Alexion Aquires Anemia Play

10/10/2018 5:00 am EST

Focus: HEALTHCARE

Crista Huff

Editor, Cabot Undervalued Stocks Advisor

Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders, notes Crista Huff, growth stock expert and editor of Cabot Undervalued Stocks Advisor.

Last week, Alexion announced the acquisition of Syntimmune for $400 million up front and up to $800 million upon reaching performance milestones. Syntimmune is far along in the development of SYNT001, a treatment for warm autoimmune hemolytic anemia, adding to Alexion’s pipeline of treatments for rare diseases.

The Cowen & Co. analyst believes that SYNT001 could contribute $1 billion in annual revenue to Alexion. The acquisition was previously budgeted and will not therefore affect the 2018 earnings outlook. The deal is expected to close in the fourth quarter of 2018.

Alexion also revealed successful trials of Soliris in combating symptoms of neuromyelitis optica (NMO), an inflammatory disease of the central nervous system.

Management intends to promptly file an application with regulators for approval of Soliris in treating NMO, which could add hundreds of millions of dollars to Alexion’s annual revenue.

Potential net income from the Syntimmune acquisition and from the new Soliris label indication is not yet figured into consensus earnings estimates. ALXN is an undervalued aggressive growth stock. Analysts expect EPS to grow 23.4% and 18.4%. The corresponding P/Es are 19.1 and 16.1.

The stock rose rapidly in September to price resistance at about $137. The stock will most likely need to rest (or pull back) while it gathers strength for its next run-up.

The best case scenario this year — barring a takeover offer — is that ALXN could rise to the upper $140’s by year-end, where it will still be undervalued. Buy on pullbacks. 

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