We are reverting to a Neutral recommendation on
) from Outperform as we believe that the stock is fairly valued
at current levels. Our target price is $20.00. The stock carries
a Zacks #3 Rank (Hold rating) in the short run.
The purchase of
) Elan Drug Delivery unit in September 2011 has strengthened
Alkermes' product portfolio as well as its pipeline. Alkermes'
revenues climbed 72% to $124 million in the second quarter of
fiscal 2013 (ended September 30, 2012) due to the expanded
Alkermes' pipeline has expanded significantly following the
merger. Interesting candidates include Zohydro (under review by
the US Food and Drug Administration: target date - March 1, 2013)
for pain, ALKS 9070 (phase III: data expected by the end of
calendar 2013) for treating schizophrenia, ALKS 5461 (a
combination of ALKS 33 and buprenorphine) for major depressive
disorder (phase II, data expected in the first half of calendar
2013). ALKS 5461 has also been evaluated for treating patients
suffering from cocaine dependence. The successful development and
commercialization of these candidates should boost the company's
Alkermes' management increased their guidance for fiscal 2013
on the second quarter of fiscal 2013 conference call. The company
now expects revenues in the range of $510 million to $540 million
(previous guidance: $490-$530 million) for fiscal 2013. We expect
Alkermes to achieve the guidance given its expanded product
portfolio. Alkermes also upped its projection for adjusted
earnings in fiscal 2013. Adjusted earnings are now expected in
the range of 88 cents-$1.02 per share (previous guidance: 69
cents - 84 cents per share).
The US approval and subsequent launch of type II diabetes
drug, Bydureon, co-developed with Amylin (now a wholly-owned
Bristol-Myers Squibb Company
)), earlier this calendar year, is a major positive for
Despite being impressed by the event, we believe that
Bydureon, a glucagon-like peptide-1 receptor agonist, might
struggle for market share in the highly crowded diabetes market.
The market already has big players, such as
). Competition will intensify further as several companies are
working on bringing their type II diabetes treatments to market.
Lower-than-expected sales of Bydureon would be a dampener for
Moreover, Alkermes is highly dependent on partners for most of
the products in its portfolio. For example, Risperdal Consta is
Johnson & Johnson
), Ampyra/ Fampyra is marketed by
Acorda Therapeutics, Inc.
) in the US and by
) in the ex-US markets. Partnership related setbacks would weigh
heavily on Alkermes.
In view of the challenges facing Alkermes, we see limited
upside from current levels.
ACORDA THERAPT (ACOR): Free Stock Analysis
ALKERMES INC (ALKS): Free Stock Analysis
BIOGEN IDEC INC (BIIB): Free Stock Analysis
BRISTOL-MYERS (BMY): Free Stock Analysis
ELAN CP PLC ADR (ELN): Free Stock Analysis
JOHNSON & JOHNS (JNJ): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
NOVO-NORDISK AS (NVO): Free Stock Analysis
To read this article on Zacks.com click here.