We are maintaining our Neutral recommendation on Alexion Pharmaceuticals (ALXN) with a target price of $99.00.
Alexion Pharma delivered a strong performance in the first quarter of 2011. First quarter 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.
(Read our full coverage on this earnings report Alexion Tops on All Fronts )
The main growth driver at Alexion Pharma is Soliris which is marketed for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a rare genetic blood disorder. We note that strong Soliris sales have helped the company achieve profitability since the second quarter of 2008.
Alexion Pharma is exploring the use of Soliris in other indications as well besides PNH. In April 2011, the company submitted marketing applications in the US and the European Union (EU) seeking approval 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 Pharma 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). The company intends to evaluate its oncology candidate, samalizumab, in patients with a rare, solid tumor later in the year.
However, we remain concerned about Alexion Pharma’s dependence on a single product for growth. Given the absence of any late-stage pipeline candidate, we are concerned about the company’s long-term growth prospects.
We prefer to remain on the sidelines until more visibility is obtained regarding the pipeline development at Alexion Pharma and retain our Neutral stance on the stock.
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