Biotech Stock On The Radar: Alkermes At A Crossroads

Alkermes Plc (NASDAQ: ALKS), an actively traded, mid-cap biotech, has lost about 32% year-to-date. Dublin, Ireland-based Alkermes is a global biopharma company developing innovative medicines for central nervous system diseases.

Benzinga · 11/07/2019 16:54

Alkermes Plc (NASDAQ: ALKS), an actively traded, mid-cap biotech, has lost about 32% year-to-date.

Dublin, Ireland-based Alkermes is a global biopharma company developing innovative medicines for central nervous system diseases.

The company has identified high-value opportunities in CNS and oncology as its two core areas in R&D, Alkermes CEO Richard Pops said during the company's recent earnings call. In oncology, the company is building on its scientific strengths in cytokine engineering. 

Its commercial portfolio includes:

  • Aristada, a long-acting atypical antipsychotic approved for the treatment of schizophrenia in adults. 
  • Vivitrol, a once-monthly medication, for the treatment of alcohol dependence as well as for the prevention of relapse to opioid dependence following opioid detoxification. 
  • Vumerity, or droximel fumarate, for multiple sclerosis; Vumerity is being developed under a licensing and collaboration agreement with Biogen Inc (NASDAQ: BIIB).
  • The FDA OK'ed Vumerity Oct. 30. The FDA approval has kicked in a milestone payment of $150 million from Biogen to Alkermes. Biogen is also liable to pay a mid-teens percentage royalty on worldwide net commercial sales of the drug. 

alkscp.png

Source: Alkermes

The company has also licensed its proprietary technologies to other companies to develop products for which it receives royalties and/or manufacturing revenues.

In the U.S., such licensing partnerships are forged with: 

  • AstraZeneca plc (NYSE: AZN) for Bydureon, a once-weekly injectable suspension for type 2 diabetes
  • Johnson & Johnson (NYSE: JNJ)'s Janssen unit for Ampyra to treat schizophrenia and bipolar I disorder
  • Janssen's Invega Sustenna for treating schizophrenia and schizoaffective disorder
  • Janssen's Invega Trinza for treating schizophrenia in patients after they have been adequately treated with Invega Sustenna for at least four months

EU-Approved Products Using Alkermes Technology Include:

  • AstraZeneca's Bydureon
  • Acorda Therapeutics Inc (NASDAQ: ACOR)'s Fampyra
  • Janssen's Risperdal Consta, Trevicta and Xeplion

Related Link: Attention Biotech Investors: Mark Your Calendar For These November PDUFA Dates

The Clinical Pipeline

Alkermes has a late-stage candidate in development: ALKS 3831 for schizophrenia. It also has an early stage immuno-oncology asset known as ALKS 4230. ALKS 4230 is being evaluated in two studies dubbed ARTISTRY-1 and ARTISTRY-2.

Financials

Unlike clinical-stage biotech companies, Alkermes is revenue-earning, generating 20%-plus revenue growth in recent years. That said, the bottom line is still in the red.

alksafy.png

Source: 10-K filing

For the recent third quarter, the company reported revenue of $255.2 million, up 2.6% year-over-year. Product revenues accounted for about 54.4% of the total and rose a solid 20%.

Manufacturing and royalty revenues slid about 11% due to generic competition hurting Ampyra revenues.

The loss per share widened from 22 cents to 34 cents, while on a non-GAAP basis, the company reversed from a profit of 7 cents per share to a loss of 4 cents per share. 

As of Sept. 30, the company had cash, cash equivalents and total investments of about $608.53 million.

Right-Sizing For Growth

Following a review of operations, costs structure and growth opportunities, the company recently enacted a restructuring plan that included the elimination of about 160 jobs and a reduction in near-term hiring plans and cost-saving measures related to external spend.

Alkermes said it expects cost savings of about $150 million from these efforts.

Forward Expectations

In its third-quarter report, Alkermes guided to full-year 2019 revenue of $1.14 billion to $1.19 billion, which includes a $150-million milestone payment from Biogen for Vumerity; $330 million to $340 million from Vivitrol; and $185 million to $190 million from Aristada.

Alkermes upwardly revised its full-year non-GAAP EPS estimate from 25-43 cents to 44-57 cents.

Upcoming Catalysts

  • Society for Immunotherapy of Cancer, or SITC, Presentations: Phase 1/2 data for ALKS 4230 as a monotherapy as well as in combination with Merck & Co.'s (NYSE: MRKKeytruda in solid tumors:  Nov. 6-10. 
  • NDA submission for ALKS 3831: fourth quarter of 2019

Stock Take

Alkermes stock has had a tough go over the past year, with a negative Adcom verdict on its ALKS 5461 as an adjunctive treatment for major depressive disorder — and the subsequent FDA rejection — sending the shares spiraling lower.

The technical picture isn't very encouraging, with the stock trading below the 50-day SMA, currently at $19.67, and 200-day SMA, at $26.01.

alksstock.png

The sell side is mixed on Alkermes, with half of those covering the stock bullish on its prospects and the rest in wait-and-watch mode, according to the Yahoo database.

The average analyst price target for the shares is $25.25, suggesting roughly 30% upside from current levels.

H.C. Wainwright has a Buy rating and $28 price target for Alkermes.