On Friday, Leerink Partners maintained its Market Perform rating and $28.00 price target on Alkermes (NASDAQ:).

The company's analysis followed a recent earnings report that highlighted that Alkermes' revenue and expenses were slightly better than expected and balanced each other out. However, the company's stock saw a slight decline of about 3.5%, which was seen as an indicator of investor confidence during a transition to Orexin growth phase.

The focus of Alkermes' conference call was the company's financial outlook for 2025, which includes an expected $200 million decline in production and licensing revenue. Additionally, the company expects to increase research and development spending to support three ALKS-2680 programs.

Despite these forecasts, Leerink only adjusted its EPS estimates slightly, from $2.73 to $2.70 for 2024 and from $2.40 to $2.05 for 2025. This adjustment was primarily due to necessity higher investments in research and development.

Leerink's valuation of Alkermes' base business is approximately $22 per share, implying approximately $5 per share of added value for the Orexin platform based on the current share price. The report also noted that Alkermes is preparing for increased competition by expanding its sales team and improving payer contracts for its drug Lybalvi, which is expected to face competition from Bristol-based Cobenfy (KarXT).

Despite the challenges, Leerink expressed interest in Alkermes' potential in the Orexin market, but maintained a cautious stance amid concerns about Lybalvi's growth and the need to reassess consensus peak sales numbers. The company also emphasized the importance of understanding the competitive landscape in the Orexin space.

While maintaining a “Market Perform” rating and a price target of $28, Leerink recommended that investors keep an eye on developments in the Orexin market.

In other recent news, Alkermes Plc reported an 18% increase in total revenue for the third quarter of 2024 compared to the same period last year, reaching $378.1 million. This growth was primarily due to the strong performance of its proprietary products VIVITROL, ARISTADA and LYBALVI.

The company's most recent financial performance also showed GAAP net income of $92.8 million and non-GAAP net income of $121.4 million for the quarter. Alkermes ended the quarter with $927.8 million in cash and investments. For the full year, Alkermes expects net sales of $410 million to $430 million for VIVITROL, $275 million to $295 million for LYBALVI and $340 million to $360 million for ARISTADA.

Alkermes is also advancing its ALKS 2680 program for the treatment of narcolepsy, with Phase 2 trials underway. The company expects results from this program in the second half of 2025.

Investing Pro Insights

Complementing Leerink Partners' analysis, InvestingPro's data provides additional insight into Alkermes' financial position. The company's P/E ratio of 12.18 and adjusted P/E ratio of 11.09 for the trailing twelve months (as of Q3 2023) suggest that the stock may be undervalued relative to its earnings. This is further supported by an InvestingPro tip, which suggests that Alkermes is trading at a low P/E relative to its near-term earnings growth.

Despite the expected decline in sales and increased research and development spending mentioned in the article, Alkermes maintains a strong financial position. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, which could give it flexibility to manage the transition period and invest in its Orexin platform.

The article discusses the possibility of increased competition for Lybalvi, but it's worth noting that Alkermes was profitable over the last twelve months and analysts are predicting continued profitability this year, according to another InvestingPro Tip. This financial stability can help the company withstand competitive pressures and support its research and development initiatives.

For investors who want a more comprehensive analysis, InvestingPro offers 7 additional tips for Alkermes that provide a deeper understanding of the company's financial health and market position.

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