On Thursday, Stifel, a financial services company, adjusted its outlook on shares of Alkermes (NASDAQ: NASDAQ:ALKS), reducing the price target to $25.00 from $28.00, while maintaining a Hold rating on the stock. The adjustment followed the company's third-quarter earnings report, which presented a mixed outcome.
Alkermes' product revenues met expectations, but royalty revenues, which are considered less significant, did not meet the forecast. Moreover, earnings were slightly below the consensus.
The initial press release from Alkermes did not indicate any major changes to the company's thesis, and the 2024 guidance was reiterated. However, during the earnings conference call, Alkermes' management provided guidance for approximately $200 million in EBITDA for 2025. This figure significantly undershoots the consensus estimate of around $450 million and is more than 50% below Stifel's model.
The lower-than-expected EBITDA guidance prompted Stifel to revise its expectations for Alkermes' other product revenues downward and to anticipate higher expenses. This revision affects the perceived stability of the company's legacy business. The focus among investors may now shift more toward the potential of ALKS2680, Alkermes' drug candidate, and the confidence in its overall safety and efficacy beyond its initial indication.
In other recent news, Alkermes has been the focus of numerous analyst reports, following the company's Q2 2024 revenue of $399 million, primarily driven by strong sales of proprietary products Lybalvi and Aristada.
Alkermes is making significant strides 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 also considering the development of ALKS-2680 for idiopathic hypersomnia (IH), based on unmet needs and positive feedback from patient groups and clinicians.
Alkermes' exploration into the orexin drug class has been highlighted as a strategic move to diversify its therapeutic offerings. The company has plans to progress two additional OX2R agonists into clinical trials by 2025, and is exploring the potential of the orexin mechanism for other neurological and psychiatric conditions, as well as selected rare diseases.
Analyst firms such as Baird, JPMorgan, and Mizuho have maintained neutral to positive ratings on Alkermes, citing the potential of ALKS-2680 as a leading treatment for narcolepsy. Piper Sandler showed continued confidence in Alkermes, maintaining an Overweight rating and a $38.00 price target.
H.C. Wainwright also maintained a Neutral stance on Alkermes shares, with a consistent price target of $37.00. These are among the recent developments at Alkermes.
InvestingPro Insights
Despite Stifel's reduced price target for Alkermes (NASDAQ: ALKS), recent InvestingPro data reveals some positive aspects of the company's financial health. As of the last twelve months ending Q2 2024, Alkermes reported a robust gross profit margin of 83.31% and an operating income margin of 20.1%. These figures suggest strong profitability despite the challenges highlighted in the earnings report.
InvestingPro Tips indicate that Alkermes holds more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates through the lower EBITDA guidance for 2025. Moreover, the company's valuation implies a strong free cash flow yield, potentially offering value to investors despite the recent stock price adjustments.
It is worth noting that InvestingPro offers 8 additional tips for Alkermes, providing a more comprehensive analysis for investors looking to delve deeper into the company's prospects. These insights could be particularly valuable given the current focus on ALKS2680's potential and the company's future performance.
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