On Monday, H.C. Wainwright maintained its Neutral stance on shares of Alkermes (NASDAQ: NASDAQ:ALKS), with a consistent price target of $37.00. The firm's analysis highlighted a shift in the company's strategy, emphasizing the development of its proprietary products, particularly focusing on its orexin-2 agonist portfolio. Alkermes is advancing ALKS-2680 into Phase 2 trials for narcolepsy and idiopathic hypersomnia.
The company has indicated a forthcoming decrease in its manufacturing and royalty business for the next year. This expected downturn is attributed to the expiration of the royalty for Invega Sustenna in August. While formal financial guidance for 2025 will not be released until the fourth-quarter results are announced in February, Alkermes has pre-emptively noted a projected $200 million decline in its manufacturing and royalty segment for the upcoming year.
The analyst from H.C. Wainwright pointed out the rebasing of expectations for Alkermes' manufacturing and royalty business as the company pivots towards a greater focus on developing its own products. This strategic realignment is in response to the evolving dynamics within the pharmaceutical industry and the company's own portfolio progress.
Despite the anticipated challenges in the manufacturing and royalty segment, Alkermes is proceeding with its research and development efforts, particularly with ALKS-2680. The transition into Phase 2 development marks a significant step for the company in addressing sleep disorders such as narcolepsy and idiopathic hypersomnia.
Alkermes' direction towards proprietary product development is a key factor in maintaining the $37.00 price target as set by H.C. Wainwright. The firm's reiterated Neutral rating reflects a watchful approach, taking into account both the potential impacts of the expiring royalty and the prospects of the company's pipeline developments.
In other recent news, Alkermes Plc has reported an 18% year-over-year increase in total revenues for Q3 2024, reaching $378.1 million, primarily driven by its proprietary products, VIVITROL, ARISTADA, and LYBALVI. The company's non-GAAP earnings per share (EPS) for the quarter stood at $0.72, slightly above the estimated $0.70. Alkermes also confirmed its full-year 2024 guidance despite mixed results.
Piper Sandler, Goldman Sachs, and Leerink Partners have updated their price targets for Alkermes, with varying ratings. Piper Sandler maintained an Overweight rating, lowering its target to $37.00, while Goldman Sachs kept a Buy rating, reducing its target to $30.00. Leerink Partners maintained a Market Perform rating with a $28.00 price target.
Alkermes is focusing on its ALKS-2680 program, with Phase 2 studies underway and significant data readouts expected in the second half of 2025. The company plans to increase its research and development (R&D) and selling, general, and administrative (SG&A) expenses in 2025, particularly for the development of their orexin pipeline and promotional efforts for Lybalvi, their treatment for schizophrenia and bipolar I disorder.
Despite an expected reduction in EBITDA due to changes in manufacturing and royalty revenues, Alkermes remains focused on its growth strategy. These recent developments highlight Alkermes' commitment to driving growth through its proprietary product portfolio and strategic focus on future profitability and expansion.
InvestingPro Insights
To complement the analysis of Alkermes' strategic shift towards proprietary product development, InvestingPro data offers additional financial context. Despite the anticipated $200 million decline in its manufacturing and royalty segment, Alkermes maintains a strong financial position. The company's P/E ratio of 11.41 suggests it may be undervalued relative to its earnings, especially considering its low PEG ratio of 0.2, which indicates potential for growth at a reasonable price.
InvestingPro Tips highlight that Alkermes holds more cash than debt on its balance sheet, providing financial flexibility as it invests in its proprietary pipeline, including ALKS-2680. This solid financial footing is crucial as the company navigates the transition away from reliance on manufacturing and royalty revenues.
Furthermore, management's aggressive share buyback program, as noted in another InvestingPro Tip, signals confidence in the company's future prospects despite the anticipated revenue decline. This aligns with the company's strategic pivot and may help support shareholder value during the transition period.
Investors seeking a more comprehensive analysis can access 7 additional InvestingPro Tips for Alkermes, offering deeper insights into the company's financial health and market position.
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