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Alkermes Upped to Outperform

Zacks Equity Research

We have upgraded Alkermes plc (ALKS) to Outperform from Neutral following the revised adjusted earnings guidance provided by the company for fiscal 2013 (ending March 31, 2013).

Alkermes now expects to end fiscal 2013 with adjusted earnings in the range of 69 cents – 84 cents, as opposed to the previously forecasted range of 62 cents-77 cents per share. The company boosted its guidance following the successful completion of the refinancing of Alkermes’ previously outstanding senior secured bank debt in September 2012.

We are also impressed by the strong performance of the company in the first quarter of fiscal 2013. This was the third full quarter for the company, formed in September 2011 after the merger of Alkermes Inc. and Elan Drug Technologies (EDT), the drug delivery unit of Elan Corporation (ELN).

Alkermes beat the Zacks Consensus Estimate both in terms of revenues as well as earnings. Results were boosted by the inclusion of drugs belonging to the EDT unit of Elan. Alkermes' revenues jumped 146% in the first quarter of fiscal 2013 due to the expanded product portfolio.

The key marketed products of the company include Risperdal Consta (schizophrenia and bipolar disorder), Xeplion (schizophrenia), Vivitrol (opioid and alcohol dependence), Ampyra/Fampyra (improving walking ability in multiple sclerosis patients) and Bydureon (type II diabetes).

We are pleased with the US approval and launch of Bydureon earlier in the year. The drug offers significant commercial potential. Alkermes has co-developed the drug with Amylin Pharmaceuticals (now a wholly owned subsidiary of Bristol-Myers Squibb Company (BMY)). We are also pleased by the pipeline progress at Alkermes.

In view of these positives, we believe that there is significant scope for stock price appreciation from current levels.

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