Alexion - Among The Best Risk/Reward In Biotech?

Summary

• The biotech ALXN may just have begun to complete a reversal from a two-year sell-off from its near-bubble peak in 2015.
• The company has experienced significant management turmoil; the current leadership may be just what the doctor ordered.
• Positive earnings and guidance and positive news on the key pipeline product lead me to think of ALXN even more favorably than I did one month ago.
• This article reviews the latest news, suggests upside fundamental price targets, but warns about the high-risk nature of this stock.

Introduction

Mid-cap Alexion (ALXN), listed as the 9th most heavily-weighted stock in the iShares Nasdaq Biotech ETF (IBB) (probably 8th now after jumping today), highlighted Q1 earnings and the running start that its new CEO has gotten on the company. The stock may be a large cap soon again at this rate (market cap above $30 B).

This is what I was hoping for when I scaled in not too long ago at progressively lower prices: $130, 125, 120 (all prices are per share where appropriate). Buying a sell-off is not my usual style, but it's extremely rare to find a blockbuster product wherein the next-generation product may be on the market before there is even competition for the first-generation product. And the way it looks, a third-gen, or V. 2.1 if you wish, may also come to market before any competitor. All this for what was a price:sales ratio far below that of over-hyped takeover target Incyte (INCY); that is, over-hyped above $130-135. INCY is coming back to earth; it's a great company, but there are limits.

Whereas, ALXN, currently around $126 on Thursday afternoon, may more fairly right now have fair value at least at $150, and its takeover value is, I am guessing, $190+.

One month ago, I covered ALXN in My Favorite Biotech Takeover Play when the stock was around $119. Feel free to review that first if you're not familiar with ALXN and my positive views of its management changes and underlying valuation. I'll try not to be repetitious but still be clear in this article for readers who are not familiar with that article.

Here's my updated opinion, based on the latest information.

ALXN begins to get run as an efficient business and more like Big Pharma (in the good ways)

All the bullet

Analyst’s Disclosure:I am/we are long ALXN, CELG, XLRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not investment advice. I am not an investment adviser.