Alexion Pharmaceuticals
/ (ALXN-NASDAQ) / $46.05Note:More details to come; changes are highlighted. Except where noted, and highlighted, no other section of this report has been updated.
Reason for Report: Flash Update: 1Q18EarningsUpdate
Prev. Ed.: Apr 20, 2018:4Q17 and FY17 Earnings Update
Note: The tables below (Revenue, Margins, and Earnings per Share) contain material from fewer brokers than in the Valuation table. The extra figures in the Valuation table come from reports that did not have accompanying spreadsheet models.
Flash Update
Alexion's Earnings Beat Estimates in Q1, Guidance Up-Apr 26, 2018
Alexion posted 1Q18 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% y/y 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% y/y, 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% y/y.
Adjusted selling, general and administrative (SG&A) expenses were $220.4 million, down 2.5% y/y.
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.
MORE DETAILS WILL COME IN THE IMMINENT EDITIONS OF ZACKS RD REPORTS ON ALXN.
Portfolio Manager Executive Summary
Alexion Pharmaceuticals(ALXN) is a biopharmaceutical company focused on the development of candidatesin the fields of hematology, nephrology, neurology, metabolic disorders and autoimmune disorders. Alexion's portfolio includes Soliris (eculizumab) for the treatment of paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS); Strensiq for the treatment of perinatal-, infantile- and juvenile-onset hypophosphatasia (HPP); and Kanuma for lysosomal acid lipase deficiency (LAL-D). The Jun 2015 acquisition of Synageva BioPharma added Kanuma to Alexion’s portfolio.
Of the 17firms covering the stock, 94.1% (16 firms) assigned positive ratings and5.9% (onefirm) provided neutral ratings. Notably, none of the firms rendered a negative rating on the stock.
Positive Outlook (16/17 firms):Alexion reported above consesnus 4Q17 results but the the firms view the 2018 guidance provided by the company as conservative. The firms remain positive about the successful approval of Soliris for generalized myasthenia gravis (gMG) and they believe that this indication could provide significant growth to Alexion’s topline in the next few years. TALXN announced that it will be initiating a single, PK-based phase III study of ALXN1210, once a week subcutaneous formulation to support registration in PNH and aHUS. The firms believe that the subcutaneous formulation could offer a significant convenience advantage and hence remain positive about it. With multiple value creating catalysts expected in 2018, they expect the stock to perform well.The firms remain positive on the company’s announcedan $855 million cash deal to acquire weden-based Wilson Therapeutics for the phase III drug WTX101 for Wilson’s disease, a rare liver disease affecting about 10,000 patients in the United States and Europe. The Wilson transaction is well aligned with Alexion’s strategy of doing smaller-sized deals to expand the company’s pipeline after ALXN1210. The firms view the deal as positive and believe that the addition of WTX101 to a development pipeline will be a positive for the company.
Neutral Outlook (1/17firms): The firms remain concerned as the approval of Soliris for gMG will require relatively rapid trial of Soliris in the 3-8,000 eligible patients in the United States, although this may take several months to develop given the bottlenecks of reimbursement, immunization and scheduling. The firms are concerned about the company’s overdependence on Soliris for growth.Moreover, pipeline setbacks remain a concern for them.
Apr 20, 2018
Overview
Alexion Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the discovery, development and commercialization of therapeutic products aimed at treating patients suffering from severe and ultra rare disorders. The company’s products include Soliris for the treatment of PNH and aHUS, Strensiq for treatment of HPP, and Kanumafor the treatment of LAL-D. The company is evaluating Soliris in other indications as well. The company’s pipeline also includes candidates such as ALXN1101, ALXN1210,SBC-103 and ALXN 1007.
In Jun 2015, Alexion completed the acquisition of Synageva BioPharma, thereby strengthening its global leadership in the market for ultra-rare diseases.The transactionadded Kanuma to the company’s portfolio.
On Sep 12, 2017, Alexion announced that it will undertake a restructuring plan to re-align the organization with refocused corporate strategy.
The company’s website address is
The firms have identified the following issues for evaluating the investment merits of Alexion
Key Positive Arguments / Key Negative ArgumentsThe company’s strategy of pursuing acquisitions/signing deals to expand its pipeline beyond Soliris encourages the firms. Alexion’s acquisition of Synageva has added Kanuma to its portfolio. This acquisition is believed to strengthen the company’s global leadership. / The company’s growth is heavily dependent on its main revenue driving product, Soliris.The company has faced significant setbacks in its attempts to expand Soliris’ label.
Approval of Soliris for the aHUS indication has strengthened Alexion’s top line. / Lack of near-term catalysts is a cause of concern.
The launch of newly approved drugs, Strensiqand Kanuma is likely to diversify product revenues.
Note: The company’s financial year coincides with the calendar year.
Apr 20, 2018
Long-Term Growth
Alexion’s revenue is tied to Soliris. The drug was initially approved and commercialized in 2007 for treating PNH, after which its label was expanded to include the aHUS indication. Accelerated approval of Soliris for aHUS has strengthened the company’s top line.
