Alkermes Catches A 'Sell' Downgrade On Depression Therapy, M&A Prospects

Alkermes Plc ALKS has enjoyed a relatively strong Street backing over the last six months despite its nearly 40-percent drop. On Wednesday, though, it caught a downgrade, bringing its ratings mix to six Buys, five Holds and two Sells, according to TipRanks.

The Rating

Goldman Sachs analyst Terence Flynn cut Alkermes from Neutral to Sell and lowered his price target from $49 to $26.

The Thesis

Flynn removed two key elements from its model: sales of ALKS-5461 for depression and the potential for merger activity.

“We expect FDA to issue a complete response letter (i.e., non-approval) on or before the Jan 31 PDUFA date and we don’t expect Study 217 to be sufficient to address potential FDA issues following the negative Adcom outcome (11/1),” he said of the depression candidate.

Additionally, channel checks suggest the schizophrenia treatment, ALKS-3831, posts unfavorable metabolic and weight-gain data and will not likely transform treatment.

“The level of SG&A investment ahead of a potential ‘3831 launch is underappreciated (we raise our expenses and are now 9%-15% higher than consensus in 2019-2021),” the analyst wrote in the note.

Flynn would take a more bullish stance on the stock if Alkermes could better differentiate the ALKS-3831 metabolic profile from Zyprexa; secure FDA approval of ALKS-5461; drive leverage in Vivitrol sales; outperform estimates for Aristada; or posts strong activity for ALKS-4230 in cancer treatment.

Price Action

At time of publication, Alkermes shares were down 3.4 percent at $30.72.

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