On Friday, Leerink Partners maintained its Market Perform rating and $28.00 price target for Alkermes (NASDAQ:ALKS).
The firm's analysis followed a recent earnings report, highlighting that Alkermes' revenue and expenses were slightly better than anticipated, balancing each other out. However, the company's stock experienced a modest decline of about 3.5%, which was seen as an indicator of investor confidence through a period of transition toward the orexin growth phase.
The focus during Alkermes' conference call was on the company's financial outlook for 2025, which includes an anticipated $200 million drop in manufacturing and royalty revenues. Additionally, the company expects to increase R&D spending to support three programs for ALKS-2680.
Despite these projections, Leerink adjusted its EPS estimates only slightly, from $2.73 to $2.70 for 2024, and from $2.40 to $2.05 for 2025. This adjustment was primarily due to the need for increased R&D investment.
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. The report also noted that Alkermes is preparing for increased competition by expanding its sales force and improving payer contracts for its drug Lybalvi, which is expected to face competition from Bristol's Cobenfy (KarXT).
Despite the challenges, Leerink expressed interest in Alkermes' potential in the orexin market but maintained a cautious stance due to concerns over the growth of Lybalvi and the need to reassess consensus peak sales figures. The firm also highlighted the importance of understanding the competitive landscape in the orexin space.
While maintaining the Market Perform rating and $28 price target, Leerink suggested that investors should pay attention to developments in the orexin market.
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 strong performance of its proprietary products, VIVITROL, ARISTADA, and LYBALVI.
The company's recent financial performance also revealed a GAAP net income of $92.8 million and a non-GAAP net income of $121.4 million for the quarter. Alkermes ended the quarter with $927.8 million in cash and investments. For the full year, Alkermes anticipates net sales of $410-$430 million for VIVITROL, $275-$295 million for LYBALVI, and $340-$360 million for ARISTADA.
Alkermes is also advancing its ALKS 2680 program for narcolepsy, with Phase 2 studies underway. The company expects results from this program in the second half of 2025.
InvestingPro Insights
To complement Leerink Partners' analysis, InvestingPro data offers additional insights into Alkermes' financial position. The company's P/E ratio of 12.18 and adjusted P/E ratio of 11.09 for the last twelve months as of Q3 2023 suggest that the stock may be undervalued relative to its earnings. This is further supported by an InvestingPro Tip indicating that Alkermes is trading at a low P/E ratio relative to its near-term earnings growth.
Despite the anticipated revenue drop and increased R&D spending mentioned in the article, Alkermes maintains a strong financial position. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, which could provide flexibility as it navigates the transition period and invests in its orexin platform.
The article discusses the potential for increased competition for Lybalvi, but it's worth noting that Alkermes has been profitable over the last twelve months, with analysts predicting continued profitability this year, according to another InvestingPro Tip. This financial stability may help the company weather competitive pressures and support its R&D initiatives.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Alkermes, providing a deeper understanding of the company's financial health and market position.
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