Is A New Blockbuster Drug In The Works For Alkermes?

Alkermes (ALKS) was a loser for last week, going down three straight days after announcing its 4th quarter numbers on May 29, 2007. Its stock price now rests just below 16, which leaves the company with a market cap around 1.6 billion.

WR Hambrecht analyst Andrew Forman downgraded the stock to “hold” and characterized the company's reliance on Risperdal Consta as “the only leg on the stool.” ALKS revenues were largely dependent on the antipsychotic drug because its sales of recently approved Vivitrol have been slow.

Vivitrol is used to treat alcohol dependence pharmacologically. One analyst was positive - Friedman, Billings, Ramsey analyst Jim Reddoch, who rates the stock “outperform,” pointed to growing monthly sales of Vivitrol as a potential catalyst for future sales growth.

Vivitrol has the potential to be a huge blockbuster, changing the way alcoholism is treated for the future. However, ALKS and its marketing partner Cephalon (CEPH) need to do a better job marketing this new treatment option. With Risperdal approved for schizophrenia and Vivitrol approved for alcohol dependence, what is next in the pipeline for this company to potentially move it into the upper-echelon of biotechnology companies?

Well, it appears the next drug in line for approval for ALKS is a collaboration effort with Eli Lilly (LLY) to develop inhaled insulin. This inhaled form of insulin could substitute for some of the injections many diabetes patients need to control their blood sugar. AIR Insulin, the product candidate, is currently in Phase III clinical development. This product, if approved, could be the first true “blockbuster” drug for ALKS and a real catalyst for its stock and investors. Other drugs in the pipeline follow a similar trend aimed primarily at diabetes or alcohol dependence.

While the analysts are disappointed with Vivitrol sales and feel Risperdal makes up too much of ALKS current revenues, just wait until AIR Insulin phase 3 results are announced and the drug is either approved or denied by the FDA. ALKS, and LLY for that matter, desperately need a big winner and the inhaled insulin concept, if approved, would be a blockbuster drug and a wonderful alternative for those with diabetes.

Disclosure: Author owns stock in Alkermes.

ALKS 1-yr chart: