Expectations Deflated for Alkermes
12/01/06 - 03:17 PM EST
Michael Latwis
This column was originally published on RealMoney on Dec. 1 at 10:29 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
After an extraordinary downshift in the outlook for specialty pharma player Alkermes (ALKS Quote - Cramer on ALKS - Stock Picks), the stock is beginning to look more attractive now that a bit of reality has set in. Earlier in the year, the company had been riding high on the prospects for its new alcoholism treatment, Vivitrol, and a generous co-promotion deal with Cephalon (CEPH Quote - Cramer on CEPH - Stock Picks). This product reached the U.S. market in June, and in its first full quarter on the market, it missed just about all of the market's forecasts with only $1.1 million in sales. This prompted management to bring down its Vivitrol sales forecasts for the full year to a range of $5 million to $10 million, from $35 million to $40 million, previously. This performance also brought at least one high-profile analyst downgrade and more cautious investor sentiment overall. Alkermes still faces an uncertain market outlook for Vivitrol based on its modest ramp-up and the difficulties of other treatments in this space. I'm now more comfortable with the stock, though, as there is a more balanced market perspective on Vivitrol going forward. In fact, the shares are off nearly 40% from their peak earlier this year and are down 16% year to date. I suspect that Vivitrol may still cause further volatility for shareholders, but the main appeal of Alkermes rests in its differentiated drug-delivery technologies and solid late-stage diabetes pipeline. With Vivitrol expectations now deflated, I believe the shares will be better able to move forward on the strength of their core delivery capabilities and pipeline opportunities.
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