Alkermes: R&D Complementing Royalties

| About: Alkermes plc (ALKS)

By Barry S. Cohen, Stock Traders Daily

For years, Alkermes (NASDAQ:ALKS) made its money by collecting royalties and/or manufacturing revenues from other companies' products. The Dublin, Ireland-based company is still doing plenty of that. But now it has some unique compounds from its own R&D efforts that promise to not only help patients, but offer good value for payers. And that may spell opportunity for investors.

The pipeline product the company is most enthusiastic about is an oral compound designed to compete with the best in class among oral antipsychotic agents. It's a combination of a proprietary new clinical entity of Alkermes and one of the most important antipsychotic drugs in the world called olanzapine, otherwise known as Zyprexa, a product of Eli Lilly (NYSE:LLY) This year the company plans to start testing the product in patients with schizophrenia, hoping that it is not only effective but doesn't have the undesirable side effects - weight gain so sensitive that it can lead to diabetes - of olanzapine.

Of course, what's enabled the company to fund a beefed up R&D program is the success of its commercial offerings. The Alkermes line consists of about 25 products from which it earns royalties and/or manufacturing revenues. The mainstays of its line consist of what the company calls the big five. These products are unique in the classes in which they compete, are early in their patent life and will likely drive the revenue of Alkermes for the next ten years. Our real time trading reports help investors identify companies like Alkermes that still have plenty of upside potential.

The latest addition to the big five is Bydureon, considered one of the most outstanding new biotechnology drugs to come along in the past several years. It's the first and only once weekly medication for Type II diabetic patients. Bydureon is a new class of molecule that was developed by developed by Alkermes' partners at Amylin. Last year, Bristol-Myers Squibb (NYSE:BMY) bought Amylin for $7 billion, primarily to gets it hands on Bydureon.

To help finance the transaction, Bristol-Myers teamed up with AstraZeneca (NYSE:AZN), which paid about half the purchase price and shares in the profits for Bydureon.

Alkermes earned a royalty of $5.3 million on revenues of Bydureon during the company's fiscal third quarter ended December 31, 2012, pushing total revenue for the quarter up 8.2% from a year earlier and beating analyst estimates. In the reported quarter, Alkermes also scored a 10.3 percent gain to $52.5 million of manufacturing and royalty revenues from its long-acting atypical antipsychotic franchise comprising Risperdal Consta and Invega Sustenna/Xeplion. These drugs are marketed by Johnson & Johnson (NYSE:JNJ).

Meanwhile, sales of its own product, Vivitrol, grew about 50 percent to nearly $15 million. Based on the excellent performance of Vivitrol, Alkermes raised its guidance for sales and EPS in fiscal 2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: By Barry Cohen for Stock Traders Daily and neither Mr. Cohen or Stock Traders Daily receive compensation from the publically traded companies mentioned in this article for writing this article.

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