Alexion (ALXN) Up 17.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Alexion Pharmaceuticals (ALXN). Shares have added about 17.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Alexion due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Alexion Beats on Q1 Earnings & Sales, Lowers Guidance

Alexion posted better-than-expected results for the first quarter of 2020 but trimmed its outlook for the year.

First-quarter adjusted earnings of $3.22 per share comfortably beat the Zacks Consensus Estimate of $2.70 and grew from $2.39 in the year-ago quarter.
Moreover, revenues rose 27% year over year to $1.44 billion in the reported quarter and surpassed the Zacks Consensus Estimate of $1.35 billion. Revenues were driven by higher sales of Soliris, Strensiq, Kanuma and Ultomiris.

Revenues in Detail

Soliris (paroxysmal nocturnal hemoglobinuria [PNH], atypical hemolytic uremic syndrome [aHUS], and generalized myasthenia gravis [gMG]) sales were up 6% year over year to $1.02 billion in the reported quarter.

Long-acting C5 complement inhibitor, Ultomiris, for the treatment of adult patients with PNH and aHUS generated sales of $222.8 million compared with $24.6 million in the year-ago quarter and $170.2 million in the previous quarter.
Strensiq revenues were $172.2 million (up 32% year over year). Kanuma contributed $26.7 million (up 14% year over year) to quarterly revenues.

Cost Summary

Adjusted research and development (R&D) expenses increased to $185.7 million from $159.4 million in the year-ago quarter.

Adjusted selling, general and administrative (SG&A) expenses were $259.1 million, up from $243.7 million in the year-ago quarter.

2020 Guidance Lowered

Alexion now expects adjusted earnings per share of $10.45-$10.75 (previous guidance: $10.65-$10.85). The company now projects revenues of $5.23-$5.33 billion (previous guidance: $5.50-$5.56 million).

Combined revenues from Soliris and Ultomiris are now estimated at $4.49- $4.57 billion (previous guidance: $4.76-$4.80 billion).

The guidance was lowered due to the ongoing coronavirus crisis.

Pipeline Update

The company recently initiated a phase III study on Ultomiris in a subset of adults with COVID-19. It has also donated Soliris for compassionate use and expanded access programs.

Alexion plans to initiate a phase II/III study in children and adolescents with neuromyelitis optica spectrum disorder (NMOSD) in mid-2020. Another phase III study on Soliris is underway for addressing children and adolescents with gMG.

Meanwhile, applications for the approval of Ultomiris in aHUS are under review in the EU and Japan. Last month, Alexion announced a positive opinion for Ultomiris in aHUS from the European Medicines Agency’s Committee for Medicinal Products for Human Use. Another phase III study of Ultomiris in children and adolescents with aHUS is underway. Also, a phase III study on the drug in children and adolescents with PNH is underway.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.36% due to these changes.

VGM Scores

At this time, Alexion has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alexion has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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