Good News for Alexion Pharma

Alexion Pharmaceuticals Inc. (ALXN) received a boost when the U.S. Food and Drug Administration (FDA) sanctioned the company’s Rhode Island manufacturing facility (ARIMF) in Smithfield as a second source of commercial supply for Alexion’s sole marketed product Soliris (eculizumab). The European Medicines Agency has already approved ARIMF as a second source of supply for the drug in the European Union (EU).

Management stated that it will carry on its agreement with its long-time contract manufacturer apart from sourcing Soliris from ARIMF. The company is seeking approval from the regulatory authorities of other countries (where it operates or is establishing operations) for ARIMF.

We note that Soliris was approved by the FDA and the European Commission in 2007 for the treatment of paroxysmal nocturnal hemoglobinuria (PNH). This is a rare genetic blood disorder characterized by the onset of severe hemolytic anemia, chronic fatigue and intermittent episodes of dark colored urine, known as hemoglobinuria. Currently, Soliris is the only drug available for the treatment of PNH patients. The drug, which is also approved in Canada, Latin America and Australia, received marketing approval in South Korea, Switzerland and Japan in 2010.

Soliris has been granted orphan drug designation for the treatment of PNH which means Alexion has market exclusivity for the drug for seven years in the U.S. and ten years in Europe. We note that strong Soliris sales have helped the company deliver profits since the second quarter of 2008.

Soliris is also being developed for other indications. These include atypical hemolytic uremic syndrome, a rare disorder that can lead to kidney failure or death; dense deposit disease, a rare and severe kidney disorder; myasthenia gravis, a rare and severe neuromuscular disorder; multifocal motor neuropathy, a rare and severe autoimmune disorder. Currently, there are no approved treatments for any of these disorders and the successful development of Soliris for one or more of these indications will further help increase the market potential of this product.

However, we remain concerned about the company’s dependence on a single product for growth. Given the absence of any late-stage pipeline candidate, we are concerned about the company’s long-term growth prospects.

Our Recommendation

Alexion currently has a Zacks #3 Rank, which translates into a short-term Hold rating. We are also Neutral on the stock in the long term. Our Neutral stance indicates that the stock is expected to perform in line with the U.S. equity market over the next 6+ months. We advise investors to retain the stock over the time period.

ALEXION PHARMA (ALXN): Free Stock Analysis Report

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