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Alexion (ALXN) Down 3.2% After Amgen Buys Otezla From Celgene

Zacks Equity Research

Shares of Alexion Pharmaceuticals, Inc. ALXN were down 3.2% on Aug 26 after soaring last week on rumors of a potential acquisition by Amgen, Inc. AMGN.

Notably, shares of the company have gained 14.7% in the year so far against the industry’s decline of 2.3%.

 

However, Amgen recently announced an agreement to buy Celgene Corporation’s CELG plaque psoriasis and psoriatic arthritis drug, Otezla, for more than $13.4 billion, thereby squashing the speculations of buying out Alexion.

We note that rumors have been rife for quite some time now that Amgen is considering acquiring Alexion to bolster its portfolio.

Nevertheless, Alexion has been one of the prime candidates for acquisition from the onset of 2019 after the mega-merger announcement of Bristol-Myers BMY and Celgene.

Alexion primarily focuses on developing and commercializing drugs for the treatment of patients with ultra-rare disorders. The market potential of these drugs is significant, with less competitive pressure. The company's blockbuster drug, Soliris (approved for the treatment of two severe and ultra-rare disorders resulting from chronic uncontrolled activation of the complement component of the immune system — paroxysmal nocturnal hemoglobinuria [PNH] and atypical hemolytic uremic syndrome [aHUS]), continues to perform well. The FDA approval of the generalized myasthenia gravis (gMG) indication has boosted the drug’s prospects further.

The FDA recently approved Alexion’s long-acting C5 complement inhibitor, Ultomiris, for the treatment of adults with PNH, which consolidated its PNH franchise. The initial uptake of the drug has been strong. The company is working to expand the drug’s label. It submitted an application in the United States for the approval of the same to treat patients with aHUS. The company also initiated a phase III study on the drug for gMG and plans to initiate another phase III program on the same for neuromyelitis optica spectrum disorder (NMOSD).

Concurrently, Alexion is looking to strengthen its pipeline with acquisitions and collaborations. It acquired Sweden-based Wilson Therapeutics for $855 million. The acquisition added a late-stage candidate, ALXN1840, to Alexion’s pipeline. It also acquired a clinical-stage biotechnology company, Syntimmune, for $1.2 billion. Additionally, it entered a partnership with Complement Pharma to co-develop the preclinical C6 complement inhibitor, CP010, for neurodegenerative disorders.

Notably, attractively modest valuations resulting from a disappointing run in 2018 sparked renewed interest in the ever-volatile biotech sector from the beginning of this year. Evidently, the spotlight is back on mergers and acquisitions. A slowdown in mature products due to increasing competition and rise of biosimilars forced most pharma behemoths to target lucrative buyouts in the biotech space to bolster their pipelines.  While oncology and immuno-oncology are the key areas of focus, treatments for non-alcoholic steatohepatitis (NASH) and rare diseases also promise great potential, thereby making them profitable areas of investment.

Recently, Alexion reported strong results for the second quarter, wherein both earnings and sales beat estimates. The company also raised its annual guidance for earnings and sales. This, in turn, boosted investors’ sentiments.

With a market capitalization of more than $25 billion, Alexion is a hot target for big pharma companies looking to foray into the rare diseases market.

Alexion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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