Actelion (ALIOF) Beats Q2 Earnings & Revenues, View Up

Actelion Ltd. (OTC:ALIOF) reported second-quarter 2016 earnings of $2.13 per American Depository Receipt (ADR), up from the year-ago figure of $1.60. Reported earnings were also above the Zacks Consensus Estimate of $1.86.

Revenues were up 16.1% year over year to $607.7 million, beating the Zacks Consensus Estimate of $589 million.

Quarter in Detail

All growth rates mentioned below are in constant exchange rates and on a year-over-year basis.

Product sales were up 15%. Sales surged 25% in the U.S. driven by the launch of Uptravi, continued momentum in Opsumit and share gains in the endothelin receptor antagonist (ERA) market. Sales in the EU were down 3%, while that in Japan soared 29% on the back of Opsumit, Veletri and Zavesca (Japanese trade name: Brazaves). In the rest of the world, sales were up 10%.

Key growth drivers at Actelion include Opsumit and Tracleer. Opsumit generated revenues of CHF200 million, up 71% driven by continued uptake on the back of commercial availability in over 30 countries.

On the other hand, sales of Tracleer amounted to CHF256 million, down 19%. The decline was due to increasing demand for Opsumit, pricing pressure in the EU and stiff generic competition. On the other hand, Veletri and Valchlor recorded sales growth of a respective 18% and 20%.

Research & development expenses rose 31% to CHF124 million in the reported quarter. Selling, general and administrative expenses were also up 11% to CHF122 million.

Pipeline Update

Actelion continues to progress with the candidates in its pipeline. Currently, the company is evaluating ponesimod, in comparison to Sanofi’s (NYSE:SNY) Aubagio, in the phase III OPTIMUM study for multiple sclerosis.

In addition, the company is evaluating cadazolid in the phase III IMPACT study for the treatment of clostridium difficile-associated diarrhea. Patient enrolment for both the studies is expected to be complete by the end of 2016. Results from the IMPACT study are expected in the first half of 2017.

The company is also evaluating Opsumit in a phase II study (MERIT) for the treatment of patients with chronic thromboembolic pulmonary hypertension (CTEPH). Data from the study are expected by the end of this year.

Outlook

Actelion has revised its outlook for 2016. At constant exchange rates, the company expects core operating income growth in the low-teen percentage range (previous guidance: high single-digit percentage range).

Our Take

Actelion’s performance in the second quarter of 2016 was impressive with the company beating both the top-and bottom-line estimates.

Moreover, the company’s pulmonary arterial hypertension portfolio is performing well, with Opsumit expected to drive the top line going forward. Continued uptake trajectory with commercial availability in over 30 countries, the drug is expected to fuel growth into 2016.

Based on the excellent first-half results, the company has upped its financial guidance for the full year.

Actelion carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the health care sector are Nektar Therapeutics (NASDAQ:NKTR) and Innoviva, Inc. (NASDAQ:INVA) . Both stocks sport a Zacks Rank #1 (Strong Buy).

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