Alexion Pharmaceuticals’ (ALXN) third-quarter 2014 earnings (including stock-based compensation expense) of $1.14 per share beat the Zacks Consensus Estimate by 9 cents. The earnings beat was attributable to higher-than-expected revenues. Moreover, earnings were above the year-ago figure by 56.2%.
Including one-time items, Alexion’s earnings climbed 87% year over year to 88 cents per share in the reported quarter.
Alexion’s revenues climbed 39% year over year in the third quarter to $555.1 million. We note that the entire revenues at Alexion are generated from Soliris sales. Revenues surpassed the Zacks Consensus Estimate of $542 million. Soliris sales were impressive 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 29.2% to $231 million in the quarter. The increase was due to a rise in research and development (R&D) expenses (34.5% higher) and selling, general and administrative (SG&A) expenses (25.8% higher).
The increase in R&D expenses was due to the company’s efforts to develop its pipeline. SG&A expenses increased due to Alexion’s efforts to expand.
Alexion had initiated the rolling submission of a Biologics License Application (BLA) for asfotase alfa in the hypophosphatasia indication in Apr 2014. The rolling submission to the FDA is expected to be completed by Dec 31, 2014. The candidate is also under review in the EU. Earlier in the month, the company announced that it has filed a new drug application with the Japanese Ministry of Health, Labour and Welfare for the candidate.
2014 Outlook
Alexion increased its guidance for 2014 both on the top and the bottom line. The company now expects adjusted earnings per share in the range of $5.15 to $5.20 per share (old guidance: $4.95 to $5.05).
Revenues for 2014 are now expected in the range of $2.220 billion to $2.225 billion (old guidance: $2.18 billion to $2.20 billion). The Zacks Consensus Estimate for 2014 is pegged at $4.56 per share on revenues of approximately $2.2 billion. We expect the Zacks Consensus Estimate to be revised upwards following the company’s fresh guidance.
The increase in guidance and the outperformance with respect to revenues as well as earnings pleased the investors. Consequently, the stock gained in early trading.
Our Take
We are encouraged by Alexion’s strong results in the third quarter and hike in the 2014 earnings and revenues guidance. We expect growth at Alexion 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. This is expected to substantially reduce the company’s dependence on Soliris for growth.
Alexion currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the health care sector include Pluristem Therapeutics (PSTI), Medivation (MDVN) and PDL BioPharma (PDLI), each sporting a Zacks Rank #1 (Strong Buy).
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