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What's Behind Alexion Pharmaceuticals' Strong Q2 Results

By Keith Speights – Jul 30, 2020 at 12:00PM

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It wasn't the company's blockbuster drug Soliris this time around.

Alexion Pharmaceuticals (ALXN) stock has been on a big roll over the last few months. However, it hasn't been enough to outperform the S&P 500 index -- and Alexion's shares are still in negative territory year to date.

But Alexion provided good news to investors with its second-quarter results announced before the market opened on Thursday. Here are the highlights from the Q2 update.

Masked and gloved woman holding a red capsule between her thumb and index finger.

Image source: Getty Images.

By the numbers

Alexion reported revenue in the second quarter of $1.44 billion, a solid 20% year-over-year jump. This figure easily beat the average analysts' Q2 revenue estimate of $1.28 billion.

The company's bottom line didn't look as great, though. Alexion announced a net loss in Q2 of $1.1 billion, or $4.84 per share, based on generally accepted accounting principles (GAAP). This reflected significant deterioration from GAAP earnings of $460 million, or $2.04 per share, posted in the prior-year period.

But Wall Street pays more attention to adjusted numbers than it does GAAP results. Alexion recorded adjusted non-GAAP earnings in Q2 of $702.2 million, or $3.11 per share. This was well above the adjusted earnings of $605 million, or $2.64 per share, generated in the second quarter of 2019. It also blew past the consensus analysts' adjusted earnings estimate of $2.59 per share.

Behind the numbers

Alexion's revenue growth would have been a little better were it not for foreign exchange headwinds. According to the company, the negative impact of currency fluctuations caused its total revenue to be $15.9 million lower, or around 1%.

As usual, Soliris generated the bulk of Alexion's revenue in the second quarter. Sales of the rare-disease drug totaled $975.5 million, down slightly from sales of $980.8 million in the prior-year period. However, this decline wasn't overly concerning. Sales for Ultomiris, the heir apparent for Soliris, soared 363% year over year to $251.1 million. 

Hypophosphatasia drug Strensiq also performed well, with Q2 sales rising 30% year over year to $184.3 million. Sales for Kanuma, an enzyme therapy for treating lysosomal acid lipase deficiency, increased 28% to $33.6 million.

What caused the glaring plunge in Alexion's GAAP bottom line? The company recorded impairment charges of more than $2 billion primarily related to what it referred to as a "revised strategic view" of Kanuma.

Looking ahead

Alexion boosted its full-year 2020 guidance. The company now anticipates revenue of $5.55 billion to $5.6 billion in full-year 2020, up from its previous guidance of $5.23 billion to $5.33 billion. It projects GAAP earnings per share (EPS) between $0.96 and $1.30, down from its previous forecast of a range of $8.14 to $8.47. Non-GAAP EPS is expected to be between $10.65 and $10.95, up from previous guidance of $10.45 to $10.75.

There are potential catalysts for the biotech stock in the coming months. Alexion hopes to win U.S. and European Union approval for its Ultomiris 100 mg/mL formulation. The company has several late-stage clinical studies in progress, including one evaluating Ultomiris in treating COVID-19 patients. Also, Alexion CEO Ludwig Hantson said that the company plans to "return value to shareholders through an expanded stock buyback program."

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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