Why You Should Watch Alexion Pharmaceuticals, Inc., Ariad Pharmaceuticals and Thermo Fisher Scientif
Jan 30th 2014 9:06AM
Updated Jan 30th 2014 9:08AM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Good morning, fellow Foolish investors! It's time to check in on today's movers in health care.
Alexion Pharmaceuticals beats earnings estimates
First up is Alexion Pharmaceuticals which is moving higher this morning on heavy volume after reporting stronger than expected fourth quarter results. One of the key developments exciting investors this morning is a 38% increase in net product sales last quarter compared to a year ago. This marked increase in sales is primarily the result of strong sales for Alexion's blood disorder drug Soliris, which generated sales of $1.55 billion in 2013. Looking ahead, the company expects revenues to grow another 33% this year.
Although this is stellar growth for a large cap pharma, you should keep in mind that Alexion is currently trading at over 24 times revenues. So, it's not exactly cheap -- even with earnings growing at breakneck pace. With the broader market showing signs of weakness, I am unsure how much longer investors will continue to pay such rich premiums for biopharma earnings. And the market is certainly assigning a hefty premium to Alexion right now.
Ariad looking for growth down under
Ariad Pharmaceuticals is also on the move this morning following an announcement late yesterday that the company signed a seven year partnership agreement with Specialised Therapeutics Australia to commercialize Iclusig in Australia. Ariad previously filed for marketing authorization for Iclusig in Australia last year, so this agreement is essentially handing the remaining regulatory paperwork off to a third party. Specialised Therapeutics Australia will also be responsible for reimbursement issues, assuming approval later this year.
Is this a big deal? I don't believe so. Although financial terms of the deal weren't disclosed, it's hard to see Australia being a major revenue generator for Iclusig going forward. There are only an estimated 1,500 patients being treated for chronic myeloid leukemia in Australia, and it's important to remember that Iclusig is not a frontline treatment for the disease.
So, you shouldn't put much weight on this development when considering an investment in Ariad. Looking down the road, the bigger issues are Iclusig's ability to stay on the market in the U.S. and the EU, as well as the company's ongoing clinical trials to expand the drug's label.
Thermo Fisher also beats estimates
Turning back to the earnings front, Thermo Fisher Scientific is in positive territory in premarket this morning after beating fourth quarter revenue estimates by a healthy $160 million. Specifically, Thermo Fisher's adjusted earnings per share grew to a record $1.43, with fourth quarter revenue coming in at a whopping $3.47 billion. In short, these are the best numbers the company has ever posted. To top it off, Thermo Fisher generated $1.75 billion in free cash flow for the year, giving them ample dry powder to pursue possible licensing deals or acquisitions. For 2014, Thermo Fisher is forecasting even more growth in revenues, with earnings per share expected to rise by 24%-27% year over year.
Should investors be excited by these numbers? In my view, the answer is a big yes! Unlike so many other biotechs right now, Thermo Fisher shares aren't trading at sky high premiums. Namely, the company's shares are trading at a mere three times annual sales, making it comparatively cheap. With strong guidance for 2014 and a nice cash position, I think Thermo Fisher looks like it's in for a good year.
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The article Why You Should Watch Alexion Pharmaceuticals, Inc., Ariad Pharmaceuticals and Thermo Fisher Scientific Inc. Today originally appeared on Fool.com.George Budwell has no position in any stocks mentioned. The Motley Fool recommends Thermo Fisher Scientific. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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