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On Thursday, Baird reaffirmed its Outperform rating and $38.00 price target for Alkermes (NASDAQ:ALKS). The endorsement follows a recent investor event where Alkermes reviewed its Orexin Portfolio Strategy, emphasizing the potential of the orexin drug class in a variety of indications beyond narcolepsy, which is currently the lead setting.
The event showcased the versatility of the orexin class, suggesting it could be significantly effective in several medical indications. This development underscores the company's commitment to exploring the broader implications of its research in the treatment landscape.
Despite the promising outlook presented, the analyst noted that the market's current focus on drug safety over efficacy might limit immediate positive impact on Alkermes' stock price. The market's cautious stance is expected to persist until the phase 2 results of ALKS 2680 for narcolepsy become available in the second half of 2025.
Alkermes' exploration into the orexin class represents a strategic move to diversify its therapeutic offerings. The company's focus on this new class of drugs could potentially lead to advancements in the treatment of various conditions, pending the outcome of ongoing clinical trials.
The analyst's comments suggest that while the potential for the orexin class is recognized, the true valuation impact on Alkermes' shares will hinge on forthcoming clinical results. Investors are anticipated to watch closely for the phase 2 outcomes of ALKS 2680, which could be a pivotal moment for the company's stock valuation.
In other recent news, Alkermes has made significant strides in its financial performance and drug development. The company's Q2 2024 revenue reached a robust $399 million, primarily driven by strong sales of proprietary products Lybalvi and Aristada. Analyst firms Baird and H.C. Wainwright have raised their share targets for Alkermes, reflecting a positive outlook on the company's performance.
Alkermes is also making progress with its investigational drug ALKS-2680, with Phase II studies for narcolepsy types 1 and 2, known as VIBRANCE-1 and VIBRANCE-2 respectively, expected to release results in the second half of 2025. Additionally, Alkermes is exploring the potential of the orexin mechanism for other neurological and psychiatric conditions, as well as selected rare diseases.
Analyst firms such as JPMorgan, Mizuho Securities, and Piper Sandler have maintained neutral to positive ratings on Alkermes, citing the potential of ALKS-2680 as a leading treatment for narcolepsy. Alkermes is also considering further development of ALKS-2680 for idiopathic hypersomnia (IH), based on the unmet need and positive feedback from patient groups and clinicians following Phase 1b data.
InvestingPro Insights
Alkermes' strategic focus on its Orexin Portfolio aligns with its strong financial position and market performance. According to InvestingPro data, the company boasts a market capitalization of $4.38 billion and a P/E ratio of 15.35, indicating investor confidence in its growth potential. The company's revenue for the last twelve months as of Q2 2024 stood at $1.51 billion, with a gross profit margin of 83.31%, reflecting robust operational efficiency.
InvestingPro Tips highlight that Alkermes holds more cash than debt on its balance sheet, which provides financial flexibility to fund its research and development initiatives, including the promising orexin drug class. Additionally, the company's management has been aggressively buying back shares, potentially signaling their belief in the company's future prospects.
While the market awaits the phase 2 results of ALKS 2680, it's worth noting that Alkermes has shown a strong return over the last three months, with a price total return of 15.56%. This positive momentum, coupled with analysts predicting profitability for the year, suggests that investors are optimistic about the company's direction.
For those interested in a deeper analysis, InvestingPro offers 10 additional tips for Alkermes, providing a comprehensive view of the company's financial health and market position.
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