Technology

Why Is Alkermes (ALKS) Down 12% Since Last Earnings Report?

It has been about a month since the last earnings report for Alkermes (ALKS). Shares have lost about 12% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Alkermes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Alkermes' Q2 Earnings & Revenues Surpass Estimates

Alkermes reported adjusted earnings of 6 cents per share in the second quarter of 2020, lower than earnings of 9 cents reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at a loss of a cent.

The company’s revenues of $247.5 million in the quarter decreased 13.1% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $239 million. During the second quarter, the performance of the Aristada product family, together with disciplined management of expenses, partially offset the negative impact on Vivitrol net sales that resulted from COVID-19-related decreases in patient visits to healthcare providers and treatment centers.

Quarter Details

Total manufacturing and royalty revenues were up 9.8% year over year to $116.5 million.  Manufacturing and royalty revenues from J&J’s (JNJ) drugs — Risperdal Consta, Invega Sustenna/Xeplion and Invega Trinza/Trevicta — were $83.1 million, down9.6% year over year.

Vivitrol sales decreased about 19% year over year to $71.6 million. The decline resulted from reduced new patient starts and more restricted access to healthcare providers due to COVID-19-related disruptions.

Aristada sales came in at $58.8 million, up 21% year over year, driven primarily by increased breadth of the Aristada provider base and growth in the drug’s two-month dose.

Research and development (R&D) expenses were $94.2 million, down 9.8% year over year.

Selling, general and administrative (SG&A) expenses were $132 million, down 17.5% year over year.

2020 Guidance

The expectations for 2020 reflect the anticipated net impacts of the COVID-19 pandemic on Alkermes' operating and financial results.  The company expects that the negative impact of COVID-19 on Vivitrol net sales will be partially offset by a decrease in operating expenses, notably within R&D. 

The company now expects total revenues of $965-$1,005 million, down from the previous expectation of $1,030-$1,080 million. It expects Vivitrol net sales of $270-$300 million, down from the prior expectations of $340-$355 million. Aristada net sales are expected to be $220-$235 million, same as the prior expectation.

Earnings are expected between break-even and 19 cents, down from the earlier expectation of 25 cents- 43 cents per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted 62.7% due to these changes.

VGM Scores

Currently, Alkermes has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Alkermes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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