On Friday, Alkermes Plc (NASDAQ:ALKS) received an updated price target from Goldman Sachs, with the firm lowering its expectation to $30.00 from the previous $32.00, while still endorsing the stock with a Buy rating. This adjustment follows the company's third-quarter 2024 performance, which, according to the analyst, was consistent with expectations based on the current commercial portfolio.
The quarterly report brought to light some key points from the management's commentary. One was a preliminary guidance that hinted at a reshaping of the company's financials starting in 2025. This shift is anticipated due to the expected decline in legacy manufacturing royalties and an increased commercial support for Lybalvi, coupled with a formalization of research and development (R&D) investment strategies.
Strategically, the company emphasized its plans to increase and concentrate investment in ALKS-2680, aiming to capitalize on the potential of its orexin-2 receptor agonist pipeline. The analyst expressed a bullish stance on the value creation potential of ALKS-2680, noting the attractive opportunity set across various indications such as narcolepsy types 1 and 2, idiopathic hypersomnia, and potentially other related conditions.
Alkermes is poised for significant data readouts from its Phase 2 VIBRANCE-1 and -2 studies in the second half of 2025. Despite the expectation that these developments may temper near-term profitability, the long-term prospects for ALKS-2680 and the company's strategic focus on its pipeline are seen as highly promising.
In other recent news, Alkermes Plc reported an 18% year-over-year increase in total revenues for Q3 2024, reaching $378.1 million. This growth was primarily attributed to the robust performance of its proprietary products, VIVITROL, ARISTADA, and LYBALVI.
Despite an anticipated reduction in EBITDA from approximately $400 million to over $200 million due to transitions in manufacturing and royalty revenues, Alkermes remains focused on its growth strategy.
Leerink Partners maintained its Market Perform rating and $28.00 price target for Alkermes, following a recent earnings report. The firm highlighted that Alkermes' revenue and expenses were slightly better than anticipated, balancing each other out. Leerink's valuation of Alkermes' base business stands at approximately $22 per share, implying an additional value of around $5 per share for the orexin platform, based on the current stock price.
Alkermes is also advancing its ALKS 2680 program for narcolepsy, with Phase 2 studies underway, expecting results in the second half of 2025.
InvestingPro Insights
Adding to Goldman Sachs' analysis, InvestingPro data provides further context on Alkermes' financial position. The company's market capitalization stands at $4.34 billion, with a P/E ratio of 12.18, suggesting a relatively modest valuation compared to its earnings. This aligns with an InvestingPro Tip indicating that Alkermes is "Trading at a low P/E ratio relative to near-term earnings growth," which could be attractive for value-oriented investors.
Despite the anticipated reshaping of financials mentioned in the article, Alkermes maintains a strong balance sheet. An InvestingPro Tip highlights that the company "Holds more cash than debt on its balance sheet," providing financial flexibility as it increases investment in ALKS-2680 and supports Lybalvi's commercialization.
The company's focus on pipeline development, particularly ALKS-2680, is reflected in its financial metrics. With a gross profit margin of 83.17% for the last twelve months as of Q3 2024, Alkermes demonstrates strong profitability in its current operations, potentially allowing for sustained R&D investments.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Alkermes, providing deeper insights into the company's financial health and market position.
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