Despite Alexion's Internal Investigation, Goldman Standing Behind Its Buy Rating

Goldman Sachs stuck to its Buy rating on Alexion Pharmaceuticals, Inc. ALXN, which delayed filing of its third-quarter report as it is under investigation regarding its sales practices of lead drug Soliris based on the allegations of a former employee.

The Investigation

Soliris is indicated for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH) to reduce hemolysis, a condition when dying red blood cells outpace bone marrow’s production.

Soliris is also used to treat patients with atypical hemolytic uremic syndrome (aHUS) to inhibit complement-mediated thrombotic microangiopathy. Atypical hemolytic-uremic syndrome is a disease that primarily affects kidney function as it causes abnormal blood clots in small blood vessels in the kidneys that may block blood flow.

Alexion is looking into whether its personnel engaged in sales practices that did not match the company’s “policies and procedures and the related disclosure and other considerations raised by such practices.”

As of now, the probe has not found any instances where Soliris orders were not placed by customers for patients or any facts that require the company to update its previously reported historical results. However, the investigation is ongoing.

Implications Of The Delay, Investigation

Alexion noted that the delayed filing does not affect its ability to serve existing or new patients worldwide or to progress its pipeline.

“In our view this disclosure mitigates one potential downside scenario,” analyst Terence Flynn wrote in a note.

Flynn’s Buy rating is based on the thesis that the setup is favorable for the stock heading into 2017 as numbers have reset, and ALXN-1210 could help protect the Soliris franchise from biosimilar competition.

Further, the company has less exposure to U.S. government drug pricing dynamics than peers and the analyst expects a number of key pipeline updates in 2017.

However, the analyst admits that that the latest news is an overhang on the stock and is looking for additional clarity in the weeks ahead.

At the time of writing, shares of Alexion were up 0.19 percent to $127.40. The analyst has a price target of $158.