Alexion Pharmaceuticals, Inc. Scores 2 Regulatory Wins

Source: Alexion Pharmaceuticals.

Investors in Alexion Pharmaceuticals , a biopharmaceutical company with a focus on rare diseases, received a double dose of good news earlier this week. The company just announced that European regulators cleared two of its new drugs for sale: Kanuma, which is used to treat lysosomal acid lipase deficiency, and Strensiq, which treats pediatric-onset hypophosphatasia.

As Alexion's investors have come to expect, both of these diseases are designed to treat extremely rare genetic disorders that have very high mortality rates and currently have few treatment options -- precisely this company's area of expertise. But what do these new drug approvals mean for Alexion's growth prospects?

Acquiring growthPatients who have lysosomal acid lipase deficiency,or LAL-D, experience a decrease in activity of the LAL enzyme, causing the body to accumulate high amounts of cholesterol esters and triglycerides. This excess buildup occurs in vital organs throughout the body and can result in liver failure, cardiovascular disease, and a number of other deadly consequences.

Kanuma is an enzyme replacement therapy that helps to reduce this substrate accumulation in the body, and clinical studies showed that patients who used Kanuma saw a reduction in lipid accumulation, leading to better health outcomes for those patients.

Kanuma only recently entered Alexion's pipeline this year, as the company acquired the molecule through its $8.4 billion acquisition of rare-disease-focusedSynageva. This approval should go a long way in helping Alexion recoup its investment, as analysts forecast sales of Kanuma to eventually reach blockbuster status, with peak sales eclipsing $1 billion.

Patients in the U.S. who have LAL-D hopefully won't have to wait too much longer on regulatory news, as in the U.S. Kanuma has been granted a Breakthrough Therapy designation and Priority Review by the FDA. The drug is alsocurrently pending approval in Japan.

A homegrown solutionStrensiq was approved to treat hypophosphatasia, or HPP, an ultra-rare metabolic disease that causes defective bone mineralization, which can lead to bone malformation, seizures, and even premature death. Strensiq helps to replace the enzyme that is missing from these patients' bodies, which can help to reverse the mineralization defects in the patients' bones. This can prevent many of the disease's effects.

Stensiq has already been cleared for sale in Japan and Canada, and the FDA has granted the drug priority review. Analysts expect big things from this therapy, with peak sales estimated around $1 billion.

Diversifying the revenue baseThese approvals are a greatdevelopment for the company: Up until now, it has been a one-drug story. The company'sfinancial success has been 100% dependent on Soliris, a super-expensive drug approved to treat two rare and life-threatening diseases:paroxysmal nocturnal hemoglobinuria, or PNH, and atypical hemolytic uremic syndrome, or aHUS.

Soliris has certainly proven to be a huge revenue-generator for Alexion, as this single drug cranked out more than $636 million in sales in the last quarter alone, up a strong 24% over the prior-year period. These results were so strong that the company actually nudged up its revenue estimate for the year to $2.6 billion-$2.62 billion, despite assuming a 6% hit due to the craziness in the foreign exchange rates.

Despite this revenue strength, Alexion actually pulled back a bit on its all-important non-GAAP earnings-per-share guidance for the year as a result of costs related to the Synageva acquisition, and now expects a range of $4.70 to $4.80 per share, down from its previous guidance of $5.60 to $5.80 per share. While seeing a hit like that is never pleasant, I think the Synageva acquisition was a great move, as it should help to diversify future revenue growth.

Is the stock a buy?Alexion has long been a dream stock for investors, and the stock's long-term performance is a prime example of why you should strongly consider adding biotech to your portfolio. Assuming the company can hit the midpoint of its guidance, the stock is currently trading for around 36 times 2015 earnings, which I call a fair price for a company that is currently launching two new products that hold blockbuster potential. For opportunistic biotech investors who want to add a profitable, long-term winner to their portfolio, I think Alexion is currently a compelling choice.

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