The expansion of Soliris into additional markets encouraged most firms. However, some firms are worried about Alexion’s dependence on Soliris as reliance on a single product for growth has its inherent risks. They believe that Alexion needs to drive the performance of the other products in its portfolio to reduce Soliris’ share of contribution to revenues.
Meanwhile, Soliris is currently being evaluated for other indications as well. With the Enobia acquisition in February 2012, Alexion added Strensiq to its portfolio. Strensiq represents a new growth catalyst in 2017 and beyond.
In Jun, 2015, Alexion acquired Synageva BioPharma. With this acquisition, Alexion added Kanumainto its portfolio, which is approved for the treatment ofLAL-D. The acquisitionalso added several pipeline candidates including SBC-103 (in phase I/II developmentfor the treatment of mucopolysaccharidosis IIIB/MPS IIIB).
Going forward, Alexionplans to focus on rare diseases businesses in core areas of hematology, nephrology, neurology and metabolic disorders to enhance productivity. As a result of its restructuring initiatives, the company expects pre-tax savings of approximately $250 million by 2019 while the total pre-tax restructuring and related expenses associated with the plan will be in the range of $340- $440 million. The company targets non-GAAP operating margin of 50% by 2019. Approximately 50% of the restructuring and related expenses will result in cash outlays.
Oct 12, 2017
Apr 20, 2018
Target Price/Valuation
Rating DistributionPositive / 94.1%
Neutral / 5.9%
Negative / 0.0%
Avg. Target Price / $158.4
High / $180.0
Low / $113.0
No. of Analysts with Target price/Total / 17/17
Recent Events
Alexion's Earnings and Sales Beat Estimates in Q4
Alexion posted 4Q17 adjusted earnings of $1.48 per share, higher than the year-ago earnings of $1.26 by 17.1%.
Revenues rose 9.5% y/y to $909.7 million. Revenues were driven by increased sales of Soliris, Strensiq and Kanuma.
2018 Guidance
Alexion expects adjusted earnings per share in the range of $6.60-$6.80. It projects revenues in the range of $3.85-$3.95 billion. Revenue guidance for Soliris is expected to be $3.33-$3.40 billion.
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 $30 million to $70 million related to the 2017 restructuring activities.
Revenue
According to the company,revenues rose 9.5% y/y to $909.7 million in 4Q17. The benefit of foreign currency on total revenues y/y was less than 1%, net of hedging activities.
Revenues were driven by increased sales of Soliris, Strensiq and Kanuma. Total revenues for FY17 were $3.551 billion, a 15% increase y/y.The Zacks Digest average revenues for 4Q17 and FY17 were in line with the company’s report.
2018 Outlook: The company projects revenues in the range of $3.85-$3.95 billion.
Revenue ($ in million) / 4Q16A / 2016A / 3Q17A / 4Q17A / 2017A / 1Q18E / 2Q18E / 2018E / 2019EDigest High / $831.1 / $3,084.4 / $859.5 / $910.0 / $3,551.1 / $934.4 / $1,000.0 / $4,276.5 / $4,887.8↓
Digest Low / $830.5 / $3,083.8 / $859.0 / $909.4 / $3,549.4 / $904.6 / $969.4 / $3,975.0 ↑ / $4,555.0↓
Digest Average / $831.0 / $3,084.2 / $859.1 / $909.7 / $3,550.8 / $917.7 / $978.7 / $4,058.3↓ / $4,703.6↓
Specific Products
Soliris (eculizumab)
Indication:PNH and aHUS
Product Life Cycle Status: Marketed.
Sales: Soliris sales were up 6% to $791.9 million during 4Q17 driven by strong volume growth.The Zacks Digest average sales for 4Q17 were in line with the company’s report.
2018Outlook: Soliris revenuesare expected to be $3.33-$3.40 billion. The outlook assumes unfavorable Soliris revenue impact of $90 million to $110 million from ALXN1210 and other clinical trial recruitment versus prior year.
Patent:On Nov 6, 2017, Alexion announced that the Japanese Patent Office (JPO) issued patent No. 6224059, directed to the composition of matter of Soliris and pharmaceutical formulations of eculizumab, which will expire in 2027.
On Aug 15, 2017, Alexion announced that the United States Patent and Trademark Office (USPTO) issued U.S. Patents No. 9,732,149; 9,718,880; and 9,725,504, which are directed to the composition of matter of Soliris, pharmaceutical formulations of eculizuma, and methods of treating paroxysmal nocturnal hemoglobinuria (PNH) with eculizumab, respectively, to be expired in 2027.
Alexion is pursuing corresponding patent applications for Soliris in other regions and countries, including Europe. In addition, Alexion is pursuing patent applications for additional indications of Soliris, including for the treatment of anti-acetylcholine receptor (AchR) antibody-positive generalized myasthenia gravis (gMG).
