Portfolio: Zacks Deep Value

Alkermes plc is a global biopharmaceutical and a pure-play neuroscience company. Alkermes earns revenue through multiple channels:

1) Product Sales (68% of 2024 revenue), which includes VIVITROL (alcohol and opioid dependence treatment), ARISTADA and ARISTADA INITIO (schizophrenia treatment), and LYBALVI (schizophrenia and bipolar I disorder treatment)
2) Manufacturing & Royalty Revenue (32% of 2024 revenue), which includes licensing of drug delivery technologies, manufacturing services for partner companies, and royalties from products using Alkermes’ technologies
3) Research and Development Revenue, collaborations and partnerships with other pharmaceutical companies

However, the company’s most significant value driver is the ALKS 2680 program – a novel approach being developed for the treatment of narcolepsy. This represents entry into a potentially transformative new therapeutic category addressing central disorders of hypersomnolence. Phase II enrollment is expected mid-2025 with results expected by fall of this year. Phase I revealed compelling efficacy and safety, placing it potentially highly competitive with Takeda’s solution while also significantly reducing dosage requirements. This represents a multi-billion dollar revenue opportunity, as existing therapies generate well over $2.5 billion today, and Alkermes’ drug with superior efficacy and patient convenience could take significant market share.

At today’s market capitalization of $4.4 billion, or just a 15x forward P/E according to Zacks estimates, we believe shares of ALKS offer a compelling deep value opportunity in which very little of the company’s growth opportunities are priced in.