BofA Downgrades Alkermes After Stock Rally: 'We Don't See A Favorable Catalyst Pathway'

Following the recent rally, Alkermes Plc’s ALKS shares have exceeded their fair value and the stock looks “expensive on a relative basis,” according to BofA Securities.

The Alkermes Analyst: Jason Gerberry downgraded the rating for Alkermes from Neutral to Underperform, while keeping the price target unchanged at $27.

The Alkermes Thesis: The company’s stock has added 56 percent year-to-date, versus a 14 percent gain in the NYSE Arca Pharmaceutical Index, Gerberry said in the downgrade note.

“We don’t see a favorable catalyst pathway with shares likely ‘pricing in’ value accretive divestitures and/or partnership of key royalties (Vumerity for multiple sclerosis) and nemvaleukin (oncology), respectively, while ALKS has lapped easier 1H20 (C19) EPS comps,” he noted.

“Last, we see recently approved Lybalvi (mood disorders) as a drug capable of generating $450m in 2027E revenue, but we see profile limitations curbing upside,” the analyst further wrote. “Using our assumed ~$1.5bn DCF valuation for ALKS royalties, we believe the market is valuing ALKS net product sales at ~5x on EV/S, above 3.5-4.7x for peers,” he added.

ALKS Price Action: Shares of Alkermes had declined by 4.05% to $29.99 at the time of publication Thursday.

Photo: Courtesy Alkermes