Alkermes (ALKS) To Report Q4 Earnings: What's In Store?

Alkermes Plc. (NASDAQ:ALKS) is scheduled to release fourth-quarter 2019 results on Feb 13.

The company’s surprise history has been impressive so far, having delivered an earnings beat of 236.80%, on average, in the trailing four quarters. In the last reported quarter, Alkermes came up with a positive earnings surprise of 80%.

Shares of the company have lost 39.5% in the past year compared with the industry’s decline of 1%.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Alkermes’ revenues are being driven by its proprietary products, Vivitrol and Aristada, and some partnered products — Risperdal Consta, Invega Sustenna/Xeplion, Invega Trinza/Trevicta, Ampyra/Fampyra.

Sales of Vivitrol and Aristada increased year over year during the third quarter. We expect the trend to continue in the fourth quarter as well. For 2019, the company narrowed its guidance for Vivitrol sales to $330-$340 million from the previous range of $330-$350 million

The company introduced certain initiatives to drive Aristada growth. However, the growth in the third quarter was slower than the company expected. Hence, the company now expects Aristada net sales for 2019 to be $185-$190 million, down from its previous expectation of $200-$210 million.

During the third quarter, the company witnessed a year-over-year decline in royalty revenues, mainly from the Ampyra/Fampyra franchise following the drug’s entry to the U.S. market in 2018. We expect this trend to continue in the fourth quarter.

The company also adopted certain restructuring measures. These include streamlining the headcount across a number of functional areas within the organization; reducing the number of open positions, including re-projecting its hiring plans for the next several years; and reducing external spend. The company expects such restructuring efforts to deliver savings of about $150 million, with roughly one third related to research and development (R&D) and two thirds driven by selling, general and administrative (SG&A) expenses. The company expects a restructuring charge of approximately $15 million in the fourth quarter.

In October 2019, Alkermes and its partner Biogen (NASDAQ:BIIB) received FDA approval for Vumerity (diroximel fumarate), a novel oral fumarate with a distinct chemical structure, for the treatment of relapsing forms of multiple sclerosis (MS).. Alkermes also announced the receipt of a $150-million milestone payment from Biogen triggered by the approval. The company will record substantially all of the milestone payment as license revenues in the fourth quarter of 2019 which should add in to the revenues to the fourth qurter. Alkermes should start recording royalty on net sales of Vumerity from Biogen and we also expect Alkermes to provide updates on the launch of the drug in the fourth quarter.

During the quarter, the company acquired Rodin Therapeutics, Inc., a privately-held biopharmaceutical company focused on developing novel, small molecule therapeutics for synaptopathies. The deal will enable Alkermes to expand its central nervous system (CNS) development efforts into a wide range of neurodegenerative disorders through epigenetic control of synaptogenesis. The company plans to advance investigational new drug (IND)-enabling activities for lead preclinical assets in the Rodin development candidate portfolio. Alkermes also intends to continue Rodin’s preclinical research program focused on the subset of frontotemporal dementia patients with an inherited mutation of the progranulin gene (FTD-GRN) and exploratory work in hematological disorders and oncology. We expect the company to provide updates on the same in the fourth-quarter earnings call.

Last month, the company’s new drug application (NDA) seeking approval of ALKS 3831 (olanzapine/samidorphan) for the treatment of schizophrenia and bipolar I disorder has been accepted by the FDA for review. The NDA has been given an action date of Nov 15, 2020. Approval of the additional indication will help Alkermes gain access to a broader patient population.

Why a Likely Earnings Beat

Our proven model predicts an earnings beat for Alkermes this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Alkermes has an Earnings ESP of +0.76% as the Zacks Consensus Estimate is pegged at a profit of 67 cents and the Most Accurate Estimate stands at 66 cents.

Zacks Rank: It currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks That Warrant a Look

Here are a few other healthcare stocks worth considering, as our model shows that these too have the right mix of elements to beat estimates this time around.

Nektar Therapeutics (NASDAQ:NKTR) has an Earnings ESP of +8.36% and a Zacks Rank of 3.

Ascendis Pharma A/S (NASDAQ:ASND) has an Earnings ESP of +4.22% and a Zacks Rank #3.

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