EUR 850.00 For Business Accounts Only

Morningstar | FDA Approves Alexion's Blockbuster Drug Soliris for NMOSD; Shares Undervalued With $169 FVE

On June 27, Alexion Pharmaceuticals received approval from the U.S. Food and Drug Administration for Soliris for a subset of patients diagnosed with neuromyelitis optica spectrum disorder, a rare, chronic disorder of the brain and spinal cord. With no other approved treatments, NMOSD fits well with Alexion's strategy of targeting rare indications of high unmet need. We are maintaining our fair value estimate of $169 per share, given the positive late-stage clinical results published earlier this year, and believe that the shares look attractive.

The approval provides treatment for anti-aquaporin-4-positive patients, which make up at least two thirds of the total patient population. The company estimates that there are about 4,000-5,000 eligible patients in the United States; this significantly expands the addressable population for Soliris, which is currently approved in ultrarare paroxysmal nocturnal hemoglobinuria, ultrarare atypical hemolytic uremic syndrome, and rare generalized myasthenia gravis. Given the larger population size, we estimate that NMOSD could contribute the largest portion of revenue by 2023.

With an ultrarare price tag and sizable addressable patient population, Soliris is a unique success story that has drawn competitors into the space of complement-mediated disorders, including Apellis Pharmaceuticals, which just finished enrolling a late-stage trial in PNH comparing its APL-2 with Soliris. However, we continue to believe that Alexion possess a narrow moat. Despite approaching patent expirations in PNH and aHUS, market exclusivity in gMG and NMOSD should continue to drive excess returns, in our opinion. Further, our valuation and narrow moat rating depend on a successful launch of Ultomiris, Alexion's next-generation therapy with a more convenient dosing schedule. While Ultomiris is already approved in PNH, we expect a decision from the FDA in aHUS this October.

We see one key risk to Soliris' launch in NMOSD, which is that the disease can be difficult to diagnose. It is characterized by recurring attacks that can be mistaken for other disorders, such as multiple sclerosis. As its name suggests, NMOSD presents itself in a spectrum of mild to severe symptoms, including attacks of weakness, paralysis, and blindness. However, we believe Soliris' strong launch in gMG in 2018 is testament to the company's education and marketing strategies. Our valuation depends on a strong launch in the U.S. and internationally (if approved); we estimate NMOSD sales from Soliris could reach $1 billion in the next few years.