Piper Sandler has maintained a positive outlook on Alkermes (NASDAQ: NASDAQ:ALKS), reiterating an Overweight rating and a $38.00 price target.
The firm's stance comes after Alkermes presented in-depth results from its Phase Ib study of ALKS-2680, an orexin 2 receptor (OX2R) agonist, at the SLEEP Europe Congress. The study focused on patients with narcolepsy type 2 (NT2) and idiopathic hypersomnia (IH).
Alkermes had previously announced data earlier in the year indicating a significant wakefulness signal in both patient cohorts.
Piper Sandler's analysis highlighted the safety and tolerability profile of ALKS-2680, noting that while pollakiuria, or frequent daytime urination, was a side effect to consider, it was deemed a manageable "nuisance" adverse event. This assessment aligns with the feedback from key opinion leaders consulted by the firm.
The firm's commentary suggests a continued belief in the potential of ALKS-2680, pointing out the "high degree of optionality" associated with the drug. This optimism is reflected in the valuation of Alkermes' shares, which Piper Sandler notes are trading at an enterprise value to an estimated 2025 EBITDA ratio of approximately 7 times.
In other recent news, Alkermes' Q2 2024 revenue hit a robust $399 million, largely driven by strong sales of proprietary products Lybalvi and Aristada.
The financial performance has led analyst firms Baird and H.C. Wainwright to increase their share targets for Alkermes, reflecting a positive outlook on the company's performance.
Alkermes has also initiated the Vibrance-2 phase 2 clinical trial to evaluate the safety and efficacy of its investigational drug ALKS 2680 for adults with narcolepsy type 2.
The trial is part of Alkermes' broader effort to innovate within the field of neuroscience. Mizuho and Jefferies have both maintained positive ratings on Alkermes, citing the potential of ALKS-2680 as a leading treatment for narcolepsy.
Furthermore, Alkermes is considering further development of ALKS-2680 for idiopathic hypersomnia (IH), based on the unmet need and positive feedback from patient groups and clinicians following Phase 1b data.
The company is also exploring the potential of OX2 in other indications, such as neurodegenerative and neurodevelopmental diseases, where disrupted sleep is a clinical feature.
InvestingPro Insights
Piper Sandler's positive outlook on Alkermes is supported by several metrics and InvestingPro Tips that highlight the company's financial health and potential for growth. Notably, Alkermes boasts a strong balance sheet, holding more cash than debt, which is a reassuring sign for investors considering the company's financial stability. This is further emphasized by the company's ability to cover interest payments with its cash flows, demonstrating financial prudence.
From a valuation standpoint, Alkermes' adjusted P/E ratio over the last twelve months as of Q2 2024 stands at 11.12, suggesting that the stock may be undervalued, especially when considering the strong free cash flow yield implied by this valuation. This aligns with Piper Sandler's view that the shares are trading at favorable multiples. Additionally, the company's gross profit margin of 83.31% over the same period indicates efficient operations and the potential to generate significant profits.
While some caution may be warranted due to the fact that 4 analysts have revised their earnings downwards for the upcoming period, it's important to note that Alkermes has been profitable over the last twelve months, and analysts predict profitability will continue this year.
For investors looking for more in-depth analysis and additional InvestingPro Tips, the platform offers a comprehensive set of 9 tips for Alkermes, providing a broader perspective on the company's financial outlook and performance. These tips, along with real-time data, are available at https://www.investing.com/pro/ALKS for those seeking to make an informed investment decision.
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