On Tuesday, Alkermes plc (NASDAQ: NASDAQ:ALKS) experienced a downgrade in its stock rating by UBS from 'Neutral' to 'Sell', while the price target was maintained at $25.00. The adjustment comes amid concerns about the company's pipeline updates and launch performances.
Alkermes is currently trading close to its 52-week high. However, UBS indicates there is a negative risk/reward scenario unfolding, driven by the company's pipeline update and launch performance. According to UBS, the current stock valuation seems to be factoring in approximately $2.2 billion in projected sales for the year 2029, which is optimistic compared to UBS's base case projection of $1.6 billion. This discrepancy suggests expectations of flawless clinical outcomes for their orexin program and strong growth for Lybalvi.
UBS expressed caution regarding the upcoming phase 1 read-out of ALKS-2680, Alkermes' orexin agonist, which is expected in the first half of 2024. The potential for significant tolerability issues with a higher dose in the Phase 1 narcolepsy type 2 (NT2) and Idiopathic Hypersomnia study is a particular point of concern for UBS.
Additionally, there are indications that the growth of Lybalvi, Alkermes' drug for the treatment of schizophrenia and bipolar I disorder, is beginning to slow. UBS projects that from fiscal years 2024 to 2027, sales for Lybalvi could be roughly 12% below consensus estimates, which could lead to market expectations being revised downward.
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