ALEXION PHARMACEUTICALS, INC (ALXN)

Based in Boston, Alexion Pharmaceuticals develops various therapeutics products used in the treatment of cardiovascular and hematological diseases, cancers and auto-immune diseases.
– Marchiafava and Michelli Syndrome (genetic disease-causing anemia) with Soliris and Ultomiris
– Metabolic disorders with Strensiq and Kanuma

ALXN sales increased by 21% in 2019, reaching $5 Bn, with its with its key products Soliris (most expensive treatment with only 5 million patients worldwide), and Utomoris delivering in total 85% of 2019 revenue worldwide, making the firm highly dependent of its rare diseases products. In addition, its margins increased steadily over the years. In a one hand, with the approvement of its drugs in new therapeutic areas by the FDA (Food & Drug Administration) to start diversifying its
revenue stream: Strensiq and Kanuma (approved in 2015), Utomiris (approved in 2019). In the other hand, by managing costs effectively and increasing the amount of cash in their cash flows for further investments: either acquisitions, or buying backs shares to improve its financials for its sharholders with higher EPS.

 

 

With record revenue delivered in 2019, ALXN reported (Q2-20) sales on up 20% y/y to $1.44 Bn (vs $1.2 Bn prior year), pushed by rare-disease drug Utlomiris momentum, tripling its revenues to $251.1 M vs Q2-19, next in line to replace its star product Soliris1, patent with expiry date on March 2021 (USA) and May 2020 (Europe), impacting Soliris performance on the future against new emerging generic competitors, outside the US (which explains partly the 1% drop in sales vs Q2-19).
Both drugs: Strensiq and Kanuma in the metabolic disorders area, performed well with sales up, respectively, 30% and 28% y/y. But this quarter saw a revision on strategic view on Kanuma drug, adding non-recurring impairment expenses on intangibles ($2 Bn) to its operational costs, driving both operating and net margins down.

With the goal of strengthening and diversifying its business on rare diseases drugs, acquisitions and partnerships remain necessary. ALXN agreed on May 2020 to acquire Portola Pharmaceuticals, a clinical stage biopharma company, centering on life threatening blood related disorders, adding Adexxa / Ondexxa to its portfolio. ALXN has been on an acquisition spree, and closed significant deals by targeting biopharmaceuticals offering treatments against rare diseases, such as Achillion Pharmaceuticals (2019) for $930 M, Wilson Therapeutics (2018) for $855 M, Syntimmune (2018) for $1.2 Bn. Cash is rising ($2 Bn in FCF, $248 M in net cash), expenses become more manageable, so the focus can be put on further business investments through the improvement of intangible assets by adding new treatments which makes it easier to acquire new patients. As such, new opportunities arise from this pandemic with ALXN initiating 3 rd phase trial of Ultomiris blood disorder drug to treat severe pneumonia and respiratory distress, such as covid-19. Consequently, before a vaccine is launched in the market, a significant amount of drug developed against covid-19 consists of existed medicines being repurposed. (such as the Gilead Sciences case with Remdesivir).

SHARE PRICE – Since January 2020, the stock did not gain much (+0.12%). The share price (09/09/2020) closed at $108.28 per share. The company will move at its own pace, at the rhythm of its bio-pharma acquisitions and pipeline diversification (drug portfolio), especially in this rare-diseases sector. In addition, ALXN must continue to improve its margin (most importantly its operating and net margin) in the long run, to consider taking a position on its shares. With a strong position as a leading company in this market, ALXN is an interesting stock to follow.

 

Written on 10/09/2020

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