Alexion Pharmaceuticals’ (ALXN) first quarter 2011 earnings (excluding special items but including stock-based compensation) of $0.47 per share surpassed the Zacks Consensus Estimate by $0.05 and the year-ago earnings by $0.19. Earnings in the quarter benefited from an increase in revenues.

Alexion’s revenues jumped 41% to $166.1 million in the reported quarter driven by strong Soliris (eculizumab) sales. Soliris is Alexion’s only marketed product. It is approved for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a rare genetic blood disorder. The disorder can lead to anemia, fatigue, pain and breathing problems.

Revenues surpassed the Zacks Consensus Estimate of $165 million. The impressive revenues recorded in the reported quarter were indicative of the addition of new patients primarily in the US, Western Europe and Japan.

Alexion is working to expand the label of Soliris into other indications. In April 2011, Alexion submitted marketing applications in the US and the European Union (EU) seeking approval of the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA), to market Soliris for treating patients suffering from atypical hemolytic uremic syndrome (aHUS). The disorder often leads to heart attack, stroke or kidney failure which can even prove to be fatal.

We note that the market for aHUS has a huge unmet need as patients suffering from the disorder have limited treatment options. Consequently, if Soliris is approved for treating the disease then the market potential for this product will further expand. Alexion is also studying Soliris in patients undergoing kidney transplantation, having a high risk of organ rejection. The condition is referred to as acute humoral rejection (AHR).

Alexion, which is lending support to investigator-initiated studies in high-risk kidney transplantation in the US and Australia, is planning two company-sponsored controlled studies using Soliris to prevent AHR in kidney transplant patients. The studies are expected to commence later in the year. Alexion intends to evaluate its oncology candidate, samalizumab, in patients with a rare, solid tumor later in the year.

Adjusted operating expenses at Alexion jumped 31.7% to $85.9 million in the reported quarter. The increase was attributable to a hike in both research and development (R&D) expenses (up 38.4%) and selling, general and administrative expenses (up 28.7%). We expect R&D costs to increase further as Alexion is exploring the use of Soliris in other indications besides PNH.

2011 Revenue Guidance

Alexion reiterated the 2011 revenue guidance, which was revised upward while announcing the submission of marketing applications in the US and the EU in April 2011.

Alexion expects 2011 revenues in the range of $720 to $740 million. The previously forecasted range (announced while disclosing the fourth quarter 2010 results) was $715 million – $735 million. The increased forecast was based on the impressive sales of Soliris for the PNH indication. The expectation of approval for Soliris in the US for aHUS as early as in the fourth quarter of 2011, assuming priority review, also contributed to the revised revenue forecast.

The current revenue forecast for 2011 also takes into account the possibility of treatment disruptions for the patients in Japan due to the recent natural disaster in that country. Forecast for other items remains unaltered.

Our Recommendation

Alexion currently carries a Zacks #2 Rank (short-term Buy recommendation) driven by the encouraging results in the first quarter of 2011. However, we are more cautious in the long-run and have a Neutral stance on the stock.

 
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