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$ALKS - Alkermes

$ALKS – Alkermes

About:

Alkermes is a global pharmaceutical company based out of Ireland. As a leader in innovative medicine addressing unmet needs in the market.  With a global reach and vast resources, this company is developing products to make a meaningful difference in the world and how patients are monitoring their diseases.

Uniquely positioned, Alkermes is an engine of innovative treatments for major clinical conditions specifically focused on central nervous system (CNS) disorders, such as schizophrenia, depression, addiction and multiple sclerosis. 

Alkermes has proven expertise reflected in a diversified commercial product portfolio, featuring ARISTADA and VIVITROL as well as having granted multiple different licenses to their proprietary technology in both the United States and European Union which expand the company’s portfolio.  This technology is paving the way towards improved treatments and discovering new, patentable medicines.  The company also boasts a pipeline of novel product candidates focused on CNS diseases in clinical development, keeping the patients needs at the forefront of their focus.

Positioning their company with strategic partnerships, Alkermes has developed collaborations with some of the worlds largest pharmaceutical companies to help generate new and innovative medicines.   A partial list of Alkermes partnerships include Biogen, AstraZeneca, Janssen, Acorda, and Acceleron. 

Richard Pops, the Chairman and CEO of Alkermes, has been CEO of the company since 1991.  Since taking over the company, he has grown the company from a small private company of 25 employees to a powerhouse biopharmaceutical company with more than 2,000 employees.  Currently serving on the board of directors of Neurocrine Biosciences, Acceleron Pharma, Epizyme, the Biotechnology Industry Organization (BIO), the Pharmaceutical Research and Manufacturers of America, and the National Health Council.  Pops brings quite an impressive background to the table, with almost 30 years as CEO of his current company and aiding in improving several others, he displays a track record of success.

The company also focuses on their responsibility in all aspects of the word.  Alkermes supports educational, healthcare-related, and public policy events through partnerships and donations which are aimed at central nervous system disorders such as depression and schizophrenia.  Contributing to individual education by providing educational grants, Alkermes focus lies on activities which improve patient care and public health in CNS disorders.  Committed to their patients and furthering the field of medicine, Alkermes remains a leader in treatments for CNS disorders.

Pipeline:

As previously mentioned, Alkermes has a robust pipeline of not only completed products and partnerships, they also have several drug candidates in various stages of clinical trials.

Their fully approved drugs include:

·         ARISTADA – Long-acting, atypical antipsychotic

·         VIVITROL – Once-monthly medication to treat alcohol dependence and prevention of relapse to opioid dependence

Products in the US utilizing Alkermes technology:

·         BYDUREON – AstraZeneca product to treat type 2 diabetes

·         RISPERDAL CONSTA – Janssen product to treat schizophrenia and Bipolar I Disorder

·         INVEGA SUSTENNA – Janssen product to treat schizophrenia and schizoaffective disorders

·         INVEGA TRINZA – Janssen product to treat schizophrenia in patients already treated with SUSTENNA

Products in the EU that utilize Alkermes technology:

·         BYDUREON

·         FAMPYRA

·         RISPERDAL CONSTA

·         TREVICTA

·         XEPLION

 

Their Research and Development side of the business has several late stage drug candidates in Phase III or have filed NDA, with one product in early stages at Phase I. 

·         ALKS 5461 – NDA Filed for Major Depressive Disorder

·         ALKS 3831 – Phase III for Schizophrenia

·         BIIB098 (Formerly ALKS 8700) – Phase III for Multiple Sclerosis

·         ALKS 4230 – Phase I in Immuno-oncology

 

Alkermes has two big FDA deadlines and events in the upcoming months which will be the focus of this write up.  The first is ALKS 5461 for the treatment of Major Depressive Disorder with the FDA advisory committee discussing the NDA application for the drug candidate on November 1st as well as a PDUFA date of January 31, 2019.  The second is ALKS 4230 for treatment of Solid Tumors, where they are reporting Phase I initial data in the second half of 2018.  I will be setting 2 dates for this write up to remind investors of the Advisory Meeting/data presentation sometime in the next 2 months, as well as the PDUFA date of January 31, 2019.  With multiple catalysts in the pipeline in the next 3 months, Alkermes is an exciting company to watch.