$ in million / 2015A / 2016A / 2017A / 2018E / Est. Growth (’15-’18)Soliris / $2,591.3 / $2,843.5 / $3,144.6↑ / $3,432.9↓ / -
Additional Indications:Alexion is also studying Soliris for additional indications which include antibody-mediated rejection(AMR)., refractory generalized myasthenia gravis (gMG), neuromyelitis optica spectrum disorder (NMOSD).
Soliris’ proven efficacy in PNHhas led the company and independent investigators to evaluate its use in other indications where there is a complement-mediated component to the disease.
AMR:Alexion is studying Soliris for theAMRindication in presensitized kidney transplant patients. Patient follow-up in the multi-national, multi-center-controlled study in those who received kidneys from deceased organ donors is ongoing. InMay 2015,the company presented positive results from the phase II single-arm, deceaseddonor transplant study for the prevention of acute AMR. However, a phase II study in patients who received kidneys from living donors, failed to meet the composite endpoint. The company is currently analyzing data from the study and planning on the next steps, based on its discussions with the regulatory bodies. Soliris enjoys Orphan Drug designation in the EU for the prevention of graft rejection following solid organ transplantation.
gMG:On Oct 23, 2017, FDA approved Soliris as a treatment for adult patients with gMG who are anti-acetylcholine receptor (AchR) antibody-positive. The approval was based on results from the phase III REGAIN study. In the REGAIN study and its ongoing open-label extension study, Soliris demonstrated treatment benefits for patients with anti-AchR antibody-positive gMG who had previously failed immunosuppressive treatment and continued to suffer from significant unresolved disease symptoms, which can include difficulties seeing, walking, talking, swallowing and breathing. On Aug 21, 2017, the European Commission approved the extension of the indication for Soliris to include the treatment of refractory gMG in adults who are AchR antibody-positive.
On Dec 26, 2017, Alexion announced that the Ministry of Health, Labour and Welfare (MHLW) in Japan approved Soliris as a treatment for patients with generalized myasthenia gravis (gMG) who are anti-acetylcholine receptor (AChR) antibody-positive and whose symptoms are difficult to control with high-dose intravenous immunoglobulin (IVIG) therapy or plasmapheresis (PLEX). Soliris is the first and only complement inhibitor approved in Japan as a treatment for these patients. The approval was based on the phase III REGAIN study and its ongoing open-label extension study.
On Sep 13, 2017, Alexionannounced results from an interim analysis of the ongoing phase III REGAIN study of Soliris for the treatment of patients with refractory gMG, who are anti-acetylcholine receptor (AChR) antibody-positive. The study showed sustained treatment benefits of Soliris treatment for patients with refractory generalized myasthenia gravis. Additionally, it revealed that safety profile of Soliris was consistent with that observed in the REGAIN study.
Soliris has received Orphan Drug Designation (ODD) for the treatment of patients with MG in the United States and the EU as well as for the treatment of patients with refractory gMG in Japan.
Neuromyelitis optica spectrum disorder (NMOSD):Alexion completed enrollment in the PREVENT study, a single, multinational, placebo-controlled phase III study of eculizumab in patients with relapsing NMOSD, and expects to report datain mid-2018. Soliris has Orphan drug designation in both the United States and the EU for this indication.
Strensiq (asfotase alfa)
Indication: Treatment of perinatal-, infantile- and juvenile-onset HPP
Product Life Cycle Status: Marketed.
Partner: On Jul 5, 2017, Alexion announced that it has reached a national funding agreement with the National Institute for Health and Care Excellence (NICE) and the National Health Service (NHS) England based on a Managed Access Agreement (MAA), which provides access to Strensiq for patients in England with pediatric-onset hypophosphatasia (HPP), regardless of their current age. The funding agreement was announced in a positive final evaluation determination (FED) issued by the NICE Highly Specialised Technologies (HST) Evaluation Committee to recommend Strensiq according to the MAA.
Sales: While Strensiq contributed $95.6 million to revenues in 4Q17, up 36% y/y. The Zacks Digest average Strensiq sales for 4Q17were in line with the company’s report.
Strensiq was added to the company’s portfolio following the Enobia acquisition in February 2012. Strensiq is also approved in Japan and Canada.
New Data: On May 15, 2017, Alexion announced data showing that the rapid benefits of Strensiq (asfotase alfa) achieved in adolescents and adults (ages 13-66 years at study entry) with hypophosphatasia (HPP) within the first six months were sustained through five years of treatment. These are the final data from the extension phase of a phase II study of Strensiq and they confirm previously presented interim results. The results demonstrate a reduction in two key biomarkers of HPP disease activity, as well as improvements in physical function in patients treated with Strensiq, as observed in tests to measure walking distance, running speed and agility, and muscle strength. The findings of this study suggest that asfotase alfa appears to be safe and effective long-term and reduces the debilitating burden of HPP in adolescent and adult patients.