Alexion Deal Picture Clouds Growth Projections
Alexion Pharmaceuticals, Inc. (Alexion) is a biopharmaceutical company. Its marketed product Soliris (eculizumab) is for patients with two ultra-rare and severe disorders resulting from chronic uncontrolled activation of the complement component of the immune system: paroxysmal nocturnal hemoglobinuria (PNH), a blood disorder, and atypical hemolytic uremic syndrome (aHUS), a life-threatening genetic disease.
[PostStockWidget stock_valuation="" pricetype="live" manual_date="Dec. 21, 2012, 2:04pm GMT" symbolcodes="'ALXN'" symbolprices="199" div_align="right"]
We bought Alexion at $175.10 in February. Since that time they reported a negative quarter in earnings and their forward earnings estimates were reduced by about 20%.
The company also announced a major acquisition which will require additional financing. When a stock has a high multiple and the growth rate gets revised downward, the risk of a correction in valuation increases. We will stand aside until the smoke clears.
The Purple Chips valuation range is now: low: $USD 1600.00 high: $USD 199.00
EXITING ALEXION AT $169.95 (ALXN-US) HALF POSITION
TOTAL RETURN: -2.9%
PURPLE CHIPS TARGET: $199.00 POSITION SIZE: HALF (2.5%) P/E: 32.9X DIV: NIL MKT CAP: $34.3B Cash:$2B RETURN ON CAPITAL: 35.4% EARNINGS YIELD: 2.6% 5 YR EPS Growth rate*:30% P/E/G Ratio: 1.00X EPS: $5.21 2016 EST.: $5.80 2017 EST.: $7.51
*Blended growth rate= 2/3 historical (5yrs), 1/3 forward.