Specific Drugs:

ALKS 5461

AKLS 5461, buprenorphine/samidorphan, is a k-opioid receptor (KOR) antagonist which functions as an adjunct to antidepressant therapy in treatment-resistant depression (TRD).  The buprenorphine is a partial agonist of µ-opioid receptors (MOR), antagonist of the KOR, as well as a slight antagonist of the δ-opioid receptor (DOR), and a weak agonist of the nociception receptor (NOP).  Samidorphan on the other hand is a preferential antagonist of the MOR, allowing for the combination of the two to function as a stopper to KORs with negligible activation of MORs. 

Essentially this means that by activating the KOR, opioid peptides which are endogenous ligands of the KOR and function by inversing morphine-like, euphoric endorphins, create a sense of dysphoria and psychotomimetic effects, and are to produce changes in neuroplasticity evoked by chronic stress that has led to the development of depression and CNS disorders and drug addiction.  It is suggested in research that inhibiting the KOR abolishes antidepressant-like effects of buprenorphine, but the drug exhibits both antagonistic and agonist properties.  This has led to the concern that in theory, ALKS-5461 could be limited in the effectiveness of treatment of depression. 

Granted a Fast Track Designation in 2013, the drug has proceeded up to Phase III where thee different trials were initiated for the treatment of depression.  The first two trials failed in 2016, FORWARD-3 and FORWARD-4, however based on the third trial, FORWARD-5, the company submitted an NDA in 2017 for ALKS-5461.  Things started to look grim for the company moving forward, as the FDA served Alkermes a refuse-to-file letter saying that more data from well-controlled clinical trials must be presented before an application would be recognized.  However, just two weeks after serving the notice, the FDA rescinded their letter and accepted the NDA after productive interactions with Alkermes where the company clarified certain aspects of the NDA.  No further data was needed to rescind the letter and PDUFA date is scheduled by January 31, 2019.

The first two trials failed after the company reported higher placebo responses as the chief obstacle in their studies.  Not something a company would like to hear in relation to an antidepressant medication.  Causing the stock to plummet 44% in 2016, from nearly $80 to under $40, the company has been slowly recovering since.  ALKS-5461’s fate lies in the hands of FORWARD-5, without a clear success and perfect data, an FDA approval seems unlikely for this drug.

FORWARD-5 focused on two doses of 1mg/1mg and 2mg/2mg of ALKS-5461 for adjunct treatment in patients with major depressive disorder (MDD).  Concurrently to taking ALKS-5461, the patients also remained on background antidepressant therapy.  With 407 patients enrolled, 63 received 1mg/1mg, 63 received 2mg/2mg, and 280 received the placebo.  The study was conducted in two stages: Stage 1 was 5 weeks, Stage 2 was 6 weeks. In Stage 1, the average change from baseline depression scores was calculated for weeks 3 through 5. For Stage 2, the average change was calculated for weeks 3 through 6. Depression scores were assessed using the 6-item Montgomery–Åsberg Depression Rating Scale (MADRS-6) and MADRS-10, an assessment tool for depression.

In the study, ALKS-5461 2mg/2mg met the prespecified primary endpoint of significantly reducing depression scores compared to placebo, as measured by 6-item MADRS scores (p=0.018). ALKS-5461 2mg/2mg also demonstrated statistically significant reductions in 10-item MADRS scores compared to placebo (p=0.026). The 1mg/1mg dose of ALKS-5461 showed improvement in depressive symptoms in the study, but did not separate significantly from placebo.  2mg/2mg treatment did show a significant change, warranting its efficacy while also having no incidences of withdrawal or pattern of adverse effects suggesting abuse potential.  The clinical benefit of the compound maintained through 11-week study and the compound is relatively safe and tolerable.  Where FORWARD-3 and FORWARD-4 failed to meet their endpoints, FORWARD-5 succeed in meeting primary endpoint for the 2mg/2mg dose, showing great efficacy when compared to a placebo.   

November 1st, 2018, the FDA advisory committee is meeting to discuss ALKS-5471 in relation to the compound’s efficacy, safety and risk-benefit profile of the NDA for buprenorphine and samidorphan sublingual tablets for adjunctive treatment of major depressive disorder.  In recent history, the FDA has gone against the decision and vote of the advisory committee roughly 10% of the time over all, with 30% of the votes being against approving the drug and 70% of the votes being for approval. 

