Strong Quarter at Alexion

Alexion Pharmaceuticals Inc.’s (ALXN - Analyst Report) third quarter 2012 earnings (excluding special items but including stock-based compensation expense) of 53 cents per share beat the Zacks Consensus Estimate by 12 cents. Third quarter 2012 earnings increased 65.6% from the year-ago period. Higher product sales boosted third quarter earnings.

Alexion’s revenues jumped 44.2% to $294.1 million in the reported quarter driven by strong sales of Soliris. Revenues comfortably surpassed the Zacks Consensus Estimate of $293 million.

Quarterly Results

Soliris, Alexion’s only marketed product, is available for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a rare genetic blood disorder and atypical hemolytic uremic syndrome (aHUS), an ultra-rare genetic disorder. Soliris continued to perform well with new patient additions in the PNH indication. The successful label expansion into the aHUS indication boosted revenues further.

Adjusted operating expenses climbed 26.5% to $130.9 million in the reported quarter. The increase was attributable to a hike in both research and development (R&D) expenses (up 48.4%) and selling, general and administrative (SG&A) expenses (up 15.5%).

Alexion currently has several candidates in clinical development focusing on different areas including hematology, nephrology and neurology. The company is also working on expanding Soliris’ label for additional indications like Shiga-toxin producing e. coli hemolytic uremic syndrome (STEC-HUS), acute humoral kidney rejection (AHR), neuromyelitis optica (NMO) and myasthenia gravis (MG). Alexion’s pipeline also includes asfotase alfa (hypophosphatasia), ALXN1102 (inflammatory disorders), ALXN1007 (inflammatory disorders).

2012 Guidance

Apart from announcing financial results for the third quarter, Alexion raised its adjusted outlook for 2012. The company expects 2012 adjusted earnings in the range of $1.78–$1.88 per share (previous guidance: $1.99–$2.04). The revised guidance range is well above the current Zacks Consensus Estimate of $1.66 per share.

Encouraged by the strong sales of Soliris, Alexion now expects 2012 revenues in the range of $1.120–$1.130 billion, as opposed to the previously forecasted range of $1.110–$1.125 billion. The Zacks Consensus Estimate of $1.127 billion is well within the company’s new guidance range.

Alexion decreased its adjusted SG&A guidance to $345–$355 million from the old guidance of $360–$370 million. The company also decreased its R&D guidance range for the year to $210–$220 million from the previous range of $220–$230 million.

Our Recommendation

Currently, we have a Neutral recommendation on Alexion, which carries a Zacks #3 Rank (short-term hold rating). We are impressed by the continued strong sales of Alexion’s sole marketed product, Soliris. However, we remain concerned about Alexion’s overdependence on a single product and the lack of near-term catalysts.