Underappreciated Leader Skips Over Equal-Weight In Double Upgrade

• Shares of Alkermes Plc ALKS have risen more than 33 percent over the past year.
• Morgan Stanley’s David Risinger has upgraded Alkermes from Underweight to Overweight, while raising the price target from $61 to $85.
• Risinger believes that negative results has either been resolved or are reflected in the valuation, while Phase 3 data is awaited on a “potential blockbuster” for treatment-resistant depression.

Risinger explained that there had been concerns regarding the commercial potential of Aristada and the durability of royalties from Ampyra. “We now believe that investor enthusiasm for Aristada has moderated, and the Ampyra IPR patent challenges were resolved in favor of the brand on August 25,” Risinger stated.

Risinger believes that the Street and investors are grossly under-appreciating Alkermes’ leadership potential in the development of drugs for central nervous system disorders. The company has specific expertise in “the brain's reward centers.”

Risinger expressed optimism about the potential for its two late stage pipeline drugs, 5461 for depression and 3831 for schizophrenia. The former product has already demonstrated that it has limited abuse potential, while the Phase 2 trial validated its mechanism of action.

According to the Morgan Stanley report, the end user sales estimate for 5461 for 2020 has been raised from $680 million to $900 million. “And if 5461 succeeds, we expect investor enthusiasm for 3831 to step higher, since both drugs incorporate novel agent samidorphan,” the report added.