Why Oppenheimer Says Alexion Is a Cheap Buy Now

By Chris Lange Published Sep 24, 9:55AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

The biotech and pharmaceutical industries were hit hard recently when a presidential candidate posited via Twitter that drug prices were absurdly high. This caused a massive sell-off in the stocks. Despite this sell-off, one key analyst sees an opportune entry point for Alexion Pharmaceuticals Inc. (NASDAQ: ALXN).

Oppenheimer maintained its Outperform rating with a $228 price target for Alexion, which implies upside of roughly 43% from Wednesday’s close. The firm recommends buying Alexion on recent weakness, noting that near-term launches of Strensiq and Kanuma are low-risk opportunities likely to drive above-consensus revenue growth over the next 12 to 18 months.

The firm noted that its conservative slower-than-historical ERT launch estimates for Strensiq and Kanuma yield above consensus revenue starting in the second half of 2016. Oppenheimer expects U.S. approval of Strensiq and Kanuma by the 2015 year end and launch acceleration likely in 12 to 18 months, with further patient identification strategies driven by improved diagnosis due to treatment availability. It anticipates readouts from a mostly under-appreciated pipeline, including 30 pre-clinical programs yielding upside in 2016 and beyond. Finally, Oppenheimer believes any pricing pressure concerns are unwarranted. Alexion historically manages mandatory discounting and organic growth well.

Estimates for the ERT launches were adjusted to reflect anticipated timing of sales. Oppenheimer estimates both launches to be similar to slow historical enzyme replacement therapy launches that require a high-touch selling model.

Ultimately the firm believes that Alexion is trading at a discount to rare disease peers, despite conservative launch expectations and consistent profitability. Patient identification is a core competency of Alexion that drives organic growth of the Soliris franchise and should also apply to new launches. This current weakness provides a buying opportunity, according to Oppenheimer.

So far in 2015, Alexion has underperformed the market. The stock is down 13.7% year to date, while in the past 52 weeks it is up only 0.6%.

Shares of Alexion closed Wednesday up 0.2% at $159.63 on its 52-week trading range of $150.06 to $208.88. The stock has a consensus analyst price target of $223.88. Alexion shares were down 1.3% at $157.60 just after Thursday’s opening bell.

ALSO READ: Merrill Lynch Has 4 Pharma Stocks to Buy Against Political Chatter

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.