Shares of Alkermes (ALKS 0.98%) were sinking 7.9% as of 11:58 a.m. ET on Wednesday and had fallen as much as 13.1% earlier in the session. The decline came after the Ireland-based drugmaker announced its third-quarter results.

Alkermes reported Q3 revenue of $380.9 million, up nearly 51% year over year. The average analyst estimate was for revenue of $362.1 million.

The company generated earnings of $47.8 million, or $0.29 per diluted share, based on generally accepted accounting principles (GAAP). This reflected a big improvement from the GAAP loss of $64 million, or $0.39 per diluted share, in the prior-year period. Alkermes posted a non-GAAP profit of $109.5 million, or $0.64 per diluted share, up from $3.5 million, or $0.02 per share, in the third quarter of 2022. The consensus estimate was for non-GAAP earnings per share of $0.43. 

Why did Alkermes stock fall despite beating Q3 estimates?

When a company tops Wall Street's revenue and earnings expectations, its shares usually rise. Why did Alkermes stock fall despite beating Q3 estimates? We have to go back to earlier in the week.

On Monday, Alkermes announced preliminary results from a phase 1 clinical study evaluating its experimental drug ALKS 2680 in treating narcolepsy. Those results raised questions about how long ALKS 2680 remains active after dosing and suggested it might not be able to be used in treating other sleep disorders.

The biotech stock tumbled nearly 10% following the clinical update. Although its Q3 results were strong, they apparently weren't good enough to make investors forget their concerns about ALKS 2680.

Is Alkermes stock a buy?

Alkermes isn't a stock that's well suited for risk-averse investors. It's much too volatile and faces the possibility of pipeline setbacks.

However, aggressive investors might want to consider picking up a few shares on the recent pullback. Additional data for ALKS 2680 could prove to be more promising. Sales are soaring for Alkermes' schizophrenia and bipolar disorder drug Lybalvi. The future just might be brighter for Alkermes than the present.