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Alexion Tops on Earnings & Revs in Q4

Zacks Equity Research

Alexion Pharmaceuticals, Inc.’s (ALXN) fourth-quarter 2013 earnings (including stock-based compensation expense) of 78 cents per share beat the Zacks Consensus Estimate by 5 cents. Earnings were above the year-ago figure by 44%. The year–over-year rise in earnings was attributable to higher product sales.  The stock gained significantly in pre-market trading, reflecting investors’ optimism on the earnings report.

Alexion’s revenues jumped 38% to approximately $441.9 million in the final quarter of 2013 driven by strong Soliris sales. Soliris is available in the U.S, EU, Japan and many other countries for the treatment of paroxysmal nocturnal hemoglobinuria (:PNH). PNH is a rare genetic blood disorder. Sales of the drug have been boosted further by its label expansion into the aHUS indication in the U.S. (Sept 2011) and the EU (Nov 2011). Japanese approval for Soliris in the aHUS indication came in Sep 2013. Revenues surpassed the Zacks Consensus Estimate of $431 million.

Adjusted operating expenses (excluding stock-based compensation expense) climbed approximately 24% to $201.7 million in the fourth quarter of 2013. The increase was attributable to a rise in both research and development (R&D) expenses (up 33%) and selling, general and administrative (SG&A) expenses (up 18%). The increase in R&D expenses was attributable to the company’s efforts to develop its pipeline. SG&A expenses increased due to Alexion’s efforts to expand.

The biopharmaceutical company’s full year earnings (including stock-based compensation expense) were $2.70 per share, up 45.2% year over year and above the Zacks Consensus Estimate of $2.68 per share. Revenues came in at $1.55 billion, up 37% year over year and marginally surpassing the Zacks Consensus Estimate of $1.54 billion. Revenues in 2013 were above the company’s projected range of $1.535–$1.540 billion.

Pipeline Update

Alexion currently has several candidates in clinical development focusing on different areas. The company is also working on expanding Soliris’ label into additional indications like Shiga-toxin producing e. coli hemolytic uremic syndrome, neuromyelitis optica and myasthenia gravis.

Alexion’s pipeline also includes asfotase alfa (hypophosphatasia), ALXN 1101 (molybdenum cofactor deficiency type A) and ALXN1007 (inflammatory disorders).

2014 Outlook
Apart from announcing its earnings results, Alexion provided guidance for 2014. The company expects revenues in the range of $2.0–$2.02 billion, well over 2013 levels. The (pre earnings) Zacks Consensus Estimate of $1.96 billion is below the guided range.

The company expects R&D costs (excluding stock based compensation expense) for 2014 in the range of $360–$380 million. Selling, general and administrative costs (excluding stock based compensation expense) in 2014 are expected in the range of $560–$580 million. The company expects adjusted earnings for 2014 in the range of $3.70–$3.80 per share. The (pre earnings) Zacks Consensus Estimate is $3.11 per share.

Our Take

Once again, Alexion impressed with strong results. Moreover, the company’s guidance for 2014 is encouraging. We expect growth at Alexion to be driven by strong Soliris sales in the PNH and aHUS indications.

We are also impressed by Alexion’s efforts to develop its pipeline. Alexion is expecting six product approvals within the time period of 2014 to 2018 including asfotase alfa, ALXN 1101 and Soliris’ label expansion. Asfotase alfa is expected to be approved by year end. This will reduce the company’s dependence on Soliris for growth.

Alexion carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Actelion Ltd. (ALIOF), Affymetrix Inc. (AFFX) and Gentium (GENT). All these stocks carry a Zacks Rank #1 (Strong Buy).

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