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Actelion Beats; Maintains View

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Switzerland-based Actelion reported third quarter 2012 earnings of $1.17 per American Depository Receipt (ADR), up 40.9% from the prior-year earnings of 83 cents. Results benefited from currency movements. Earnings were above the Zacks Consensus Estimate of 72 cents.

For the nine months ended September 30, adjusted earnings were $3.46 per ADR compared with a loss of $2.19 in the year-ago period. The prior-year period results included a litigation provision related to the Asahi Kasei lawsuit.

Nine-Month Numbers

We note that all growth rates below are in local currency and represent growth over the prior-year period.

Product sales through the first nine months of 2012 were down 3%. Results were hurt by a weak performance in the US due to excessive competition for Tracleer. On a regional basis, 42% of product revenues came from the US, 37% from Europe, 11% from Japan and the balance from the rest of the world.

We note that Actelion has three marketed products, Tracleer, Ventavis and Veletri, for the treatment of pulmonary arterial hypertension (PAH). Another drug, Zavesca is indicated for the treatment of Gaucher’s disease. Zavesca is also approved in the EU for treating adults suffering from progressive neurological manifestations patients and children suffering from Niemann-Pick type C disease (NP-C). Zavesca (brand name: Brazaves) was launched this year for the NP-C indication in Japan.

Tracleer revenues were down 4% in the nine months mainly due to excessive competition in the US. Ventavis sales were down 3% from the prior year. The decline was attributable to lower units shipped.

Veletri, launched in 2010, did very well during the period with sales soaring 53%. We remind investors that in June this year, the second-generation formulation of Veletri was approved in the US. Actelion expects to launch the new formulation of the product in the EU and Japan next year.

Zavesca sales were up 22%. Strong sales of the drug in the NP-C indication in Europe contributed to the impressive showing.

Adjusted research & development expenses (R&D) declined 1%. Adjusted selling, general and administrative expenses were down 9%.

Pipeline Update

Actelion is expected to present data from a phase III long-term outcome study of macitentan on October 23, 2012. The study is evaluating the candidate in patients suffering from PAH.

The company also progressed well with selexipag, which is in the phase III GRIPHON (Prostacyclin PGI2 Receptor agonist in pulmonary arterial hypertension) study. Actelion is expecting results from the study in mid-2014.


Actelion maintained its 2012 core earnings growth guidance in mid single digits. The company expects product sales to decrease in the low single-digit percentage range.

Actelion also provided its earnings growth guidance for 2013, 2014 and 2015. For 2013, the company expects earnings to remain flat, whereas in the next two years earnings are expected to see a single-digit percentage and double-digit percentage growth, respectively.

Our Recommendation

Actelion, which competes with players such as Gilead Sciences (GILD - Free Report) and United Therapeutics (UTHR - Free Report) in the PAH space, carries a Zacks #2 Rank (But) in the short run.

We remind investors that in September this year, the company implemented a cost saving initiative, which was initially announced by the company in July 2012. In relation to the cost-cutting move, Actelion further reduced redundancies by 30 positions from the initial projection of up to 70 redundancies at its head office, thereby minimizing job losses.

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