Alexion (ALXN) Tops Q2 Earnings & Revenues, Ups 2017 View

Alexion Pharmaceuticals, Inc.’s (NASDAQ:ALXN) posted second-quarter 2017 adjusted earnings (including after-tax impact of stock-based compensation expense) of $1.31 per share higher than the year ago earnings of 93 cents as well as the Zacks Consensus Estimate of $1.08. Strong product revenues drove the bottom-line in the quarter.

Revenues rose 21% year over year to $912 million, also exceeding the Zacks Consensus Estimate of $848 million. Revenues were driven by increased sales of Soliris, Strensiq and Kanuma. Negative impact of currency headwind on the top line was 2% ($12 million). Revenues in the quarter also benefitted by favorable timing of orders.

Notably, shares of Alexion were up more than 6% in pre-market trading, in response to the better-than expected results. However, so far this year, Alexion’s share price has increased 14.5%, outperforming the Zacks classified industry’s gain of 12%.

Revenue in Detail

Soliris (paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS)) sales were up 16% to $814 million during the quarter driven by strong volume growth. While Strensiq (hypophosphatasia (HPP)) contributed $83 million to revenues, up 84% year over year, Kanuma (lysosomal acid lipase deficiency (LAL-D)) contributed $15 million (up 114%) to quarterly revenues.

Cost Summary

Research and Development (R&D) expense (excluding stock based compensation) was $179 million, up 8.5% year over year.

Selling, general and administrative (SG&A) expense (excluding stock based compensation) was $227 million , up 13.5% year over year.

2017 Guidance

The company increased its adjusted revenue and earnings guidance for 2017. The company expects adjusted earnings per share to be in the range of $5.40-$5.55 (excluding stock-based compensation expense) up from its previous expectation of $5.40-$5.30. It projects revenues to be in the range of $3.45-$3.53 billion up from its prior expectation of $3.4-$3.5 billion. In fact, revenues for Soliris are expected in the range of $3.07-$3.13 billion up from the previous expectation of $3.03-$3.1 billion.

Pipeline Update

The company continues to progress with the candidates in its pipeline. Alexion filed regulatory submissions looking for label expansion of Soliris to treat patients with refractory generalized myasthenia in U.S., Europe in Jan 2017. The applications have been accepted for review by the FDA with a decision expected on Oct 23, 2017. The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a positive opinion recommending marketing approval to the Soliris label expansion in the reported quarter. Final decision from the European Commission (EC) is expected in the third quarter of 2017.

Currently, Alexion is evaluating Soliris in a couple of other phase III studies – PREVENT, for the treatment of relapsing neuromyelitis optica spectrum disorder and expects to complete enrollment in the study in 2017 and report data in 2018.

Our Take

Alexion exceeded both earnings and revenue estimates in the second quarter and also raised its earnings and revenue guidance. We expect growth at Alexion to continue being driven by Soliris. Other new products – Strensiq and Kanuma – are doing well and should boost revenues. We are also impressed by Alexion’s efforts to develop its pipeline, especially the label expansion efforts for Soliris

Zacks Rank & Stocks to Consider

Alexion currently carries a Zacks Rank #3 (Hold). Better-ranked health care stocks in the same space include Enzo Biochem, Inc. (NYSE:ENZ) , Exelixis, Inc. (NASDAQ:EXEL) and Sanofi (NYSE:SNY) . While Enzo Biochem and Exelixis sport a Zacks Rank #1 (Strong Buy), Sanofi carries the same rank as the former. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enzo Biochem’s loss per share estimates narrowed from 12 cents to 7 cents for 2017 and from 11 cents to 3 cents for 2018, over the last 60 days. The company delivered positive earnings surprises in all the trailing four quarters, with an average beat of 55.83%. The share price of the company has increased 62.7% year to date.

Exelixis’ pulled off positive earnings surprises in all the trailing four quarters, with an average beat of 512.11%. The share price of the company has increased 87.9% year to date.

Sanofi’s earnings per share estimates increased from $3.18 to $3.20 for 2017 and from $3.30 to $3.36 for 2018, over last 30 days. The company came up with positive earnings surprises in three of the trailing four quarters, with an average beat of 5.10%. The share price of the company has increased 18.7% year to date.

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