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Alexion (ALXN) Down 6.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Alexion Pharmaceuticals (ALXN). Shares have lost about 6.3% in that time frame, outperforming the S&P 500.

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

Alexion Q4 Earnings Beat Estimates

Alexion posted fourth-quarter 2019 adjusted earnings of $2.71 per share, which improved 26.6% from the year-ago quarter’s $2.14. Earnings also beat the Zacks Consensus Estimate of $2.37.

Moreover, revenues rose 22.6% year over year to $1.38 billion in the reported quarter and surpassed the Zacks Consensus Estimate of $1.32 billion. Revenues were driven by higher sales of Soliris, Strensiq, Kanuma and Ultomiris.

Revenues in Detail

Soliris (for the treatment of paroxysmal nocturnal hemoglobinuria [PNH] and atypical hemolytic uremic syndrome [aHUS]) sales were up 4% year over year to $1013.1 million in the reported quarter, driven by strong volume growth.

Strensiq revenues were $166.8 million (up 32% year over year). Kanuma (lysosomal acid lipase deficiency [LAL-D]) contributed $34.1 million (up 33% year over year) to quarterly revenues.

Ultomiris’ (ravulizumab-cwvz) net product sales were $170.2 million in the reported quarter, reflecting a sequential increase of 89.3%.

Cost Summary

Adjusted research and development (R&D) expenses were $226.7 million, up 38.2% year over year.

Adjusted selling, general and administrative (SG&A) expenses were $340 million, up 22.3% year over year.

2019 Results

Alexion posted 2019 adjusted earnings of $10.53 per share, up 33% from the last year’s figure of $7.92.

The company reported sales of $4.99 billion, up 20.8% year over year.

2020 Guidance

Alexion expects adjusted earnings per share of $10.65-$10.85. The company projects revenues of $5.50-$5.56 billion. The Zacks Consensus Estimate for earnings is pegged at $11.36 per share and for sales at $5.62 billion. Both the earnings and sales guidance fall below the estimates.

Combined revenues from Soliris and Ultomiris are expected to be $4.76-$4.80 billion.

Pipeline Update

In November 2019, Soliris was approved for adults with anti-aquaporin-4 (AQP4) auto antibody-positive neuromyelitis optica spectrum disorder (NMOSD) in Japan. Alexion plans to initiate a phase II/III study in children and adolescents with NMOSD in the first quarter of 2020. Another phase III study on Soliris is underway for addressing children and adolescents with Generalized Myasthenia Gravis (gMG).

Meanwhile, applications for the approval of Ultomiris in aHUS are under review in the EU and Japan.Another phase III study of Ultomiris in children and adolescents with aHUSis underway. Also, a phase III study on Ultomiris in children and adolescents with PNH is underway.

Enrollment is complete  in a  single, PK-based phase III study of Ultomiris, delivered subcutaneously once per week, to support registration in PNH and aHUS. Data are expected in the first half of 2020. Another phase III study of the drug for the treatment of gMG is ongoing. In December 2019, Alexion initiated a phase III study of Ultomirisin NMOSD.

In November and December 2019, applications for the approval of the Ultomiris100mg/mL formulation were submitted in the EU and the United States, respectively. This high-concentration formulation is designed to reduce infusion time by more than 50% to approximately 45 minutes. Alexion plans to file for regulatory approval of this formulation in Japan in mid-2020.

In December 2019, Alexion submitted an investigational new drug application (IND) for Ultomiris in Amyotrophic Lateral Sclerosis (ALS) to the FDA. In January 2020, the company announced the planned initiation of a pivotal phase III study in the first quarter of 2020.

Recent Developments

Alexion acquired clinical-stage biopharmaceutical company Achillion Pharmaceuticals, Inc. for $930 million.

The acquisition adds Achillion’s lead candidate danicopan (ACH-4471), currently in phase II development for C3 glomerulopathy (C3G), and ACH-5228, which is in phase II development for PNH to Alexion’s pipeline. Alexion is looking to strengthen its PNH franchise with this buyout as a potential approval of danicopan will make the company a market leader in the PNH space.

 

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, Alexion has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Alexion has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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