We are maintaining our ‘Neutral’ recommendation on Alkermes, Inc. (ALKS) with a target price of $15.00.
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.
Earlier this month, Alkermes disclosed financial results for the third quarter of fiscal 2011. Alkermes suffered a net loss (excluding special items but including stock-based compensation expense) of $0.12 per share which compared unfavorably with the year-ago loss of $0.03 per share.
The Zacks Consensus Estimate was a loss of $0.15 per share. The wider year-over-year loss was attributable to lower revenues and higher expenses incurred in the reported quarter.
Total revenues for the third quarter of fiscal 2011fell marginally (0.4%) to approximately $44.0 million. Revenues for the reported quarter surpassed the Zacks Consensus Estimate of $43 million.
(Read our full coverage on the earnings report at Alkermes Performs Better than Est. )
Alkermes has two approved products on the market. The lead product is Risperdal Consta approved for the treatment of schizophrenia and bipolar disorder. The drug is marketed worldwide by Johnson & Johnson (JNJ) and manufactured by Alkermes.
The other approved product is Vivitrol for the treatment of alcohol dependence. The label of the product was expanded in October 2010 when the US Food and Drug Administration (FDA) approved the drug for the prevention of relapse to opioid dependence after opioid detoxification.
The drug is expected to be launched for the additional indication during calendar 2011. We believe that the approval of Vivitrol for the additional indication will bring in additional revenues at Alkermes.
In October 2010, the FDA dealt a huge blow to Alkermes by issuing a complete response letter (CRL) to its lead pipeline candidate, Bydureon, for treating type II diabetes. Bydureon has been co-developed by Eli Lilly and Company (LLY), Alkermes and Amylin Pharmaceuticals, Inc. (AMLN).
In the CRL, the US agency has asked the co-developers to conduct a thorough QT study and submit data from the DURATION-5 study, which was conducted to compare the safety and efficacy of Bydureon versus Byetta. Recently, the FDA approved the design for the tQT study.
The study is expected to commence shortly. A response to the CRL will be submitted in the second half of 2011. We note that Bydureon is currently under review in Europe with a decision expected during the course of 2011.
We note that even if Bydureon manages to clear the regulatory hurdles and ultimately hit the market, which we believe cannot be before mid-2012, it will face tough competition. The drug will compete with Novo Nordisk’s (NVO) Victoza, a once-daily injection that was launched in 2010.
Other glucagon-like peptide-1 (GLP-1) molecules under development include GlaxoSmithKline’s (GSK) Syncria (albiglutide), also a once-weekly injection.
Going forward, we expect investor focus to remain on the approval process for Bydureon and see limited upside potential from current levels. Consequently, we retain our ‘Neutral’ stance on the stock.
ALKERMES INC (ALKS): Free Stock Analysis Report
AMYLIN PHARMA (AMLN): Free Stock Analysis Report
GLAXOSMITHKLINE (GSK): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
LILLY ELI & CO (LLY): Free Stock Analysis Report
NOVO-NORDISK AS (NVO): Free Stock Analysis Report
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