2015 Could Be Blockbuster Year for Alkermes plc, Says Citi

December 17, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

It looks like 2015 will be a good year for Alkermes plc , a biopharmaceutical company that focuses on central nervous system diseases, if it can get regulatory approval for at least one potential blockbuster drug said Jonathan Eckard, a biotech analyst at Citigroup on Wednesday.

Eckard said the company has many options for a big win in 2015, with only a single one needed for investors to benefit. Thus Citigroup is increasing its valuation on Citi Focus List stock ALKS to $72 (up $12), viewing it as a key Mid-Cap Biotech stock to watch in early '15.

“We view the current risk/reward as favorable ahead of data from four proprietary pipeline programs during 2015 (three in the first half), with each program holding blockbuster potential,” said Eckard in a note to investors. “Positive results from just one could support upside to the current valuation, and multiple wins could create a significant value inflection, with our analyses pointing to valuations reaching as high as more than $100 per share.”

Citi said it had based its sunny outlook on analyses for ALKS-3831 (schizophrenia; Phase 2b January 15), ALKS-8700 (multiple sclerosis (MS); Ph1/2 first quarter 2015), ALKS-7106 (pain; Phase 1b first half 15), and ALKS-5461 (depression; Phase III mid-2H:15).

“With our relatively modest penetrations (U.S. only) for each drug, positive data for even a single program supports ALKS' current valuation (or more) for three of the out programs,” he said. “This leaves plenty on the table for multiple positive results and, overall, creates favorable risk/reward, in our view.”

So far, Wall Street interest appears most focused on the depression and MS drugs, '8700 and '7106, wrote Eckard, with the latter receiving the most attention “due to the disruptive nature” this agent could have in a multibillion dollar U.S. market.

“The Phase II data for ALKS-5461 drew broad scrutiny from the Street, and primary Phase III trial data is not expected until year end 2015, leaving the program overlooked,” wrote Eckard. “However, smaller Phase III trial data is expected over the course of 2015 and have potential to lessen the doubts around the drug’s efficacy, in our view.”

“The increase in our DCF valuation was driven by increased sales for pipeline programs (ALKS-5461, 3831, 8700, and 7106), with an introduction of our first market models for three of these programs,” he concluded.