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Analyst Blog

On Mar 14, 2013, we upgraded Alexion Pharmaceuticals Inc. (ALXN - Analyst Report) to Outperform from Neutral based on the company’s strong fourth quarter 2012 results. Moreover, Alexion Pharma has a long-term earnings growth rate of 28.5%. The stock carries a Zacks Rank #3 (Hold) in the short run.

Why the Upgrade?

On Feb 14, Alexion Pharma announced impressive fourth-quarter results. The company’s adjusted earnings of 54 cents per share beat the Zacks Consensus Estimate by 7 cents on the back of strong sales of Soliris – Alexion’s only marketed product. It is marketed for the paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome indications.

Management expects Soliris to continue performing well. Consequently, net product sales for 2013 are expected in the range of $1.490–$1.505 billion significantly above the $1.13 billion recorded in 2012. We too expect Soliris to continue performing well in 2013. Consequently, we have increased our revenue estimate for 2013.

Other Positives

Alexion is studying Soliris for additional indications as well, such as acute humoral rejection, myasthenia gravis and STEC-HUS. Alexion intends to seek marketing approval for Soliris in the STEC-HUS indication in the US and the EU in the second half of 2013. Currently, there are no approved treatments for any of these disorders and the successful development of Soliris for one or more of these indications will further help expand the market potential of the drug. Alexion’s pipeline also includes asfotase alfa (hypophosphatasia), ALXN1102/ALXN1103 (hematology), ALXN1007 (inflammatory disorders).

We are also encouraged by the company’s strategy of pursuing acquisitions/signing deals to expand its pipeline beyond Soliris. The acquisitions of Taligen Therapeutics, Enobia Pharma and the purchase of the patents and assets from Orphatec Pharmaceuticals are aimed towards fulfilling this objective.

Other Stocks That Warrant a Look

Favorably placed stocks in the pharma sector include Osiris Therapeutics, Inc. (OSIR - Analyst Report), Transcept Pharmaceuticals, Inc. and Athersys, Inc. (ATHX - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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