Chief Executive Richard Pops likes to make it very clear about
the company he leads:Alkermes (
) is not your run-of-the mill biotech firm.
For one thing, it has a thriving commercial business from
drugs that have already been approved and that will be generating
revenue "for the next decade," he says.
And it has promising new drugs in the pipeline that are late
in their development.
"Most biotech companies have only (pipeline products)," he
said. "The two together represent a very dynamic
Alkermes specializes in central nervous system disorders using
proprietary technology to create injectable drugs and other
"The company is particularly good at developing long-acting
versions of drugs," said Cowen and Co. analyst Anant
Two of its fastest-growing key products, Invega Sustenna for
schizophrenia and multiple sclerosis drug Ampyra, came through
the firm's 2011 acquisition ofElan Corp. 's (ELAN) drug
formulation and manufacturing unit, Elan Drug Technologies.
The deal, valued at $1 billion, helped boost fiscal 2012
revenue 109% to $390 million.
Revenue in the fiscal year ended this past March is expected
to hit $539 million while earnings are seen rising 288% to $1.09
a share. Results will be reported in May.
Alkermes used the acquisition to move its headquarters to
Elan's base in Dublin, Ireland, saving on taxes. Alkermes'
R&D center remains in Waltham, Mass.
The closest pipeline drug to market is an injectable,
long-lasting version of Abilify, the oral drug used to treat
schizophrenia and bipolar disorder. Abilify generated $4.5
billion in worldwide sales last year, Padmanabhan says. Its U.S.
patent expires in 2015.
Padmanabhan estimates Alkermes' injectable version for
treating schizophrenia, aripiprazole lauroxil or ALKS 9070 for
short, could generate more than $500 million in peak sales
If phase three data due out late this year go as expected,
Alkermes will file for approval next year and likely go to market
with it in 2015. "This is important for patients and important
for investors," CEO Pops said.
There's already competition. Abilify's developer, Tokyo-based
Otsuka Holdings, launched a once-monthly injectable version in
mid-March with Copenhagen-based partner H. Lundbeck.
The reformulated drug is "still in early days," says
Padmanabhan. But he says its success would validate the need for
such a long-acting drug.
Pops says Alkermes' version of Abilify was "designed to be a
generational advance" over Otsuka's latest version.
Alkermes plans to market the drug in the U.S. on its own, but
will probably seek a partner to commercialize it outside the
U.S., Pops says.
The company's second most promising pipeline drug is a new
kind of therapy for treating depression. Phase two trial data are
expected out shortly.
"If it confirms what we saw in the first study, we will have a
very important new treatment for depression," Pops said.
Dubbed ALKS 5461, the oral drug doesn't target the usual
neurochemical pathways as do selective serotonin reuptake
inhibitors (SSRIs) and serotonin norepinephrine reuptake
Rather, it targets opioid receptors. The drug uses the
anti-depressive properties of buprenorphine while neutralizing a
key drawback, its addictive properties.
About 60% of the 10 million depression patients in the U.S
need another drug because one doesn't work well enough, industry
experts say. ALKS 5461 would target those patients.
"What the (depression) community has wanted is alterative
routes to address the same problem," Pops said. "There are other
mechanisms (such as bupropion) but very few."
Morgan Stanley analysts have noted that if phase two data on
ALKS 5461 are positive, "investors may start to value it as a
$500 million-plus commercial opportunity."
Meanwhile, Alkermes' thriving commercial business is driven by
five products, which together logged revenue growth of 33% in the
third fiscal quarter ended Dec. 31 over the earlier year, to $92
million. Overall revenue in the quarter grew 8.2% to $135.9
Alkermes receives royalties from partners on all but one of
those five drugs, Vivitrol, a once-monthly drug to treat alcohol
and opioid dependence.
Alkermes markets Vivitrol itself. The product generated $15.9
million in Q3 revenue, up from $10.6 million a year earlier.
Management expected Vivitrol to take in $55 million to $60
million in fiscal 2013, which ended in March.
"We have a profitable underlying commercial business that
generates revenue to fund our pipeline," Pops said. "Most other
biotechs need to raise equity or find financing."
As for its other key commercial drugs, Alkermes gets royalties
fromJohnson & Johnson 's (
) Janssen Pharmaceuticals for its long-acting antipsychotic drugs
Invega Sustenna and Risperdal Consta.
And for its MS drug Ampyra (marketed as Fampyra in Europe and
sold there byBiogen Idec (
), it receives royalties fromAcorda Therapeutics (
Bydureon, a once-weekly treatment for Type 2 diabetes, is
marketed byBristol-Myers Squibb (
) andAstraZeneca (AZN).
But analysts see revenue growth slowing to just 1% in the
current year ending next March. While most of the company's five
key products are early in their patent life, others are at a much
later stage and won't grow as much.
For example, it will get sharply reduced royalties from a trio
of products from the Elan portfolio due to generic competition,
Padmanabhan says. Those products include Tricor, Ritalin LA and
Tricor and Ritalin LA recently went off-patent and Focalin
will do so soon. The three drugs generated around $60 million in
royalties for Alkermes, Padmanabhan says.
Longer term, however, new royalty revenue from Bydureon could
make up for at least some of that falloff and also boost
earnings, he said.
Bydureon royalties in Q3 grew to $5.3 million from just
$300,000 in the prior year's same quarter.
And then there are those pipeline drugs in the wings, waiting
for their debut.