Description:
Alexion Pharmaceuticals (ALXN) is a single product company, its sole product, Soliris, is a drug for life-threatening conditions. The company’s headquarters are based in Cheshire, CT, USA, and it has local offices in Lausanne, Switzerland; Tokyo, Japan; and Sydney, Australia. The company’s principal manufacturing facility is in Smithfield, RI, USA. Alexion employs about 500 people worldwide.
The principal use of Soliris occurs in relation to paroxysmal nocturnal hemoglobinuria (PNH), an ultra-rare blood disorder, and atypical hemolytic uremic syndrome (aHUS). Soliris was approved for sale in 35 countries for the treatment of PNH, and in the US and the European Union for the treatment of aHUS. Only a small population of patients respond to treatment with Soliris; estimates range from 8,000 to 12,000 people in North America and Europe. But given that Alexion is the sole provider of such a product, it can easily enforce the price required to cover Soliris’ decade long research and development.
The company currently has a strong portfolio of assets in the R&D pipeline with a principal focus on developing treatments for complete system dysfunctions which result in severe inflammation of the immune system. In 2011, Alexion acquired Enobia Pharma with the aim of reinforcing its research and development pipeline in the field of ultra-rare diseases and the development and marketing of asfotase alfa, a human recombinant protein for patients with the genetic metabolic disease Hypophosphatasia (HPP).
Alexion recorded sales growth in 2012 of 44.8%, and based on present available figures another jump of 35% can be expected for the 2013 financial year. This short-term downside might be disappointing; however, with clinical trials of Soliris for neurologic and nephrology use on track, the outlook for 2014 and beyond through to 2020 is extremely promising. By 2020, it is expected that company sales will have reached about USD 4.2 billion, compared with USD 1.134 billion in the 2012 financial year.
Alexion’s specialized business makes it a good takeover target (TOT). There are several reasons for this: a) the annual Soliris treatment costs are about USD 400,000, b) the present operating margin is around 40%, but c) it is expected to increase to about 60% by 2020. On the other hand, the present company valuation is about USD 20 billion, which makes such a deal only possible for very few; nevertheless, highly valuable (and attractive) for those with a complementary division and strong sales team already in place.
Strengths and weaknesses analysis / Fundamental analysis:
Strengths:
- ALXN’s sole product Soliris, sells for about USD 400k per patient per annum, imitation would be very difficult.
- Soliris has extremely high entry hurdles for the competition that would be almost impossible to match,
- ALXN is in process of testing complementary applications of Soliris,
- Given its product, ALXN is a TOT.
Weaknesses:
- The cost of treatment is prohibitive to large-scale application, and further sales have therefore plateaued,
- ALXN is a single product company which makes it very vulnerable to any setbacks and/or clinical trial failures,
- The share price has reached an all-time high recently, which may generate some profit-taking,