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Alexion: Nothing to see here?

July 14, 2017

Bloomberg reported last week that the U.S. Department of Health and Human Services was also investigatingAlexion Pharmaceuticals (ALXN) sales practices, helping to send shares down 3.2% on the day. But did the market make too much of the report?

It’s not hard to see why investors would be concerned. Alexion’s sales practices have been a huge concern, and resulted not only in an investigation, but the replacement of nearly the entire C-suite as well. Still, tehre’s likely less to the report than meets the eye. Morgan Stanley’s Matthew Harrison and team explain why:

Alexion clarified that this is related to a previously disclosed Massachusetts U.S. Attorney’s Office investigation into drug assistance programs in which multiple pharmaceutical companies are involved…While any investigation is concerning, the details suggest relatively modest risk…Given most investors fear a significant new investigation around Soliris sales practices, the details of this investigation appear more moderate, esp. given this investigation is broadly targeting multiple pharmaceutical companies and not specific to Alexion. Thus, we expect ALXN to recover. As a measure of risk, according to a Government Accountability Office report from 2015, Medicare spent $150M on Soliris through Part B or ~17% of 2015 US sales (6% of global sales).


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