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Alexion's Big Medicine in 2017

PART:
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Part 4
Alexion's Big Medicine in 2017 PART 4 OF 7

Understanding Alexion’s Profit Margin Trend in 2017

Rise in profit margins

Alexion Pharmaceuticals (ALXN) expects its non-GAAP (generally accepted accounting principles) EPS (earnings per share) in 2017 to fall in the range of ~$5.0–$5.3 in 2017. Given the midpoint of this guidance range, in 2017, the company is expected to witness a growth of around 11% in non-GAAP EPS on a YoY (year-over-year) basis.

Alexion Pharmaceuticals also expects its non-GAAP operating margin in 2017 to be around 43%–44%. The company expects to witness improved sales volumes of all its products as well as stable demand in Latin American markets.

Understanding Alexion&#8217;s Profit Margin Trend in 2017

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However, reduced Soliris revenues due to ongoing and planned clinical trials for ALXN 1210, is expected to negatively affect Alexion Pharmaceuticals’ revenues and, subsequently, operating margins in 2017. Unfavorable foreign exchange fluctuations and changing product mix due to lower-margin products like Kanuma and Strensiq are also expected to have an undesirable impact on the company’s operating margins.

Margin projections

Wall Street analysts have projected that Alexion Pharmaceuticals’ net profit margin will be ~20.8% in 2017, which is around 800 basis points higher than that reported by the company in 2016.

In 2017, peers such as Gilead Sciences (GILD), Regeneron (REGN), and Biogen (BIIB) are expected to report net profit margins of around 44.0%, 19.2%, and 35.2%, respectively. Notably, Alexion Pharmaceuticals makes up about 1.1% of the Health Care Select Sector SPDR Fund (XLV) total portfolio holdings.

In the next part, we’ll discuss trends for Alexion Pharmaceuticals’ metabolic disease drugs, Kanuma and Strensiq, in greater detail.

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