After conducting a deeper dive into the competitive dynamics that Alexion (ALXN) is facing, we’ve lowered our fair value estimate to $169 per share from $172. The shares are still in 4-star territory, however. We think the market is underappreciating Alexion’s invaluable rare-disease expertise and network of patients and doctors, which pose high barriers to entry for branded competitors. The company’s narrow economic moat is underpinned by intangible assets, including patent protection and orphan drug exclusivity with its rare-disease portfolio. We’ve incorporated price headwinds and likely competitor entry into our model, offset by strong volume growth in treatment of generalized myasthenia gravis (approved in 2017) and neuromyelitis optica spectrum disorder (if approved in 2019).
We think Alexion has smartly priced Ultomiris, which was approved in December 2018 and offers a more convenient dosing schedule of six to seven times per year compared with Soliris’ 26 or more infusions per year. By offering it at a slight discount to Soliris, which has an average net annual price of over $450,000 by our estimates, the company should be able to efficiently convert patients to Ultomiris, allowing Alexion to maintain share even as biosimilars and potential branded competitors encroach.
Anna Baran does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.