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Why is Alexion (ALXN) Down 3.5% Since its Last Earnings Report?

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A month has gone by since the last earnings report for Alexion Pharmaceuticals, Inc. (ALXN - Free Report) . Shares have lost about 3.5% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ALXN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Alexion's Earnings Beat Estimates in Q1, Guidance Up

Alexion posted first-quarter 2018 adjusted earnings of $1.68 per share which were higher than the year-ago earnings of $1.38 by 22%. Earnings also beat the Zacks Consensus Estimate of $1.48. Strong product revenues drove the bottom line in the quarter.

Revenues rose 7% year over year to $930.9 million and exceeded the Zacks Consensus Estimate of $918 million. Revenues were driven by increased sales of Soliris, Strensiq and Kanuma.  

Revenues in Detail

Soliris (paroxysmal nocturnal hemoglobinuria (“PNH”) and atypical hemolytic uremic syndrome (aHUS)) sales were up 2.1% to $800.1 million in the quarter driven by strong volume growth. While Strensiq (hypophosphatasia [“HPP”]) contributed $110.7 million to revenues, up 50.4% year over year, Kanuma (lysosomal acid lipase deficiency [LAL-D]) contributed $19.6 million (up 63.3%) to quarterly revenues.

Cost Summary

Adjusted research and development (R&D) expenses were $161.6 million, down 16.9% year over year.

Adjusted selling, general and administrative (SG&A) expenses were $220.4 million, down 2.5% year over year.

2018 Guidance

The company raised its earnings per share and revenue guidance for 2018. It expects earnings per share to be in the range of $6.75-$6.90 up from the previous range of $6.60-$6.80. It projects revenues in the range of $3.93-$3.99 billion up from its previous expectation of $3.85-$3.95 billion. Revenues for Soliris are expected in the range of $3.38-$3.42 billion compared with $3.33-$3.40 billion expected earlier. The Zacks Consensus Estimate for earnings for 2018 was $6.90 per share while for sales it was $3.99 billion and both of them reflect the higher end of the guidance range.

The outlook assumes unfavorable Soliris revenue impact of $90 million to $110 million from ALXN1210 and other clinical trial recruitment versus prior year.

Alexion expects to incur additional restructuring and related expenses of approximately $15 million to $80 million related to the 2017 restructuring activities.

Pipeline Update

The company announced positive top-line results from the phase III study of its long-acting C5 complement inhibitor — ALXN1210 which showed that patients with PNH can be effectively and safely switched from treatment with Soliris every two weeks to treatment with ALXN1210 every eight weeks. The study showed non-inferiority of ALXN1210 to Soliris in patients with PNH who had been stable on Soliris based on the primary endpoint of change in lactate dehydrogenase (LDH) levels, a direct marker of complement-mediated hemolysis in PNH. The study also demonstrated non-inferiority on all four key secondary endpoints.

In addition, ALXN1210 achieved non-inferiority on the primary and all four key secondary endpoints in the phase III PNH Switch study of ALXN1210 administered intravenously every eight weeks compared to patients currently treated with Soliris.

Alexion plans to file for regulatory approval for ALXN1210 in patients with PNH in the United States and EU in mid-2018, followed by Japan later in 2018.

Enrollment of ALXN1210 in phase III study for aHUS is expected to be completed in the second quarter of 2018 and Alexion expects to report data from this study in the fourth quarter of 2018.

Acquisition

In April 2018, Alexion announced that it will acquire Sweden-based Wilson Therapeutics. Alexion has offered SEK 232 in cash for each outstanding share of Wilson Therapeutics which translates into a total transaction value of $855 million. The transaction is expected to close in the second quarter of 2018.

The acquisition will add a late-stage candidate, WTX101 to Alexion’s pipeline. The candidate is currently in phase III for the treatment of Wilson disease, a rare genetic disorder.

Alexion is looking to diversify its portfolio and reduce its dependence on Soliris. The deal will strengthen Alexion’s rare disease pipeline with a late-stage candidate.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to three lower.

VGM Scores

At this time, ALXN has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ALXN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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