We recently downgraded Alkermes plc (ALKS) to Neutral from Outperform following the average results delivered by the company in the second quarter of fiscal 2012.
Alkermes suffered a loss of $0.07 per share (excluding merger related costs and amortization of acquired intangible assets) in the second quarter. The Zacks Consensus loss estimate was $0.10 per share.
The results of the second quarter of fiscal 2012 included 14 days results of Elan Corporation’s (ELN) drug delivery unit, Elan Drug Technologies (EDT). We remind investors that Alkermes completed the acquisition of the EDT unit on September 16, 2011.
Total revenues for the second quarter of fiscal 2012 climbed 46.3% to $72.0 million. Revenues in the reported quarter were boosted by the presence of $9.1 million from the EDT unit, which were absent in the second quarter of fiscal 2011. Revenues surpassed the Zacks Consensus Estimate of $64 million.
We note that the merger with Elan’s EDT unit has strengthened Alkermes’ product portfolio as well as its pipeline. The deal should boost Alkermes’ top line significantly. Revenues for fiscal 2012 are projected in the range of $350 – $380 million as opposed to the earlier projection of $205 – $229 million given by the standalone unit. The additional revenue is expected to come from the EDT unit.
Revenues should also benefit from Alkermes’ multi-year, multi-million dollar manufacturing deal with one of the top ten pharmaceutical companies across the globe. The deal, signed immediately after Alkermes commenced operations at its new headquarters in Dublin, Ireland, requires Alkermes to manufacture the client company’s finished pharmaceutical product, at the Athlone, Ireland facility. Meanwhile, management expects that it will be able to enter the European market and gradually expand operations across the globe by having its headquarters in Ireland.
However, we believe that it will take some time for the newly formed entity to start delivering. We prefer to remain on the sidelines till then and hence revert to a Neutral stance on Alkermes.
ALKERMES INC (ALKS): Free Stock Analysis Report
ELAN CP PLC ADR (ELN): Free Stock Analysis Report
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