What To Make Of Alexion's New FDA Approval

Shares of Alexion Pharmaceuticals, Inc. ALXN were trading higher by more than 5 percent early Tuesday morning after the U.S. Food and Drug Administration approved its therapy called Soliris (eculizumab) for the treatment of adults with generalized myasthenia gravis (gMG).

GMG represents a $1 billion, plus, opportunity for Alexion and targets approximately a subset of patients with antibodies to the o the acetylcholine receptor (anti-AChR+), which accounts for 75 percent of all gMG patients, Cowen's Eric Schmidt said in a research report. The therapy is expected to be reserved for use in patients who cannot tolerate alternative medications.

Schmidt maintains an Outperform rating on Alexion's stock with an unchanged $180 price target and re-iterates the stock as a "top large cap pick."

Approval of the therapy was based on the company's phase 3 REGAIN trial in which Soliris "narrowly missed" the trial's primary endpoint, the analyst also said. But on the product's label, the FDA accepted a different analysis that allowed the trial to achieve statistical significance while multiple secondary endpoints were successful as well.

"Most investors were optimistic for approval in gMG," the analyst also said in the report. "This is based upon Alexion's characterization of FDA discussions as constructive (no AdCom required) and prior EMA approval (granted in August). Nonetheless, given the missed primary endpoint, FDA approval was not guaranteed, and we expect a bit of a relief rally in the stock."

Finally, interest in gMG is expected to build ahead of a "robust launch" and given a price tag of more than $700,000 per year, the U.S. opportunity could "easily exceed" $1 billion with upside potential from international markets the company plans to commercialize in the future.

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