Is Alexion Pharmaceuticals a Smart Buy for 2021?

Headquartered in Boston, Massachusetts, Alexion Pharmaceuticals, Inc. (ALXN) is a biopharmaceutical company that develops and commercializes life-transforming therapeutic products. As a leader in rare disease therapies for more than 25 years, the company has developed and commercializes two complement inhibitors to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). It also markets the only approved complement inhibitor to treat anti-acetylcholine receptor (AchR) antibody-positive generalized myasthenia gravis (gMG) and neuromyelitis optica spectrum disorder (NMOSD).

Last December, ALXN entered an agreement with Astrazeneca PLC (AZN), for it to acquire ALXN. Subject to regulatory clearances and shareholder approval from both companies, the acquisition is expected to close in the third quarter of 2021. Consequently, it is expected that the combined company will have an enhanced global footprint and broad coverage across primary, specialty and highly specialized care.

ALXN  recently delivered another strong quarter, reporting an increase in net product sales for SOLIRIS, ULTOMIRIS, and STRENSIQ. Also, over the past year, ALXN rallied 53.7% to close yesterday’s trading session at $161.75, after hitting its all-time high of $162.60. This impressive performance and potential upside based on several factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates ALXN:

Trade Grade: A

ALXN is currently trading well above its 50-day and 200-day moving averages of $152.26 and $123.19, respectively, indicating an uptrend. Moreover, ALXN has gained 33.9% over the past three months, reflecting solid short-term bullishness.

For the third quarter ended September 30, 2020, ALXN’s total revenues climbed 25.8% year-over-year to $1.59 billion. Sales of SOLIRIS increased 5% year-over-year to $1,042.3 million, and ULTOMIRIS sales increased 222% year-over-year to $289.3 million. Its net income increased 23.6% year-over-year to $578.1 million, yielding non-GAAP EPS of $3.24, which increased 16.1% year-over-year.

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In November, the European Commission (EC) approved ALXN’s new 100 mg/mL intravenous (IV) formulation of ULTOMIRIS (ravulizumab) for the treatment of two ultra-rare diseases — paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). Prior to that, in September, Japan’s Ministry of Health, Labour and Welfare (MHLW) approved ULTOMIRIS (ravulizumab) for adults and children living with aHUS.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, ALXN is well positioned. The stock is currently trading just 0.5% below its 52-week high of $162.60.

ALXN has grown  over the years with a strong focus on research & development. As a result, the company’s  revenue has grown  at a CAGR of 19.1% over the past three years, while its EBITDA has increased at a CAGR of 31.1% over the same period. Also, its EPS has increased at a CAGR of 24.4% over the past three years.

Peer Grade: A

ALXN is currently ranked #4 out of 484 stocks in the Biotech industry. Other popular stocks in the biotech group are Alnylam Pharmaceuticals, Inc. (ALNY), Gilead Sciences, Inc. (GILD), and Takeda Pharmaceutical Company Limited (TAK).

With a 53.7% gain, ALXN has comfortably beaten the returns of these popular industry participants over the past year. While ALNY and GILD have gained 41.7% and 5.6%, respectively, over the same period, TAK has lost 8.3%.

Industry Rank: B

The Biotech industry is ranked #22 of the 123 StockNews.com industries. The companies in this industry manufacture drugs, therapies, vaccines, and medical diagnostic tests for the treatment of health disorders and illnesses.

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To successfully launch a product, the companies in this industry must invest heavily  in research and development. Nevertheless, this industry is expected to witness greater demand in the coming months as research progresses with the help of technological advancements.

Overall POWR Rating: A (Strong Buy)

Overall, ALXN is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

Continuing its momentum, ALXN has gained 59.4% over the past six months. We believe it is wise to bet on the company because it is strategically positioned to generate big returns in the near term based on its continued business growth and strong financials.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for ALXN. It has an average broker rating of 1.86, representing  favorable analyst sentiment. Moreover, ALXN has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $6.54 billion for 2021 represents  a 9.2% increase year-over-year. Its EPS is expected to grow 6.8% in 2021, and at a rate of 11% per annum over the next five years.

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ALXN shares were trading at $156.80 per share on Wednesday afternoon, down $4.95 (-3.06%). Year-to-date, ALXN has gained 0.36%, versus a -0.21% rise in the benchmark S&P 500 index during the same period.

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About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…

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