by Susan J. Aluise | November 4, 2011 2:48 pm
It has been a good year for Alexion Pharmaceuticals (NASDAQ:ALXN) — earnings are up, its star drug Solaris is coming on strong and the company’s stock is on a tear. The stock’s performance has moved it to the head of the class among its peers in the biopharmaceutical niche. But does ALXN have what it takes to go the distance?
Biopharmaceuticals, which are drugs created primarily from antibodies or living organisms like viruses and bacteria, are one of the most promising niches in pharmaceuticals because these drugs can treat rare and difficult conditions. ALXN’s peers in the biopharmaceutical space include Amgen (NASDAQ:AMGN), Allergan (NYSE:AGN) and Roche/c (PINK:RHHBY).
All investors dream of being able to predict a stock sector boom — and better yet, picking the next big winner. After all, who wouldn’t have liked to say “I bought Amazon (NASDAQ:AMZN) back in ’97 at $1.50”? Of course, for every Amazon, there were scores of two-year wonders like WebVan and Pets.com. So in picking hot emerging market stocks, it’s good to be talented, better to be lucky, and best to be both.
With drug patents expiring now, pharmaceutical companies stand to lose billions of dollars a year in revenue, making pricey biopharmaceutical drugs that treat rare diseases a big area of opportunity. But so far, ALXN has made a pretty big splash with its signature drug, Soliris, which treats a rare, life-threatening blood disease. Here are three reasons why Alexion is the real deal:
While no one can predict future results, ALXN is the real deal and has a strong position in a narrow but important niche. The financials are pretty solid, too. It also will not be affected by the looming patent expirations that could wreak havoc with pharmaceutical manufacturers over the next few years. The biggest risk at this point is the impact of health care reform on its sales, since payers would be strongly motivated to exclude — or reduce payment for — orphan drugs like Soliris.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.
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