ALKS-4230

Currently in Phase I of development, Alkermes does a change of pace with this immuno-oncology drug for the treatment of solid tumors, making a shift away from their regular market in the CNS disease space.  This drug candidate is an engineered fusion protein comprised of permuted interleukin-2 (IL-2) and IL-2 Receptor (IL-2R) α made specifically to only activate the intermediate-affinity IL-2R.  The intermediate-affinity IL-2R is expressed mainly on effector lymphocytes, which are essential in generating an antitumor immune response.  IL-2 is a cell signaling molecule which plays a role in controlling the life cycle of specialized T-cells.  ALKS-4230 selectively binds to intermediate-affinity IL-2R to both activate and increase in number the immune cells that work to battle cancer.  Their selectivity, however, means they don’t bind to the “high-affinity IL-2 receptor,” so as not to trigger greater activity or proliferation in immune cells that could dampen an anti-tumor response Research has suggested that selective activation of the intermediate-affinity IL-2R by ALKS-4230 has the potential to provide enhanced tumor killing as well as improved tolerability. 

ALKS-4230 is currently in Phase I in patients with advanced solid tumors. Key study objectives are to determine a recommended phase 2 dose and characterize the safety profile, pharmacokinetics (PK), pharmacodynamics (PD) and evidence of antitumor activity. A dose-escalation phase in patients with refractory solid tumors (Part A) will be followed by expansion cohorts in defined populations (Part B). ALKS 4230 is administered as a 30-minute intravenous infusion once daily for five days each cycle. The dose will be escalated until reaching maximum tolerated dose or an Optimal Biologic Dose. The first two dose cohorts will use a 3+3 design. Subsequent cohorts in Part A will enroll a minimum of 6 subjects. In Part B up to 21 patients will be enrolled into each of four tumor-specific cohorts. Peripheral blood samples will be collected for PK, immunogenicity and PD assessments. The primary PD endpoint is change-from-baseline in CD8+ T, NK and T reg cell counts. Other PD measures include serum concentrations of multiple proinflammatory cytokines and immunohistochemical assessment of markers of immune activation in tumor tissue from selected patients.

Animal trials conducted previously were positive and showed the anti-tumor activity of ALKS-4230, both alone and with the checkpoint inhibitors. Rodents treated with ALKS-4230 were seen to have lesser tumor growth and better survival, supporting clinical evaluation of ALKS 4230 as a potential immunotherapy in the oncology space.

ALKS-4230 will be administered in combination with PD-1 inhibitor KEYTRUDA® (pembrolizumab). Pembrolizumab is an anti-PD-1 therapy that works by increasing the ability of the body's immune system to help detect and fight tumor cells, complimenting the mechanisms of action from ALKS-4230.

Alkermes has accelerated clinical evaluation of ALKS 4230 in combination with pembrolizumab based on data from the ongoing monotherapy dose-escalation stage of the phase 1 study, where ALKS 4230 demonstrated dose-dependent pharmacodynamic effects on circulating natural killer cells and CD8+ T cells, and minimal and non-dose dependent effects on immunosuppressive regulatory T cells. 

Initial data from Phase I is due in the second half of 2018, estimated to come out early November.

Competition and Market:

ALKS-4230 is a tough market, cancer is a hot sector but it continually sees failure.  While the FDA holds the stance that they want to try to push new oncology and immuno-oncology drugs through the approval process and get them to market to potentially save or extend lives, their decisions tend to skew otherwise.  Being so early on in development, it’s not necessary to dive into the market in depth as there is a large, unmet need in the oncology sector with the main focus being in immuno-oncology.

 

MDD has a multifaceted and varied etiology, and remains poorly understood. The MDD market is overly crowded and overly competitive, surpassing 30 FDA approved products available for the treatment of patients, the majority of which are now available as inexpensive generics. The MDD market is currently in an active transition where patents are expiring on top-selling products such as Eli Lilly's Cymbalta and Otsuka/BMS' Abilify, paving way for launches of Lundbeck/Takeda's Trintellix and Otsuka/Lundbeck's Rexulti.  These will create a significant growth in the market as cheaper generics will become available.  Growth in the MDD market is also expected to be driven by the potential introduction of numerous promising late-stage pipeline products into the market during the next few years which are directed at treatment-resistant patients.  These products include Alkermes' ALKS-5461, Allergan/Gedeon Richter/Mitsubishi Tanabe's Vraylar, Axsome Therapeutics' AXS-05, Janssen's esketamine, and Allergan's rapastinel.

