Alexion (ALXN) Q3 Earnings Lag, Revenues Tops; Lifts View

Alexion Pharmaceuticals, Inc.’s (NASDAQ:ALXN) third-quarter 2016 earnings (including stock-based compensation expense) of $1.03 cents per share missed the Zacks Consensus Estimate of $1.04.

Revenues, on the other hand, soared 20.1% year over year to $799 million. The impact of currency headwind on the top line was 2.5% ($16 million). The majority of the company’s revenues were generated by Soliris. The figure also surpassed the Zacks Consensus Estimate of $784 million.

Soliris Drives Growth

Soliris sales were up 9.6% to $729 million driven by steady growth in patients in both the indications – paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome.

Strensiq and Kanuma contributed $61 million and $9 million, respectively, to quarterly revenues.

Operating expenses (including stock-based compensation expense, and upfront and milestone payments related to license and collaboration deals, and other special items) increased. Research and development (R&D) expenses were up 18.1%, while selling, general and administrative (SG&A) expenses climbed 8.3%.

Guidance

Alexion has revised its guidance for total revenue and adjusted earnings for 2016. The company now expects both revenues and adjusted earnings per share to be at the high end of the previously guided ranges of $3.05–$3.1 billion and $4.50–$4.65, respectively.

On the other hand, the company continues to expect Soliris revenues in the range of $2.83–$2.87 billion. Revenues from the metabolic franchise, comprising Kanuma and Strensiq, are now expected in the range $225–$235 million (previous guidance: $200–$220 million).

The company expects R&D expenses and SG&A expenses to be around $680–$690 million (previous expectation: high end of the $650–$680 million band) and $790–$810 million (prior expectation: high end of the $760–$790 million band), respectively.

Pipeline Update

The company continues to progress with the candidates in its pipeline. Currently, the company is evaluating Soliris in a couple of phase III studies – PREVENT, for the treatment of relapsing neuromyelitis optica spectrum disorder; and PROTECT, for the treatment of delayed graft function. Results from the PROTECT study are expected in the fourth quarter of 2016.

Moreover, Alexion plans to file regulatory submissions for Soliris for the treatment of refractory generalized myasthenia gravis in both the U.S. and the EU in the first quarter of 2017.

Our Take

Alexion’s third-quarter results were mixed, with the company missing bottom-line estimates but beating revenue expectations. We expect growth at Alexion to continue being driven by Soliris. Launch of new products – Strensiq and Kanuma – should boost revenues and eventually reduce the company’s dependence on Soliris for growth. We are also impressed by Alexion’s efforts to develop its pipeline.

Zacks Rank & Key Picks

Alexion currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Innoviva, Inc. (NASDAQ:INVA) , BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) and Geron Corp. (NASDAQ:GERN) . Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BioMarin’s loss estimates have narrowed from 28 cents to 25 cents for 2016 and from $1.16 to $1.11 for 2017 over the last 60 days.

Innoviva’s estimates have increased from 60 cents to 62 cents for 2016 and from $1.14 to $1.15 for 2017 over the last 60 days.

Geron has posted a positive earnings surprise in each of the four trailing quarters, bringing the average beat to 20.78%.

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