Alexion's Valuation Could Be Getting Pummeled Unnecessarily

Leerink said in a note Tuesday that the delay in a 10-Q filing has pushed Alexion Pharmaceuticals, Inc's. ALXN valuation to ridiculous levels. The firm noted that the stock has continued its underperformance relative to its large-cap high growth peers such as Regeneron and Vertex, missing out on the post-election biotech rally.

Over a 10-day period, analyst Geoffrey Porges noted that a 30 percent valuation gap has emerged between Alexion's stock and its peers. The pounding, according to the analyst, has taken absolute valuation towards worst-case downside scenarios, which could materialize only if there is failure of pipeline indications and of any future Soliris label expansions.

Leerink models valuation of $100 for the current Soliris label, Strensiq and Kanuma, assuming no improvement in operating margins. However, if operating margins improve, the firm sees valuation at $125.

The firm believes the current stock pullback presents a unique opportunity for investors, and potentially trade buyers, to secure a long duration, high potential, high margin biopharmaceutical franchise. Once the uncertainty surrounding the internal investigations delaying the 10-Q filing is resolved, which is likely to occur by the end of the month, the firm believes the stock can recover to around $150.

As such, the firm has an Outperform rating and $211 price target on shares.