Alkermes Knocks on Door of Biotech Big Leagues, Aims to Make Drugs of its Own

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Plus, Alkermes has built up a formidable cash reserve of $423 million as of the end of the year, that is growing as the company has become cash-flow positive.

From a stock perspective, Alkermes still isn’t thought of as anywhere near the top tier of biotech. Its market valuation was just a shade over $1 billion as of yesterday’s close. Partly because Alkermes isn’t in the lead storytelling role for Risperdal Consta—it collects a 10 percent royalty on worldwide sales—the company flies below a lot of investors’ radar screens. “We believe the company is well-positioned in this uncertain economic environment,” wrote JP Morgan analyst Cory Kasimov in a note to clients last week. “We feel the company is still surprisingly underappreciated by many investors.”

This year, Alkermes is counting on doing two big things to take its game to a higher level. The first is with exenatide LAR, which is vying to become the first FDA approved once-weekly injectable drug for diabetes. If this drug can make it through the FDA—still a sizable if—it will be marketed by Eli Lilly and Amylin Pharmaceuticals. In the background, without spending any of its money on the marketing rollout, will be Alkermes, collecting a 7 percent royalty on worldwide sales.

“Lilly and Amylin have to launch the product, and go into the money-losing launch phase, but we’re quite happy, because we’ll get our profits from the first dime,” Frates says.

The next piece of the strategy will be to boost sales of its alcohol-dependence drug—which aren’t much, at an estimated $5 million to $8 million in fiscal 2009, Alkermes says. The company is hoping this drug has something in common with Risperdal Consta, in which a long-lasting injectable drug might have an advantage in treating a population of patients who have a hard time taking their meds consistently, Pops says. Based on greater insights into the biology of addiction, Alkermes is going to try to expand the drug’s use more broadly over time to people who suffer from addictions to opiates, Pops says.

How this experience goes in clinical trials will go a long way toward establishing Alkermes’ identity in the biotech industry. It might even propel the company into the league of “Big Biotech.” Profitability is not a bad word to have on a PowerPoint slide when investors are feeling freaked out.

“We’re right on the threshold,” of being a “Big Biotech,” Pops says. “We’re no longer money-losing, equity-dependent biotech. The Street is waiting for us, now that we’re profitable, to see whether the explosive growth will come from our next product.”

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