Alexion Pharmaceuticals’ (ALXN) third quarter 2011 earnings (excluding special items but including stock-based compensation) of $0.32 per share breezed past the Zacks Consensus Estimate by $0.09 and the year-ago adjusted earnings by $0.11. Earnings in the quarter benefited from an increase in revenues.
Alexion’s revenues jumped 44.1% to approximately $204.1 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 and atypical hemolytic uremic syndrome (aHUS) — an ultra-rare, genetic disorder.
Revenues surpassed the Zacks Consensus Estimate of $199 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.
Adjusted operating expenses at Alexion climbed 39.3% to $103.5 million in the reported quarter. The increase was attributable to a hike in both research and development (R&D) expenses (47.6%) and selling, general and administrative (SG&A) expenses (36.0%).
While R&D expenses increased because of the company’s efforts to develop its pipeline, the rise in SG&A expenses was attributable to Alexion’s efforts to expand and the costs related to the preparations for the launch of Soliris for the aHUS indication. Management expects SG&A expenses to increase further in the final quarter of 2011 due to its efforts related to Soliris for the aHUS indication.
We note that last month Alexion received encouraging news from both the US and Europe regarding its efforts to expand the label of Soliris into the aHUS indication. While the US Food and Drug Administration (FDA) cleared Soliris for the new indication, the European Committee for Medicinal Products for Human Use (CHMP) backed its approval for aHUS in the European Union (EU).
Management expects the European regulatory body to clear Soliris for the new indication by year-end. Alexion expects to initiate the procedure of gaining reimbursement clearance on a country-by-country basis in the EU following approval.
2011 Guidance Upped
Apart from announcing financial results, Alexion provided a bright outlook for 2011. The company expects to end 2011 with revenues in the range of $770 million – $775 million as opposed to the previously expected range of $760 million – $768 million. The increased forecast was based on the anticipation of continued impressive sales of Soliris for the PNH indication.
Alexion also provided guidance for cost items. While adjusted SG&A expenses are expected in the range of $275 million – $280 million (unchanged from previous guidance), the forecasted range for adjusted R&D expenses has been trimmed to $133 million – $138 million from the earlier guidance range of $138 million -$143 million. The reduction is attributable to Alexion’s prudent cost management.
Alexion also increased the adjusted earnings guidance for 2011. The company expects 2011 adjusted earnings per share in the range of $1.25-$1.28 as opposed to the previously expected range of $1.15-$1.20. The improved view is based on strong Soliris sales for the PNH indication.
Our Recommendation
Currently, we have an Outperform recommendation on Alexion in the long-run. The successful label expansion of Soliris in the US coupled with the positive recommendation in the EU has boosted the stock.
We believe that the current price represents an attractive entry point for long-term investors. Alexion carries a Zacks #2 Rank (Buy recommendation) in the short-run.
ALEXION PHARMA (ALXN): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment