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We are maintaining our Neutral recommendation on Alexion Pharmaceuticals, Inc. (ALXN - Analyst Report) with a target price of $100.00. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

Alexion Pharma performed impressively in the third quarter of 2012. Results for the quarter were announced in October 2012. The company earned 53 cents in the quarter (on an adjusted basis), beating the Zacks Consensus Estimate by 12 cents and the year-ago adjusted earnings by 21 cents per share. Earnings in the quarter benefited from increased revenues. Alexion Pharma’s revenues jumped 44.2% to $294.1 million in the third quarter of 2012 driven by strong sales of Soliris, the company’s sole marketed product.

Soliris is available since 2007 for the treatment of paroxysmal nocturnal hemoglobinuria, a rare genetic blood disorder. In September 2011, the US Food and Drug Administration (FDA) cleared Soliris for treating children and adults suffering from aHUS. The absence of competition bodes well for the initial sales ramp of Soliris for the new indication. Soliris was subsequently launched in the US. In November 2011, Soliris was approved for aHUS in the EU. Alexion Pharma expects to launch Soliris for the aHUS indication in major EU nations by mid-2013. The company intends to seek Japanese approval for Soliris in the aHUS indication by early 2013.

Alexion Pharma is also studying Soliris for additional indications, such as acute humoral rejection, myasthenia gravis and STEC-HUS. We are also encouraged by the company’s strategy of pursuing acquisitions/signing deals to expand its pipeline beyond Soliris.

However, the excessive dependence of Alexion on Soliris for growth concerns us. Moreover, the candidates in Alexion Pharma’s pipeline are far away from hitting the market. The pipeline at Alexion includes candidates, such as Asfotase alfa (phase II for treating hypophosphatasia) and Samalizumab (in phase I for chronic lymphocytic leukemia). Samalizumab will compete with big players, such GlaxoSmithKline (GSK - Analyst Report) and Roche (RHHBY - Analyst Report), if it manages to clear the regulatory hurdles and ultimately hit the CLL market.

In view of these challenges, we see limited upside potential from current levels.

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