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Can Anything Stop Alexion Pharmaceuticals?

Sean Williams
June 26, 2012

Shares of Alexion Pharmaceuticals (Nasdaq: ALXN  ) recently hit a 52-week high. Let's take a look at how it got there and see if clear skies are still in the forecast.

How it got here
The strength behind Alexion's recent results lay with the fact that its product development is targeted at rare diseases. Drugs for rare diseases often have little competition, or, in Alexion's case, no competition, and receive fast-track designation when being reviewed by the Food and Drug Administration since the drugs often hit a currently unmet medical need.

Alexion's only FDA-approved drug is Soliris, which is protected from competition through most of 2014. Soliris is used to treat paroxysmal nocturnal hemoglobinuria (PNH), a cause of anemia, and was recently approved in both the U.S. and European Union to treat atypical hemolytic uremic syndrome (aHUS). The drug has been well-accepted and Alexion has boosted its earnings forecast on multiple occasions over the past few years.

However, there are pitfalls that come with reliance on just one drug. Soliris' current product pipeline features expanding Soliris' use and Asfotase alfa, but nothing currently in phase 3 trials, giving the company little to fall back on if Soliris sales slump in its current indication. In short, Alexion is a one-trick pony that now commands an $18 billion market cap despite projections of just shy of $1.1 billion in Soliris sales this year.

How it stacks up
Let's see how Alexion stacks up to its peers.

ALXN Chart

ALXN data by YCharts

As you can see, rare disease-focused biotechs have been the darlings of Wall Street over the past nine months.

Normally here we would look at a fundamental comparison between Alexion and its peers, but since Alexion has no direct competitors to PNH or aHUS, we'll instead look at how reasonably it and other rare-disease-focused stocks are valued.

In addition to Alexion, Isis Pharmaceuticals (Nasdaq: ISIS  ) , Protalix BioTherapeutics (NYSE: PLX  ) , and Synageva BioPharma (Nasdaq: GEVA  ) are biotechs focused on rare-disease applications.

Isis Pharmaceuticals' lead drug candidate, Kynamro, aimed at treating homozygous familial hypocholesterolemia (don't you wish you'd become a doctor?) and developed in collaboration with Sanofi's (NYSE: SNY  ) wholly owned subsidiary Genzyme was recently submitted to the FDA for standard review. The submission triggered a $25 million milestone payment from Sanofi, but even more important, an approval could mean a large chunk of the $35 billion market for cholesterol-lowering drugs.

But not all rare-disease stocks are worth your time... or money. Protalix BioTherapeutics' lead drug, Elelyso, is targeted at treating Gaucher Disease, and although the drug was recently approved b