Alexion earnings beat estimates

The Cheshire based Alexion Pharma (ALXN - Analyst Report) reported second quarter earnings better than our estimates on strong sales of Soliris. The company reported GAAP net income from operations of $16.8 million ($0.19 per share) for the quarter compared to $2.4 million ($0.03 per share) in the year-ago period. The net income would have been on the higher side, but for the $3.4 million charge associated with the exchange of convertible notes during the quarter. 

Revenue from operations increased 55% year on year and 14% sequentially to $92.3 million. Alexion Pharma derives its revenue from the sale of its only marketed product Soliris. Total operating expenses increased 23% to $61million primarily due to the 30% rise in SG&A expenses. The increase in SG&A expenses reflects the increased costs associated with the expansion of operations related to the launch of Soliris. The 9% increase in R&D expenses is due to the expanded clinical studies on Soliris. Alexion is carrying out many programs in the developmental stage which includes oncology programs as well as label expansion of Soliris. 

Soliris treats a rare genetic disorder, paroxysmal nocturnal hemoglobinuria (PNH). This may lead to anemia, fatigue, pain and breathing problems. The company is quite optimistic about the future potential of the drug based on the recent EXPLORE trial. The trial, conducted with more than 5000 patients showed that PNH cells are present in majority of patients with aplastic anemia, myelodysplastic syndromes and other bone marrow disorders. The company expects more awareness in the medical community towards testing patients with these bone marrow disorders for the presence of PNH cells. 

We expect Soliris sales to pick up further in the upcoming quarters based on its launch in new markets like Australia, Canada, Japan, and Latin America and the potential for use in new indications. Currently, Soliris is available in the US and some countries of the European Union. 

With the expectation that the sales momentum will continue, Alexion Pharma upgraded its 2009 revenue guidance to $368-$378 million from the earlier level of $360-$375 million. The company is looking for a suitable strategy to enter the market in middle-eastern countries by the end of 2009. We believe Soliris has strong growth potential – increased penetration in existing markets and contributions from new territories should help drive product sales.