $80 target price by applying a price-to-sales ratio of 12.2x to our 2011 estimated total revenue of $578.8 million, discounted at 25 percent for three years.

Varun Parwal contributed to this report.

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