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Alexion Pharmaceuticals, Inc. Is Researching a Turnaround

Alexion has a promising pipeline of orphan drugs that could prompt a takeover

By Hilary Kramer, Editor, GameChangers

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Today, biotech takes us to the next level of healthcare by drawing on the traditional biological sciences and adding new capabilities from genetics, embryology, chemical engineering, bioprocess engineering, information technology and even robotics. The mapping of the human genome over a decade ago is opening up new worlds in both gene therapy and what’s called pharmacogenomics — i.e., customized drugs. In the past, one drug was used for all people.

In the future, each person could have a customized treatment plan based on their genetic makeup. Now that’s a game changer!

If you’re familiar with biotech at all, then you know it has traditionally been a risky area to invest in. There have been many disappointments along with the successes through the years, and I’ve avoided many biotech stocks as a result. However, a company in this sector that has become increasingly attractive is Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).

The company specializes in the development of orphan drugs, treating patients with severe and life-threatening rare diseases. Orphan diseases get their name because they affect fewer than 200,000 people (like Addison’s, Crohn’s or Hodgkin’s disease) or are a common disease that has been ignored (such as tuberculosis, cholera and malaria) as they are far more prevalent in developing countries than in the developed world.

Orphan drugs treat these rare diseases, and while they do not receive a lot of attention from clinical research, there is a somewhat easier and faster regulatory environment, premium price and less competition. ALXN could become a major acquisition candidate in this space, and the strength of its pipeline should help fuel its success.

The company derives practically all of its sales from Soliris, which has been on the market since 2007. This drug is used to treat atypical hemolytic uremic syndrome (aHUS), a life-threatening disease that is caused by chronic, uncontrolled activation of the immune system, and Paroxysmal Nocturnal Hemoglobinuria (PNH), which destroys red blood cells.

The company has also found good success with Strensiq, which was approved in 2015. Strensiq is an innovative enzyme replacement therapy for patients with hypophosphaturia, a metabolic bone disease.

ALXN came under significant pressure in recent years, falling from a high of $206 in July 2015 to trade around $110 today. Some of the decline was due to broader biotech weakness, but it was also caused by a failed acquisition, the removal of two top executives and investors’ fears that competitors would develop biosimilars (biologics that are almost an identical copy of the original drug and the equivalent of generics in the pharmaceutical industry) to Soliris once the drug’s patents begin to expire in 2022.

The good news is that management is taking the right steps to get the company back on track, which is one of the reasons why I really like ALXN now. I believe it will be more shareholder friendly and careful with its capital going forward, as evidenced by management’s decision to work with activist investor Elliot Management, which has taken a position in ALXN, to fill an open seat on the board. Also, new CEO Ludwig Hantson made the tough but correct decision to cut the company’s workforce 20% last year in light of the revenue shortfalls from the disappointing acquisition.

The Key to Future Success

The real key for ALXN’s success, and what could make it a strong takeover target, is Alexion 1210, the next generation of Soliris.

Alexion 1210 is used in conjunction with Soliris to lower rates of hemolysis, the rupturing of red blood cells, in patients with aHUS and PNH. Phase I and II trials showed reduced fatigue and lower needs for transfusion with patients treated with Soliris alone. If the Phase III trial continues this early success, the patent life of Soliris will be extended and competition would be thwarted.

While the most recent clinical trial results were mixed — ALXN 1210 met its primary and reduced the need for transfusions compared to Soliris — it was only judged to be non-inferior, not superior to overall efficacy. However, I believe the results are good enough to support the stock around current levels and FDA approval of ALXN 1210 should get the shares firing on all cylinders again.

Hilary Kramer is the editor of GameChangersBreakout StocksHigh Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/alexion-pharmaceuticals-inc-alxn-stock-researching-turnaround/.

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