Wachovia Downgrades Alexion Pharma
Associated Press 02.15.08, 6:25 PM ET
Alexion Pharmaceuticals Inc. shares fell sharply Friday, as a Wachovia Capital Markets analyst downgraded the stock, saying sales expectations for its Soliris blood disorder drug are already priced in and the company no longer appears to be a takeover target.
Analyst George Farmer lowered his rating to "Market Perform" from "Outperform," and cut his valuation range to between $69 and $77 from a between $80 and $87 previously.
He said the rapid uptake of Soliris in the U.S. is now priced into the stock, and he no longer believes Alexion is a takeover target, which had justified his higher price target range.
Soliris is an antibody used to prevent the breakdown of red blood cells in people with genetic condition known as paroxysmal nocturnal hemoglobinemia, or PNH.
"With patient growth largely coming from Europe, anticipated slowing growth in the U.S. (both due to slower patient growth and expected reduced adherence to the twice/per month label), and the extreme scarcity of PNH, we believe revenue guidance of $200 million to $215 million, while achievable, represents the best case scenario," Farmer wrote in a note to clients.
He thinks revenue growth will likely plateau in 2009 with a potential bump in 2010 from new sales in Asia.
In addition, Farmer said he no longer thinks Alexion is an acquisition target, believing the company would have been purchased by now if that were true.
"The intense effort to identify and coddle patients under the Soliris OneSource program may not necessarily fit in with larger company business models who have hematology-oncology sales forces of their own," he added.
Shares fell $5.70, or almost 8 percent, to $65.98. Over the past 12 months, the stock has ranged between $35.13 and $80.12.
Banc of America Securities analyst William Sargent continued to back his "Buy" rating and $88 price target, however, and lifted his outlook for 2008 earnings per share on increased optimism for Soliris sales in the EU. He expects the German launch to have the most significant PNH patient contribution through 2008, but also predicts additional upside from France, Italy, UK and Spain starting in the second half of the year and the Netherlands contributing late in the year.
"With the anticipated continuing successful EU launches of Soliris over the next 12 months, we are optimistic for Alexion's continuing share appreciation and would not rule out a potential take-out," he wrote in a note to investors.
Goldman Sachs (nyse: GS - news - people )' Meg Malloy maintained a "Neutral" rating and $83 price target on the stock, noting that Alexion reported 4th-quarter Soliris sales of $33.9 million, above both Goldman's $29.3 million estimate and the Street's $30.2 million consensus.
Malloy also pointed to the company's smaller-than-expected quarterly loss on higher revenues and lower expenses.
Cowen and Co.'s Rachel McMinn said she views 2008 sales guidance as conservative and expects increased focus on Alexion's bottom line as the company gets closer to profitability, now expected in the second half of the year.
"Based on our updated earnings per share estimates, we believe Alexion is set to outperform the market by more than 20 percent in 2008," she wrote in a client note.
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