Piper Sandler showed continued confidence in Alkermes (NASDAQ:ALKS), maintaining an Overweight rating and a $38.00 price target. This affirmation follows a detailed review of the company's orexin portfolio, particularly focusing on its lead orexin 2 receptor (OX2R) agonist, ALKS-2680. The company's management highlighted the broader potential applications of orexin-based treatments beyond sleep/wake disorders.
During the review, Alkermes' management outlined plans to progress two additional OX2R agonists into clinical trials by 2025. The firm's analysis suggests that the therapeutic scope of these molecules extends well beyond the currently targeted narcolepsy and idiopathic hypersomnia (IH), indicating a larger market potential for Alkermes and similar developers.
Piper Sandler's reiteration of its rating and price target is rooted in the belief that Alkermes' orexin portfolio represents a valuable opportunity for the company's stock. The current enterprise value to 2025 estimated EBITDA ratio of approximately 7 times, coupled with a clean capital structure, was cited as a positive indicator for the company's financial health and prospects.
The analyst's statement concluded with a reiteration of the positive outlook for Alkermes, emphasizing the potential of the orexin portfolio to contribute to the company's growth and the decision to maintain the $38 price target.
Alkermes has been the focus of several analyst reports, with Baird, JPMorgan, and Mizuho maintaining their respective targets of $38, $32, and $35. These endorsements come following Alkermes' Q2 2024 revenue reaching $399 million, primarily driven by strong sales of proprietary products Lybalvi and Aristada. Alkermes is also making progress with its investigational drug ALKS-2680, which is currently in Phase II studies for narcolepsy types 1 and 2, known as VIBRANCE-1 and VIBRANCE-2 respectively.
The company is further considering the development of ALKS-2680 for idiopathic hypersomnia (IH), based on unmet needs and positive feedback from patient groups and clinicians. Alkermes is also exploring the potential of the orexin mechanism for other neurological and psychiatric conditions, as well as selected rare diseases.
Alkermes' research into the orexin drug class has been highlighted as a strategic move to diversify its therapeutic offerings.
InvestingPro Insights
Alkermes' (NASDAQ:ALKS) financial health and market performance align with Piper Sandler's optimistic outlook. According to InvestingPro data, the company boasts a market capitalization of $4.38 billion and a P/E ratio of 15.35, suggesting a reasonable valuation relative to earnings. This is particularly noteworthy given the company's strong financial position and growth prospects highlighted in the article.
InvestingPro Tips reveal that Alkermes holds more cash than debt on its balance sheet, indicating financial stability that could support its ambitious plans for expanding its orexin portfolio. This solid financial footing is crucial for funding the development of additional OX2R agonists planned for clinical trials by 2025.
Moreover, the company's profitability over the last twelve months and analysts' predictions of continued profitability this year align with Piper Sandler's positive stance. The strong return over the last three months, as noted in another InvestingPro Tip, may reflect growing investor confidence in Alkermes' strategic direction and potential market expansion beyond narcolepsy and idiopathic hypersomnia.
For investors seeking a deeper understanding of Alkermes' potential, InvestingPro offers 10 additional tips, providing a comprehensive view of the company's financial health and market position.
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