Alexion on a roll as Soliris gets label expansion in EU; although flying under the radar, analysts, investors still bullish.

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The News:

Alexion Pharmaceuticals Inc. (New Haven CT) got another shot in the arm this week with the EU approving its key revenue driver Soliris for an additional indication. EU approval was for the treatment of patients with refractory generalized myasthenia gravis (gMG), making it the first and only complement-based therapy approved in the EU for an ultra-rare subset of gMG. Alexion will launch Soliris for this indication initially in Germany and is evaluating additional EU launches, according to Nasdaq.

The gMG indication represents incremental growth opportunity for Soliris and enables the company to enter the neurology therapeutic area. Soliris is currently under review in the US and Japan (response expected early next year) for the gMG indication. With the EU granting approval, it looks like Soliris will also gain approval in the US where a decision is expected by Oct 23, 2017.

According to information provided by the company, about 60,000 to 80,000 Americans suffer from myasthenia gravis (MG). Alexion’s targeted population will be approximately 5%-10% of the total MG patient population. Data from a late-stage study (REGAIN) indicate that about 60% of these refractory gMG patients will respond to treatment with Soliris.

Soliris is Alexion’s key growth driver with the drug garnering sales of $1.6 billion in the first half of 2017. It’s also approved for two severe and ultra-rare disorders resulting from chronic uncontrolled activation of the complement component of the immune system–paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). The company expects Soliris revenues of $3.075 to $3.125 billion in 2017, assuming the identification of a steady number of new patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS) worldwide.

Steve’s Take:

In case you haven’t been following the patent and FDA news recently, somebody from Connecticut, flying just under Wall Street’s radar, is headed toward some very bright days with its portfolio of new offerings—one, in particular.

First, there was news last week that Alexion Pharma announced it has won three new patents for the rare-disease biologic Soliris that are valid until 2027–six and seven years beyond its current EU and US patent expirations.

According to FiercePharma, they cover its active ingredient eculizumab, its formulations and a method of treating the ultra rare, but potentially fatal, paroxysmal nocturnal hemoglobinuria. With a Soliris biosimilar from Amgen Inc. (Thousand Oaks CA) creeping up, Alexion is amassing patents for Soliris, obviously hoping to expand the period it can ward off cheaper imitators.

Soliris, which lists for more than $500,000 per patient year, is one of the most expensive drugs on the market and has garnered more than $2.8 billion a year for Alexion. It is projected to reach $5.6 billion in sales by 2020, according to FiercePharma.

As with AbbVie Inc.’s (North Chicago) big-ticket Humira, these biologics generate such huge sales, companies can easily afford to hire the top patent law firms to pile on the legal barriers to market entry of even FDA-approved biosimilars.

These patent exercises merely reflect profit-driven legal maneuvers, sanctioned by the US laws that help continue filling pharma’s coffers (and their lawyers’). Yes, the patent and FDA structures and hurdles are meant to reward risk taking. And the investment of time, effort, energy and brute cash to discover and develop new medicines is huge.

But the financial rewards also can be huge and ultimately come at the expense of the payers; namely, the rest of us. This isn’t quite the case in the EU and other universal-payer nations which have the bargaining power to get a “fair” price for the meds they purchase for their citizens.

As an aside, another optimistic development in the quest for fair drug pricing relates to President Trump’s appointment of Scott Gottlieb, MD, as new FDA commissioner. I believe Gottlieb is the best appointee of the entire lot so far. And the President seems to be leaving him alone to do his job, which Gottlieb has echoed repeatedly, namely: bring down drug costs.

One of Gottlieb’s first assignments to his staff was to make a list of all the brand drugs whose patents had expired but for which no company had applied to sell a generic version. Brilliant! But why didn’t anyone think of that? By the way, Gottlieb did a tour with the FDA earlier in his career, so he knows the agency inside and out.

Furthermore, a little over 10 months into Fiscal Year 2017 and the FDA) is on pace to break its record for abbreviated new drug application (ANDA) approvals from last year, according to Regulatory Affairs Professionals Society.

According to the latest version of the activities report of the generic drug program, FDA has approved 633 generic drugs in FY 2017, which compares with a total of 651 approvals in FY 2016.

Also a positive: complete responses (i.e., rejections) for generic drugs are down significantly from last year, with 1,292 sent so far in FY 2017, which compares with 1,725 complete responses sent in FY 2016.

Bottom Line:

What do the analysts think of Alexion?

According to the Financial Times, as of Aug 18, 2017, the consensus forecast among 20 polled investment analysts covering Alexion advises that the company will Outperform the market. This has been the consensus forecast since the sentiment of analysts deteriorated on Nov 04, 2010. The previous consensus forecast advised investors to Buy Alexion. The company currently carries a Zacks Rank #1 (Strong Buy).

Recommendations 1yr ago Latest
Buy 7 8
Outperform 8 8
Hold 5 4
Underperform 0 0
Sell 0 0

Share price forecast:

1-year price change +4.19%

The 19 analysts offering 12-month price targets for Alexion have a median target of $165.00, with a high estimate of $180.00 and a low estimate of $121.00. The median estimate represents a 20% increase from the last price of $137.66 at close Thursday, August 24, 2017.

Steve's Take: I expect growth at @AlexionPharma to continue being driven by Soliris. Click To Tweet

There are a lot of data and news that favor buying this name, although there’s plenty of risk as well. I expect growth at Alexion to continue being driven by Soliris. Other new products–Strensiq and Kanuma–are performing well and are expected to lift revenues. With this latest label expansion for Soliris in the EU, however, and the strong upside price forecast of some 20 analysts, this is a Buy right now. Before the radar picks up the glow of future trading profits emanating from Connecticut.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. MondayMorning.com has a disclosure policy.