Investing In Biotechnology Earnings Growth

Biotechnology was full of success stories in 2013. And some of those stories just got more exciting in February as the Nasdaq Biotech Index (IBB - Trend Report) rallied 13% off the lows. My FTM Portfolio also surged higher on the back of names like Pharmacyclics (PCYC - Trend Report)Medivation (MDVN - Trend Report), and Alnylam (ALNY - Trend Report)

But Alexion Pharmaceuticals (ALXN - Trend Report) was one of the heavy lifters of that IBB performance since it comprises nearly 5% of that index. ALXN shares rallied 17% this month to hit an all-time closing high of $181.52 after a strong quarterly report in late January that first vaulted the stock over 20% in one day from the low $130s to over $160. 

What was all the excitement about that had this biotech superstar making a $50 (nearly 40%) move in under 3 weeks? Sales and taxes, of course. 

Blockbuster Drug 
Alexion's revenues jumped 38% to approximately $442 million in the final quarter of 2013 -- beating the consensus by over $10 million -- driven by strong sales of their key drug Soliris, which is the only treatment available for paroxysmal nocturnal hemoglobinuria (PNH). 

PNH is a rare genetic blood disorder characterized by the onset of severe hemolytic anemia, chronic fatigue and intermittent episodes of dark colored urine, known as hemoglobinuria. Because of the life-saving benefits for these patients that only come from Soliris, major insurance companies support one of the highest price tags of any drug treatment at roughly $440,000. 

This may seem unfair to some minds, but Alexion was founded in 1992 and it's been a long and bumpy road to profitability. If biotech companies don't have visibility on potential financial outcomes, they cannot invest the billions in laboratory and clinical R&D necessary to discover specialized drug therapies that are both effective and safe in treating rare diseases that may only afflict a few thousand people. 

In 2011, the FDA cleared Soliris for treating children and adults suffering from atypical hemolytic uremic syndrome (aHUS), an ultra-rare genetic disorder. In Nov 2011, a similar approval for the drug was granted in the EU. Japanese approval for the a HUS indication came in Sep 2013. 

Zacks Investment Research reports while Alexion is testing Soliris and a number of other compounds in a variety of different disease indications, the drug recorded sales of $1.55 billion in 2013, up 37%. 

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I'm not long or short any stocks listed in this article.

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