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Alkermes (ALKS) Down 8.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Alkermes (ALKS). Shares have lost about 8.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Alkermes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Alkermes' Earnings and Revenues Beat Estimates in Q4

Alkermes reported adjusted earnings of 83 cents per share in the fourth quarter of 2019 compared with earnings of 34 cents in the year-ago quarter. Earnings beat the Zacks Consensus Estimate of 66 cents.

The company’s revenues of $412.7 million in the quarter increased 30.7% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $408 million. The company’s proprietary products — Vivitrol and Aristada — drove revenues.

Factors Impacting Q4

Manufacturing and royalty revenues from J&J’s drugs — Risperdal Consta, Invega Sustenna/Xeplion and InvegaTrinza/Trevicta — were $107.3 million, down 35.9% year over year. Total revenues also included a $150-million milestone payment from Biogen related to the FDA approval of Vumerity, of which $144.8 million were recorded as license revenues and $5.2 million were recorded as research and development revenues.

Vivitrol sales improved about 10.7% year over year to $92.8 million.

Aristada sales came in at $56.7 million, up 16.3% year over year.

Research and development (R&D) expenses were $198.2 million, up 81.8% year over year.

Selling, general and administrative (SG&A) expenses were $154.5 million, up 9.4% year over year.

2019 Results

The company recorded earnings of 71 cents per share compared with 63 cents in 2018.

The company’s revenues increased 7% year over year to $1.17 billion.

Restructuring Update

During the quarter, Alkermes implemented a strategic restructuring to reduce cost structure and, in turn, accelerate and drive sustained profitability. The company implemented a restructuring design to deliver savings of about $150 million in 2020 with about one-third related to R&D and two-thirds driven by SG&A.

2020 Guidance

The company expects total revenues of $1.03-$1.08 billion. The midpoint of the guided range is $1.06 billion, which is below the Zacks Consensus Estimate of $1.07 billion.

Alkermes expects Vivitrol net sales of $340-$355 million and Aristada net sales of $220-$235 million.

The company expects R&D expenses of $405-$430 million. SG&A expenses are expected to be $535-$560 million.

The company expects adjusted earnings per share of $25-$43 cents, based on a weighted average share count of approximately 161 million shares outstanding. The Zacks Consensus Estimate for 2020 earnings is pegged at 45 cents.

Pipeline Update

The company submitted a new drug application to the FDA for ALKS 3831 for the treatment of schizophrenia and bipolar I disorder. The NDA was also accepted by the FDA.

During the quarter, the company acquired Rodin Therapeutics, building on its experience in CNS diseases and expanding its development efforts to a wide range of neurodegenerative disorders.

How Have Estimates Been Moving Since Then?

Estimates revision followed a flat path over the past two months. The consensus estimate has shifted -47.37% due to these changes.

VGM Scores

At this time, Alkermes has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Alkermes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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