Actelion Ltd. (ALIOF) reported first quarter earnings of $1.39 per American Depository Receipt (ADR), up 22% over prior-year earnings of $1.14 and also much above the Zacks Consensus Estimate of $1.10. The bottom-line beat was driven by higher revenues, which offset steeper expenses and increased pressure on healthcare spending in many geographical markets.
First Quarter Details
The company reported net revenue of $561 million in the first quarter of 2011, up 15% in local currency and way ahead of the Zacks Consensus Estimate of $475 million. The top-line beat resulted primarily from higher-than-expected contract revenues and continued strong performance of the pulmonary arterial hypertension (PAH) franchise. All growth rates below are in local currency and represent growth over the prior-year period.
Product sales were up 11% over the prior year driven by growth in all products and in all geographical regions. On a regional basis, 40% of product revenues came from the US which grew 4%, 40% from Europe which was up 9%, and the balance from the rest of the world.
The company currently has four products in the market. Three of them, Tracleer, Ventavis and Veletri are all indicated for the treatment of PAH. The fourth drug, Zavesca, is indicated for the treatment of Gaucher’s disease.
Tracleer revenues were up 10% in the first quarter due to an increase in volume. Tracleer revenue also benefited from switching of patients from Pfizer’s (PFE) Thelin following the drug’s withdrawal from the market in December 2010.
Ventavis sales were also up 13% from the prior year driven by growth in both volume and price. Actelion markets Ventavis only in the US.
Veletri, launched in April 2010, also did well in the quarter due to continued expansion of the prescriber base. Zavesca sales were up 8% from the prior year due to double-digit volume growth.
Contract revenue in the quarter increased 50% from the prior year boosted by the accelerated recognition of the outstanding upfront payment from GlaxoSmithKline (GSK) related to the terminated almorexant program (January 2011).
Actelion reported a 22% increase in adjusted EBIT (earnings before interest and tax), driven completely by top-line growth.
2011 Guidance
The company guided mid single-digit product sales growth for 2011 in local currency with operational expenditures remaining at approximately 2010 levels. Adjusted EBIT is expected to grow in the low double-digit range in local currencies.
Pipeline Update
Actelion is expected to present phase III data (SERAPHIN) on macitentan, a follow-on compound to Tracleer, in late 2011 or early 2012. In 2011, Actelion would also present data from a mid-stage study of Ponesimod (S1P1-agonist) for the treatment of multiple sclerosis. The data will enable the determination of the most appropriate dose for a late-stage study of the candidate.
Our Take
The shares of Actelion retain a Zacks #2 Rank (short-term Buy rating). Actelion has a dominant position in the multi-billion dollar PAH market with drugs like Tracleer and Veletri in its product suite. We also like the company’s strong pipeline in spite of the termination of development of pipeline candidates, almorexant and clazosentan (September 2010).
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