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Alexion (ALXN): Will the Stock Continue to Suffer in 2017?

Alexion Pharmaceuticals, Inc.ALXN has had a bumpy ride throughout 2016 with shares of the company plunging 33.8%. Alexion has largely underperformed the Zacks classified Medical-Biomedical and Genetics industry, which registered a decline of 24% during the year.

Setbacks Faced

Alexion made it to the headlines several times last year and all because of the wrong reasons. Shares of the company touched a 52-week low in Dec 2016 after it announced the sudden resignation of its key executives - the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) - during an ongoing internal investigation into the sales practices related to its key drug, Soliris.

The company's Audit and Finance Committee was investigating into allegations made by a former employee regarding the sales practices involving Soliris. Particularly, the committee is investigating into whether company personnel have engaged in sales practices that were inconsistent with its policies and procedures, and the related disclosure and other considerations raised by such practices. This sales probe led to a delay in the filing of the company's Form 10-Q for the period ended Sep 30, 2016.

With the investigation close to completion, the company expects to file the 10-Q no later than Jan 2017.

Although Alexion has refrained from commenting on the issue, the timing of the executives' departure did not go unnoticed by investors (Read more: Alexion Slips to 52-Week Low as CEO, CFO Quit amid Probe ).

We note that Soliris is the company's main growth driver. Approved for the treatment of two life-threatening ultra-rare disorders - paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome, the drug registered sales of $2.1 billion in the first nine months of 2016. Soliris is expected to bring in revenues in the range of $2.835-$2.875 billion in 2016.

If the 10-Q filing introduces any change in the business outlook, things are sure to get worse for Alexion.

Moreover, Alexion has faced significant setbacks in its attempts to expand Soliris' label, which are further adding to the company's woes. Last month, Soliris failed to meet the primary endpoint in a phase II/III study - PROTECT. The drug was being evaluated for the prevention of delayed graft function (DGF) in adult recipients of a deceased-donor kidney transplant who are at increased risk of the disease (Read more: Alexion Soliris Fails in Phase II/III Delayed Graft Function Study ).

Last June, Alexion shares took a beating after the company reported disappointing top-line data from a late-stage study (REGAIN) that was conducted to evaluate Soliris for the treatment of patients suffering from refractory generalized myasthenia gravis (Read more: Alexion's Soliris Misses Phase III Primary Efficacy Endpoint ).

Making matters worse, Alexion has also been feeling the heat of the drug pricing controversy that has been plaguing the healthcare sector for more than a year now. The issue has weighed heavily on the biotech sector with the NASDAQ Biotechnology Index losing 17.3% in 2016.

In addition, President-elect Donald Trump's recently disclosed intentions of targeting excessive drug price hikes do not bode well. The future of the biotech sector is shrouded in uncertainty until Trump formalizes a healthcare plan.

Given the aforementioned issues, along with macroeconomic uncertainties like pricing concerns, we expect the Zacks Rank #3 (Hold) stock to continue to be under pressure in 2017.

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ALEXION PHARMA Price and Consensus

ALEXION PHARMA Price and Consensus | ALEXION PHARMA Quote

Stocks to Consider

Some better-ranked stocks in this industry include Cambrex Corporation CBM , Arena Pharmaceuticals, Inc. ARNA and Anika Therapeutics Inc. ANIK . While Cambrex and Arena sport a Zacks Rank #1 (Strong Buy), Anika carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Cambrex's earnings estimates increased 5.2% for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters, with an average beat of 19.78%. Its share price was up 22.3% in 2016.

Arena's loss estimates for 2017 narrowed by 3% over the last 60 days. The company posted a positive surprise in three of the four trailing quarters, with an average beat of 11.43%.

Anika's earnings estimates for 2017 were up 0.5% in the last 60 days. The company has recorded a positive earnings surprise in each of the last four quarters, the average being 33.14%. Its share price gained approximately 30% in 2016.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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