MDD is the most common mental disorder in the U.S., affecting approximately 16 million American adults, of which about one-third remain untreated. The number of treated patients is projected to rise on account of expiring patents, the increase in available generic products, and rising awareness regarding depression and mental health issues. 

This competitive market was priced at a massive $3.2 billion in 2015 and is expected to consistently grow at a CAGR of 6.1% until 2025 to reach $5.8 billion.  With the current social standings of mental health, students being required to take mandatory mental health courses now in many places, and social workers and therapists being more commonplace in schools and work places, we should see a larger surge in my opinion.  Growing female prevalence, increase in prescription spending, and escalating awareness of mental health will propel the growth of this market for many years to come.

Financials:

Alkermes has a great financial standing in the biotech industry.  Leveraging both their approved products and impressive collaborations, the company was able to boast a revenue growth of 39% ($304.6 million) through product sales and payments.  Many opportunities lined up for the company and set them up for success this second quarter.

·         Vivitrol sales increased 15% to $76.2 million

·         Aristada sales increased 48% to $33.6 million

·         Royalties from Johnson & Johnson partnership increased 4% to $85.2 million

·         Royalties from Acorda Therapeutics decreased 22% to $19.7 million

·         License revenue from Biogen generated $48.3 million in revenue

Despite increased operation costs related to commercializing their products and further research and development, the company posted a Non-GAAP net income of $45.6 million and a Non-GAAP earnings per share of $0.29.

With a total cash balance of $561 million and total debt of $280 million, the company stands on strong ground.  This second half of 2018 has several catalysts, combined with increasing revenues from collaborations and drug approvals, Alkermes is likely to see success, only to be complimented by hopefully positive data from their upcoming Phase I and PDUFA dates. The company is expecting to hit $1 billion in revenues for 2018 as a year, which would be a massive milestone for the pharmaceutical company.

Review:

Historically, the FDA has been flexible with depression medications, but failures will weigh Alkermes down.  Depression studies have had a flurry of failures over recent history, and failure here can dissuade further research in the pharmaceutical space until more is known on the biology side.  With over 30 currently approved products on the market for MDD, it is overly saturated and failure can spell the end for the drug.  Following their failures in FORWARD-3 and FORWARD-4, investors are weary of another failure, especially after the initial NDA was rejected.  Good news is, there is an advisory committee meeting in November to discuss ALKS-5461. In recent history, the FDA has gone against the decision and vote of the advisory committee only about 10% of the time over all, with 30% of the votes being against approving the drug and 70% of the votes being for approval.  Chances are from that perspective that the FDA will grant approval.  The compound also shows no suggestion of tolerance of therapeutic effects, the side effect profile was generally comparable to standard medications with no significant late appearing side effects, and when medication was halted there was no sign of opioid withdrawal.  With the competitive, growing market and patents expiring, a new and novel MDD treatment would be a value add.

In the case of the early stage ALKS-4230, oncology drug candidates historically have a 57% possibility of success moving from Phase I to Phase II compared to an industry average of 63.2% possibility of success.  This does shine in comparison to the oncology end success rate of a low 3.4%.  If I were to put my money where my mouth is, I am going with the data and not the suggestive words of the FDA to say that oncology might sound like a great industry with the backing of the FDA, but their actions prove otherwise.  Oncology drugs are more likely to be denied by the FDA and fail their clinical trials at much higher rates than other industries such as vaccines which show an end rate of success over 30%.  I would guess this drug might make it to Phase III with time, but statistically it is unlikely to see approval.  While Phase III or even Phase II are years away from completion, the data in Phase I will likely reveal a lot about the drug to make future estimations off of.  I see Phase I being positive.

Currently the stock is trading around $43 and showing a high level of support and consolidation in this zone.  With a high of over $70 not 7 months ago, the company is likely to recover and soar.  This stock does not take bad news well however, seeing several 10% or more drops over the past year, but never going under $40 for long.  I think between $42-46 are great entries for this stock.  Long term their finances are growing, increasing revenues from royalties and sales of their own approved products, on track to hit $1 billion in revenues this year, and a solid pipeline that shows great promise.  I would bank on good data from ALKS-4230 as well as a positive hearing from the advisory committee.  With the PDUFA date in January, we will see a heavy run up into the end of the year.  I would take advantage of this price entry for either a long-term hold or a swing trade.  I would predict levels of up to $55 in the coming 3 months.  

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