Alkermes Retains Neutral Rec - Analyst Blog

We maintain our Neutral rating on Alkermes, Inc. (ALKS) with a price target of $11.50.

Alkermes is a drug delivery biotech company which uses its proprietary specialized drug delivery technologies to develop drugs for the treatment of central nervous system (CNS) disorders, alcoholism and diabetes.

Alkermes has two approved products on the market. Its lead product, Risperdal Consta (or simply Consta), was developed for the treatment of schizophrenia and bipolar disorder. The drug is marketed worldwide by Johnson & Johnson (JNJ) and manufactured by Alkermes. Alkermes also receives royalty revenues on Consta sales.

Risperdal Consta is the longer-lasting injectable version of Johnson & Johnson's schizophrenia drug Risperdal (risperidone). The drug is approved in over 75 countries worldwide and marketed in over 50 countries, but the US is clearly the key market.

The other approved product at Alkermes is Vivitrol, for the treatment of alcohol dependence. Apart from these two marketed products, Alkermes has a candidate under US Food and Drug Administration (FDA) review. In July 2009, the FDA accepted the New Drug Application (NDA) for exenatide once-weekly which is being co-developed by Alkermes, Eli Lilly (LLY) and Amylin Pharmaceuticals, Inc. (AMLN) for the treatment of type II diabetes.

Exenatide once-weekly is an injectable formulation of Amylin’s Byetta (exenatide). Byetta is an injection administered twice daily. Exenatide once-weekly has enormous market potential in the $13 billion type II diabetes market. A response from the FDA should be out in the first quarter of 2010 (action date: March 5, 2010).

We believe that its approval may get delayed due to safety concerns surrounding glucagon-like peptide-1 (GLP-1) molecules like exenatide. Specifically, fears of pancreatitis and new fears of thyroid cancer associated with the use of GLP-1 molecules lead us to believe that the FDA may want to see additional data before it grants approval. Investor focus will remain on the approvability of exenatide once-weekly going forward.

Alkermes has other interesting products in its pipeline, which are in early to mid-stage development. The candidates under development include ALKS 27 for chronic obstructive pulmonary disorder (COPD), ALKS 29 for alcohol dependence, ALKS 33 for addiction, ALKS 36, a co-formulation of an opioid analgesic and RDC-1036 for the treatment of pain. The successful development and commercialization of these candidates should boost the company’s top-line.

Estimate Revisions Trend

Two of the 10 analysts covering the stock for the fourth quarter of fiscal 2010 (ending Mar 31, 2010) have raised their earnings estimates over the last 30 days, while none moved in the opposite direction. This means that majority of the analysts have not revised their estimates for the next quarter, and the revisions are marginal.

Furthermore, three of the 9 analysts covering the stock for fiscal 2011 (ending Mar 31, 2011) raised their earnings estimates over the last 30 days, while none moved in the opposite direction. This means that majority of them have not revised their estimates for the next fiscal year, and the revision is marginal here, as well. As a result of the lack of strength and magnitude in estimate revisions, our short-term as well as long-term recommendations on the stock remain Hold (Zacks Rank #3) and Neutral, respectively.

Read the full analyst report on "JNJ"
Read the full analyst report on "ALKS"
Read the full analyst report on "LLY"
Read the full analyst report on "AMLN"
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