Alexion Pharmaceuticals’ (ALXN) fourth-quarter 2014 earnings (including stock-based compensation expense) of $1.15 per share missed the Zacks Consensus Estimate by 2 cents. Earnings were above the year-ago figure by 43.1%.
Including one-time items, Alexion’s earnings climbed to 76 cents per share in the reported quarter as against a loss of 10 cents in the year-ago quarter.
Alexion’s revenues climbed 35.7% year over year in the fourth quarter to $599.5 million. We note that all of Alexion’s revenues are generated from Soliris sales. Revenues surpassed the Zacks Consensus Estimate of $591 million.
The company’s full year earnings (including stock-based compensation expense) were $4.72 per share, up 72% year over year but in line with the Zacks Consensus Estimate. Revenues came in at $2.23 billion, up 44% year over year and marginally above the Zacks Consensus Estimate of $2.22 billion.
Quarterly Details
Soliris sales were driven by additions of new patients in both the approved indications – paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS).
Operating expenses (excluding stock-based compensation expense and upfront and milestone payments related to license and collaboration deals and other special items) increased 34.7% to $272 million in the quarter. The increase was due to a rise in research and development (R&D) expenses (35% higher) and selling, general and administrative (SG&A) expenses (34.4% higher).
2015 Outlook
Apart from announcing its earnings results, Alexion provided its guidance for 2015. The company expects net product sales in the range of $2.55–$2.6 billion, well over 2014 levels. The guidance includes an approximately negative foreign exchange translation impact of 5% (approximately $135 million). The (pre earnings) Zacks Consensus Estimate of $2.72 billion is above the guided range.
The company expects R&D costs (excluding stock-based compensation expense) for 2015 in the range of $440–$470 million. Selling, general and administrative costs (excluding stock-based compensation expense) in 2015 are expected in the range of $620–$650 million. The company expects adjusted earnings for 2015 in the range of $5.60–$5.80 per share. Foreign exchange translations are expected to negatively impact earnings by 30 cents. The (pre earnings) Zacks Consensus Estimate is $5.54 per share.
In a separate press release, the company announced that it has appointed David L. Hallal as the Chief Executive Officer, effective Apr 1, 2015.
Our Take
Alexion’s fourth quarter results were mixed with the company missing on earnings and beating on revenues. We are disappointed with the company’s revenue guidance which is below our expectations. The negative impact of foreign exchange translation is concerning. We expect growth at Alexion to continue 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 seven product approvals through 2018 including asfotase alfa, ALXN 1101 and Soliris’ label expansion into indications such as antibody-mediated rejection, neuromyelitis optica and the prevention of delayed graft function in renal transplant patients. Approval of new products is expected to substantially reduce the company’s dependence on Soliris for growth.
Alexion currently carries a Zacks Rank #1 (Strong Buy). Other well-ranked stocks in the health care sector include Celgene Corporation (CELG), Regado Biosciences, Inc. (RGDO) and AMAG Pharmaceuticals, Inc. (AMAG). Celgene and Regado carry the same rank as Alexion, while AMAG carries a Zacks Rank #2 (Buy).
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