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Why Alkermes Is Sinking Today

By Brian Feroldi - Feb 22, 2018 at 3:52PM

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Shares tumble after the company receives an analyst downgrade. Here's what investors need to know.

What happened

In response to receiving an analyst downgrade, shares of Alkermes (ALKS -1.65%), a commercial-stage biopharma focused on diseases of the central nervous system, fell 11% as of 3:15 p.m. EST on Thursday.

So what

An analyst at Jeffries downgraded shares of Alkermes today to "hold" from "buy." The logic behind the downgrade was that shares are "fairly valued and factor significant value for the late-stage pipeline."

Business man looking worried at his laptop

Image source: Getty Images.

Specifically, the analyst is worried that ALKS-4230 -- which is an Alkermes compound that is currently being tested as a treatment for various types of cancer -- might not be as effective of a treatment as Nektar Therapeutics' (NKTR -4.04%) NKTR-214, which is another pipeline cancer compound that could compete with ALKS-4230 someday. 

When combined with the recent run-up in Alkermes' stock thanks to good-looking earnings, the analyst felt that downgrading the stock made sense.

Now what

Short-term price movements aside, this Fool thinks that Alkermes bulls still have plenty of positives to look forward to in 2018. The company is slated to hear from regulators on two drug submissions and could also earn a big milestone payment if a third is sent off for review. There are also a number of clinical readouts that are slated to be released through the year, not to mention the continued ramp in sales of Vivitrol and Aristada.

All in all, I continue to agree with Alkermes CFO James Frates that Alkermes is set up to have a "transformative" 2018. If you feel the same way, then today's downward slide shouldn't bother you one bit.

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Stocks Mentioned

Alkermes plc Stock Quote
Alkermes plc
ALKS
$29.79 (-1.65%) $0.50
Nektar Therapeutics Stock Quote
Nektar Therapeutics
NKTR
$3.80 (-4.04%) $0.16

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