Alexion Pharmaceuticals

ALXN : NASDAQ : US$131.72
BUY 
Target: US$161.00

Alexion is a biotechnology company focused on the
development and commercialization of therapies for rare
diseases with high unmet need. Alexion has one
commercially available product, Soliris, for the treatment
of PNH and aHUS. The development pipeline consists of
additional indications for Soliris including MG, NMO and
transplant rejection, as well as TT30, asfotase alpha,
cPMP and ALXN1007. Alexion is headquartered in
Chesire, Connecticut.
All amounts in US$ unless otherwise noted.

Life Sciences — Biotechnology
A DIVERSIFIED STORY EMERGING IN 2014+; RAISING PT TO $161
ALXN shares traded at an all-time high on Friday, Jan .3 and we expect this
momentum to continue in 2014 as clinical progress (internal mandate to
have ~8-10+ programs in the clinic) and M&A/partnerships transform the
name into a diversified play focused on rare diseases, with pipeline catalysts
layered on to earnings execution. Specifically, we expect positive events from
asfotase alfa approval for hypophosphatasia (HPP) in Q4 following mid-14
regulatory filings (natural history data in Q1) in addition to cPMP healthy
volunteer (H1) / retrospective (H2) in MoCD and Soliris 9-week
living/deceased-donor kidney transplant data in early-H2. We also expect a
positive NICE (U.K.) decision on Soliris for aHUS in mid-H1 to bolster the
revenue ramp. Finally, pipeline progress will be driven specifically by three
Soliris registration trial initiations: MG and NMO (Q1) and DGF/kidney
transplant (mid-14), two P2 ALXN1007 POC trials (Q1) and two nextgeneration
Soliris molecules entering the clinic in 2014. Our DCF is now
discounted back to YE14 and we are increasing our probability of success for
asfotase alfa – raising our PT to $161 from $138.
 Physician feedback on asfotase alfa is very positive: Our physician
diligence indicates a dire need for a therapy to treat HPP patients,
especially in the more severe, early-onset form (ALXN received
breakthrough designation for asfotase to treat patients with HPP “whose
first signs or symptoms occurred prior to 18 years of age”). Physicians are
comfortable with the mechanism of action of asfotase (bone-targeted ERT)
and note asfotase may have an effect other than through bone (some
patients experience improvements in weakness, fatigue and pain before
bone healing is seen). On approval, physicians would expect to offer this
therapy to all of their early-onset patients (obvious risk/reward) and most
of their adolescent/adult patients (due to significant symptoms). We model
for launches in Q4 (U.S.) and 2015 (E.U.) with peak sales of $881M in
2023.

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