Alexion: An Undervalued Growth Stock

From Christina Huff:

lexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders; I consider this an undervalued growth stock, notes Crista Huff, editor of Cabot 
Undervalued Stocks Advisor.

The company just reported a good fourth quarter; revenue was $1.38 billion and non-GAAP EPS was $2.71, each higher than the respective consensus estimates of $1.31 billion and $2.60.

All four pharmaceutical brands — Soliris, Ultomiris, Strensiq and Kanuma — delivered higher-than-expected revenue. Full-year 2019 EPS was $10.53 vs. the expected $10.43, up 33.0% vs. the prior year. The earnings report itemizes nearly 20 projects and clinical trials that Alexion is currently pursuing.

Management expects to achieve revenue in a range of $5.50-$5.56 billion in 2020, and non-GAAP EPS in a range of $10.65-$10.85. The prior consensus 2020 revenue and EPS estimates were $5.64 billion and $11.37, respectively.

The stock fell as investors expressed their disappointment that the costs of the Achillion acquisition will impact full-year 2020 profits, as will an increased tax rate, and the higher R&D costs associated with Alexion’s current volume of clinical trials.

I keep track of earnings estimates during the entire time that I follow any particular company, and I’ve been following Alexion for many years. Its earnings estimates climb consistently throughout each year, and even at year end, the final results outperform Wall Street estimates.

Therefore, the current expectation of 3% EPS growth in 2020 is likely a very low estimate vs. the number Alexion will ultimately report a year from now. In that light, I think today’s reaction to the share price was just plain silly.

The company grew EPS 27%, 35% and 33% in 2017 through 2019. The 2020 P/E is 9.3, which is extremely low for a biopharmaceutical stock. I’m moving ALXN from "Buy" to a "Strong Buy" recommendation. The stock is cheap. Patient growth stock investors should accumulate these shares.

On NeoGenomics

From the Fool:


The clinical services segment of NeoGenomics works with over 2,600 hospitals and cancer centers. It has 10 global locations, processes 1 million oncology tests annually, and serves roughly 500,000 patients each year. In the first nine months of 2019, the segment was responsible for 88% of total revenue. It generated sales of $267 million, marking year-over-year growth of 52%.

The company's growth is supported by smoothing over the data processing workflow for smaller hospitals and clinical teams. Clinicians and researchers send in patient samples, choose tests from the company's comprehensive menu, and receive quality data and data interpretation in return. NeoGenomics even offers data consultation services, which could help the business to retain larger hospital systems as customers, especially as they increasingly move diagnostic processing capabilities in-house.

The pharmaceutical services segment is much smaller, comprising the remaining 12% of total revenue, but it provides intriguing growth potential. NeoGenomics helps companies to discover novel biomarkers, develop new diagnostics, and prepare for regulatory filings. The segment generated revenue of only $34 million in the first nine months of 2019, but reported a backlog of $118 million.

The segment should receive a sizable boost in 2020. NeoGenomics acquired the pharma services division of Human Longevity in early January for $37 million. The assets generated $10 million in revenue in 2019.

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On Repligen

From the Fool:


Repligen offers a diverse portfolio of products used to grow cell cultures, measure bioprocess metrics during manufacturing, and purify products downstream. Investors don't have to be technically competent to appreciate the role that the company plays in the high-growth biopharma sector. After all, if biotech companies cannot safely and efficiently manufacture drug products, then they won't be in business very long.

The bioprocessing leader is relatively small compared with the better-known players in the space, such as General Electric's GE Healthcare subsidiary, Samsung BioLogics, Thermo Fisher Scientific, and Sartorius. But Repligen has done a great job making the most of its high-margin niche and geographic proximity to Boston, a world-leading biotech hub.

In the first nine months of 2019, Repligen reported revenue of $200 million and operating income of $30.2 million, for year-over-year growth of 41% and 66%, respectively. The business exited September fresh off its largest-ever acquisition and, after stock offerings, still had a record cash balance of $513 million. Shares gained 75% in 2019, easily topping the roughly 29% gain of the S&P 500.

Investors should have little doubt that the business can maintain its momentum. In 2018, the Food and Drug Administration approved a record 11 monoclonal antibodies (the main category of biologic drug), while more than 400 more were in development across the industry's pipeline. Combine that with gene therapies, other genetic medicines, and cellular medicines that receive billions of dollars in investment across the biopharma sector, and Repligen has "long-term investment" written all over it.

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The Fool and Zacks Both Like Alexion

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On Penumbra

Penumbra Inc (PEN)

Just a little further up the 2019 gains ladder, is medical device maker Penumbra. Specializing in innovative neuro and peripheral vascular therapies, PEN is seeing out the year with a 33% increase to its share price.

A technology leader in mechanical thrombectomy, the company’s two lead products, the Penumbra System (neurovascular) and the Indigo System (peripheral vascular), both remove blood clots, and are in a large and unpenetrated market, estimated to be worth roughly $3.1 billion.

Penumbra has a massive market to address in the treatment of ischemic strokes, too, believed by the company to be worth $7 billion worldwide, and $0.8 billion in the US alone. In July, PEN released its most advanced technology to date – the Penumbra JET 7 Reperfusion Catheter, which is to be used with the Penumbra ENGINE, a system that allows physicians to extract thrombus in acute ischemic stroke patients.

RBC’s Brandon Henry believes PEN’s systems are “superior to the competition.” The analyst noted, “Our model assumes that PEN will grow its revenues in the high teens over the next three years. We assume that it will have low salesforce turnover and continue to innovate its existing product lines, particularly JET-ENGINE and the Indigo System. Additionally, we assume that PEN’s Peripheral Vascular segments will grow more quickly than the market, as the company continues to take share despite competition.”

Therefore, Henry kept an Outperform rating on Pen, along with a target price of $192, implying potential upside of 18%.

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