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Changes but no clarity at Alexion ​

December 12, 2016
Life sciences

The turmoil at Alexion Pharmaceuticals isn’t over just yet.

Alexion, a biotech company that specializes in rare disease treatments, announced Monday morning that Chief Executive David Hallal has resigned from the company for “personal reasons,” effective immediately. Finance chief Vikas Sinha has also left the company to “pursue other opportunities.” Neither outgoing executive was quoted in the company news release and neither appeared on Monday’s investor call. Shares fell 16% in early trading.

The departures come amid an internal investigation into sales practices of Alexion’s flagship drug, Soliris, which treats blood disorders. That investigation has caused Alexion to delay a securities filing.

Monday’s news wasn’t entirely negative. Alexion is replacing its key officers with seasoned executives. David Brennan, formerly CEO of AstraZeneca, steps in as interim CEO, and new finance chief David Anderson held the same job at Honeywell.

Alexion also vowed to file the delayed report by January or sooner, and said it hasn’t uncovered any facts in its investigation that would require a restatement of past financial results. With Alexion shares down 40% so far this year, investors might be tempted to go bargain hunting.

That would be a bad idea at this point. What matters is future financials, and Alexion won’t comment on next year’s outlook until February. The company didn’t rule out possible changes to company sales practices that could depress future revenue growth, for instance. Soliris accounts for nearly all of Alexion’s revenue. There is clearly something wrong somewhere—and it is serious enough to warrant a delayed filing and, evidently, wholesale management changes.

Shares fetch about 21 times forward earnings, according to FactSet. That isn’t an exorbitant valuation, but hardly provides a margin of safety should more bad news emerge. Given how dependent the company is on Soliris, the outcome of the investigation could make valuation numbers irrelevant. At this point, any purchase of the stock is a speculation, rather than a value investment.

By Charley Grant

Source: Wall Street Journal

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