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Biotech Seeks to Treat Alcoholism

06/10/2005 12:00 am EST


John McCamant

Editor, Medical Technology Stock Letter

I'm a big fan of both biotech investing and biotech expert John McCamant. For investors aware of the inherent risks, biotech offers exciting opportunities. And the Medical Technology Stock Letter is a terrific guide to steer you through this often complex sector.

"Alkermes (ALKS NASDAQ) recently reported fiscal 2005 results. For the full fiscal year, Alkermes reported a pro forma net loss of $64.8 million, or $0.72 per share, on revenues of $76.1 million, vs. a loss of $1.22 per share on revenues of $39.1 million in 2004. The bulk of its current revenue comes from sales of Risperdal Consta, which is used for the treatment of schizophrenia. The drug is sold by its partner Janssen, and year over year Risperdal-related manufacturing and royalty revenue grew nicely, to $50 million during fiscal 2005 from $28.1 million during fiscal 2004. 

"As for the financial guidance for the current fiscal year, ALKS has projected total revenue of $110–$125 million, of which $75–$85 million will come from manufacturing and royalty revenue. Thus, the company clearly expects Janssen to be successful in growing sales of Consta in countries where the drug is already approved and also continues to expect that the drug will be approved and successfully launched in additional countries throughout the year. However, these figures do not include any potential revenue from the signing of a partnership for Vivitrex, a product under development to treat alcoholism.

"Even though the company has been quite clear that partnership discussions are ongoing for Vivitrex, they decided to take the conservative route and not incorporate any potential revenues into their guidance. We believe that they will get a deal done this year, and that their revenue guidance will be revised upward at some point during the year as a result. The results that Vivitrex has produced are just too impressive, in our view, for this not to be the case.  Wall Street remains unhappy with the company not yet having signed a deal. We are comfortable with ALKS taking all the time they need to sign the right deal—one with the most favorable of terms for their shareholders. Meanwhile, the company will continue to work toward establishing their sales and marketing infrastructure.

"As expected, positive results from the Phase III, open-label, 12-month extension study for Alkermes’ Vivitrex for the treatment of alcohol dependency were presented at the recent American Psychiatric Association Annual Meeting in Atlanta. The extension trial included 332 patients who had completed the pivotal trial. The results showed that those patients who continued treatment with higher doses of Vivitrex achieved sustained reductions in levels of heavy drinking. Furthermore, Vivitrex was generally well tolerated over the entire 18-month treatment period. Over 85% of patients who completed the efficacy trial chose to take part in the extension trial. Plus, 78% of patients who completed the extension study chose to participate further in a continuation phase. 

"Clearly, the results from the extension study provide solid support for the previous positive data, and give us even more optimism that ALKS is going to sign a very attractive partnership for Vivitrex. The data show the ability of Vivitrex to produce a sustained reduction in the number of heavy drinking days, and with a side effect profile that appears to be relatively benign. And, given the significantly limited number of attractive and effective treatment options for patients that are alcohol dependent, the high percentage of patients that chose to proceed with further treatment comes as little surprise. ALKS is a buy under $14."

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