Analysis: Alkermes impresses the Street

WASHINGTON, June 20 (UPI) -- Alkermes impressed Wall Street at its Analyst Day, leading some to forecast a bright future for its alcoholism treatment, Vivitrol, and its schizophrenia medication, Risperdal Consta.

Friedman, Billings & Ramsey analyst Jim Reddoch, who thinks the stock is undervalued, said Vivitrol and a long-acting formulation of the diabetes drug Byetta Alkermes is developing in collaboration with Eli Lilly and Amylin could deliver big for the company.

"We think Vivitrol is showing some life and could beat guidance," Reddoch stated in a research report.

Reddoch noted that Vivitrol posted its strongest week of growth earlier this month, putting its June performance on track to be 30 percent higher than March's run rate.

In addition, he noted, doctors are anticipating Vivitrol will have wide awareness in the next year as it is already starting to be incorporated at the "big centers."

Also, Cephalon, Alkermes' marketing partner for Vivitrol, reiterated its commitment to making it a big drug.

As for the long-acting Byetta, known as exenatide LAR, Reddoch said some investors are underestimating the potential of this drug to generate revenue for Alkermes. Exenatide LAR is currently in an open-label study after delivering positive results in a phase 2 trial.

"Investors are missing something," he stated, noting that some seem to think Alkermes' royalties are limited to U.S. sales when in fact the company stands to receive a 7 percent royalty on worldwide sales.

Alkermes could receive more than $1 billion in royalties on exenatide LAR, which makes the stock a good deal at its current price, Reddoch stated.

"We calculated that Alkermes economics on exenatide LAR justify $1.3 billion of the company's $1.5 billion current market value," he said. "Because there are other assets of obvious significant value, Alkermes is undervalued."

Alkermes also offers investors a safer way to benefit from exenatide LAR's anticipated success.

"Alkermes is a more diversified, lower-risk way to buy into the LAR story compared to Amylin," Reddoch stated.

The LAR story could get even better in the fall, when data from the 30-week open-label study is scheduled to be released. If the data is better than the results seen in phase 2, which is possible, then both Amylin and Alkermes shares will go up, Reddoch said.

Lawrence Neibor, an analyst with R.W. Baird, said Alkermes' Analyst Day increased his enthusiasm for Vivitrol, and he is maintaining his views on the promise of Risperdal Consta and the company's pipeline.

"We are modestly incrementally positive on Vivitrol after hearing encouraging feedback from three key opinion leaders," Neibor stated in a research report.

In addition to the positive recommendations about the drug from the opinion leaders and a patient, Neibor noted that Cephalon's senior vice president of U.S. pharmaceutical operations said it has removed barriers that resulted in Vivitrol's slow launch, and the drug now has 97 percent coverage from national payers.

Cephalon also said it plans to continue its Vivitrol sampling program, which could lead to increased prescriptions, Neibor noted.

Sales of the drug hit $1.4 million for the most recent month, which Neibor called "encouraging" because it's the highest monthly total to date.

Regarding Risperdal Consta, Neibor said he had no change in his outlook that the drug would drive growth for Alkermes. Janssen's patent on Risperdal expires this year, so this could boost sales of Risperdal Consta, he noted.

Risperdal Consta, a long-acting formulation of Janssen's Risperdal, generated worldwide sales of $660 million in 2005. The drug, which is marketed by Janssen, is approved in more than 75 countries, including the United States.

Alkermes' pipeline also looks promising, Neibor said.

"In the long term, Alkermes' diabetes and other pipeline products represent a significant opportunity to drive substantial (earnings per share) growth, and we look forward to receiving data on the majority of projects in the pipeline by the end of 2007," he stated.