This article was written by Jason Schwartz, a Financial Analyst at I Know First

Alexion Stock Analysis 

“I’ve worked in the biopharmaceutical industry for many years, and I have been consistently impressed with Alexion” Paul Clancy

Summary:

• Alexion is best known for the development of Soliris
• Used to treat patients with PNH and aHUS, both rare medical conditions
• Internal investigation results in overhaul of senior management including CEO and CFO
• Bullish I Know First Forecast on AXLN

Alexion (ALXN) is an American pharmaceutical company committed to both the development and the delivery of life-transforming treatments for patients with rare diseases. The company is headquartered in New Haven, Connecticut. Alexion is best known for the development of Soliris.

Transformative Impact of Soliris

Soliris is used to treat patients with paroxysmal nocturnal hemoglobinuria (PNH). It is the first and only treatment that is approved by the Food and Drug Administration (FDA) for treatment of patients with PNH. It is a rare acquired, life-threatening disease of the blood. Patients with PNH commonly experience destruction of red blood cells, blood clots, and impaired bone marrow function. Soliris can also be used to treat atypical hemolytic-uremic syndrome (aHUS). aHUS is a rare, genetic, chronic disease that can damage vital organs, such as the kidneys, heart, and brain. The goal of the medication is to reduce hemolysis, which is the rupturing of red blood cells and the release of their contents into surrounding fluid.

Many people have benefited from Soliris. Before Soliris came to market, patients would suffer through years of kidney dialysis. Worst of all, death was a fairly common outcome for many patients with aHUS or PNH. Doctor Gianluigi Ardissino is quoted saying that “it’s the best drug I’ve seen for changing the outcome of a disease since I graduated in 1985.”

Cost Associated with Orphan Drugs

Soliris is one of the world’s most expensive drugs, Typically, the drug is priced anywhere between $500,000 to $700,000 a year. Soliris must be delivered by armed guards in some parts of the world. In the market for orphan drugs, Alexion is a key competitor. An orphan drug is a pharmaceutical agent that has been developed specifically to treat a rare medical condition. Consequently, orphan drugs have limited potential for profitability. In the United States, an orphan drug is defined as one that treats a disease affecting fewer than 200,000 in the country. According to a study done by John Hopkins University, orphan drugs accounted for 41 percent of all medications brought to the market in 2014. By 2022, sales of orphan drugs are expected to almost double globally.

However, patients may might need up to 26 treatments each year for the remainder of their lives. A fraction of a teaspoon of Soliris costs more than $18,000. Since Soliris accounts for nearly almost all of the company’s revenue, Alexion has managed to create enormous wealth out of less than 11,000 customers. In 2016, it generated $3 billion in sales. With a market valuation of approximately $24 billion, it has a market valuation similar to household names such as HP Inc. 

Overhaul of Senior Management

Such reliance on one product can easily lead to problems. In the past, senior management has pressured employees to convince customers to order Soliris earlier than needed. This was done in order to meet financial targets. This past November, Alexion announced it was conducting an internal investigation into its own sales practices. According to a news release, the company had come to the conclusion that management had acted inappropriately. Following the internal probe, management fled the company. The company’s chairman and co-founder, Leonard Bell, in addition to the chief executive officer, chief financial officer, and top compliance officer have all left the company within months.

Alexion was able to poach Ludwig Hantson from Baxalta, an American biopharmaceutical company. Since being appointed CEO in March, Hantson has made dramatic changes to the compliance team and appointed a head of culture. The company announced in May that the chief commercial officer, head of research, chief human resources officer, and the new chief financial officer were all leaving the company. Indicating that Hanston wanted to overhaul senior management after the investigation.

Paul Clancy Joins Alexion as CFO

Last week, it was announced that Paul Clancy will be joining the company as the newest Chief Financial Officer. Clancy is the former CFO of a Biogen, a publicly traded multinational biotechnology company. He will be the Alexion’s third CFO in the past year. He will replace Dave Anderson as the CFO. Unlike Anderson, Clancy has years of experience in biotechnology and pharmaceuticals. Anderson will resign at the end of August. To ensure a smooth transition, Anderson will remain as a senior advisor until then.

The news was welcomed by Wall Street. The day following the announcement, shares of ALXN were up nearly 8 percent. Paul Clancy is a well-known and respected name in the industry. Geoffrey Porges, an analyst at Leerink Partners, went as far to refer to Clancy as a “careful steward of capital” and a “doughty protector of margins.” We believe that ALXN will be in good hands with Ludwig Hantson and Paul Clancy at the helm.

I Know First Algorithm Bullish Forecast For ALXN

Past I Know First Forecast Successes With ALXN

In such as the one dated on June, 11 ,2017, the algorithm accurately forecast a signal for Under Armour. In a three day time span, the stock rose impressively by 11.98%, beating the S&P 500 return of 0.25%. The market premium calculates to an astounding 11.73%.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.