Is Alexion Pharmaceuticals Inc Poised for Years of Dominance?

Don't tell orphan drugmaker Alexion Pharmaceuticals (NASDAQ: ALXN  ) that the biotech sector's in a slump. This standout stock, best known for producing the most expensive drug in the world -- $400,000-per-year Soliris -- has outpaced the market handily so far in 2014. Year to date, Alexion's stock has jumped nearly 17%, crushing the Nasdaq Composite's (NASDAQINDEX: ^IXIC  ) flat year so far and outpacing many of biotech's biggest names.

Yet investors need more than just past performance; it's pivotal that top-notch biotech firms come through with growing drug sales to paint a rosy future for the company. Alexion stepped up to bat on Wednesday with its first-quarter earnings, but did this company impress investors heading into the heart of 2014?

Orphan-drug heavyweight

Source: Alexion.

High-priced orphan drugs used to treat rare and ultra-rare diseases have risen from market afterthoughts to investor gems. Alexion's own Soliris, used to treat a pair of rare blood disorders, has garnered at least 36% sales growth in each of the last two years and pulled in more than $1.5 billion in revenue in 2013. Alexion's not the only drugmaker showing off the potential of orphan drugs: Fellow orphan drug biotech leader Vertex Pharmaceuticals (NASDAQ: VRTX  ) has rallied behind the potential of Kalydeco, a cystic fibrosis treatment for select patient populations that pulled in more than $370 million last year and more than doubled 2012's revenue. Vertex's drug could emerge as a blockbuster in the coming years -- or even potentially a megablockbuster in the $5 billion annual sales range if Vertex expands Kalydeco's approved indications into larger cystic fibrosis patient pools.

With strong potential from Soliris, analysts had expected big things from Alexion going into its first-quarter earnings report. On average, Wall Street projected more than 95% year-over-year per-share earnings growth from the company, with revenue jumping 65.3% over 2013's first quarter. Given Soliris' rapid growth to among the elite drugs of the biotech sector, this hardly was out of reach for this strong company.

Not only hardly out of reach, it seems, but easily surpassed as well. Alexion thumped analyst projections by pulling in $1.53 in adjusted per-share earnings, and reeled in 67% year-over-year sales growth to beat on the top line as well. Along with a reduction of SG&A costs by 10%, those results pushed the company to raise its full-year profit outlook.

Investors sent Alexion's stock up 2.5%, but I think it still has room to run. Analysts project that Soliris could rack up more than $3 billion by 2018. Alexion has another five further indications for the drug currently under clinical development, according to its most recent pipeline update. If Soliris can expand to more patient populations, this drug could have a very bright future.

The company has more ammunition in its pipeline that should keep investors interested in its future. Hypophosphatasia drug asfotase alfa could launch in the U.S., Europe, and Japan next year, and peak sales for the drug could be north of $500 million.

Alexion's bright future
2014's been good to Alexion so far, but if the first quarter's any indication, this stock could keep on churning higher behind Soliris' success as the year progresses. Alexion's efforts to expand Soliris' indications could help this drug emerge as an even bigger hit in coming years, and if this company can diversify its product portfolio with asfotase alfa in the near future, and more drugs later on, Alexion investors could be poised to make big rewards.


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Dan Carroll

Dan began writing for the Motley Fool in 2012. He is a health care specialist who also follows the defense industry along with tracking the broader U.S. and international markets.

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