On Wednesday, Mizuho (NYSE:MFG) Securities sustained its positive outlook on shares of Alkermes (NASDAQ: NASDAQ:ALKS), raising the price target from $35.00 to $40.00 while keeping an Outperform rating on the stock. The adjustment follows a detailed analysis of the company's valuation, focusing on its base business and the prospects of its developmental drug, ALKS 2680.
The firm conducted a sum-of-the-parts (SOTP) valuation, which led to a reassessment of Alkermes' forecast. Despite lowering their expectations for the base business to below consensus, resulting in a valuation of $18 per share, the firm sees a shift in focus towards ALKS 2680. This drug, an OX2R agonist, is anticipated to significantly impact the branded narcolepsy and idiopathic hypersomnia (IH) markets, which are valued at approximately $10 billion.
Mizuho's SOTP analysis places a $22 per share value on ALKS 2680, based on risk-adjusted sales projections of $1.8 billion for narcolepsy types 1 and 2, and IH, with unadjusted sales potentially reaching $3.9 billion. The firm anticipates that the value ascribed to ALKS 2680 could increase further if the Phase 2 trial results, expected in the second half of 2025, are positive.
The analyst from Mizuho highlighted the potential of ALKS 2680 to be disruptive in its target markets. The drug is currently moving towards Phase 2 readouts, and the firm believes there is a high likelihood of positive outcomes. The positive sentiment is based on the drug's innovative approach to treating sleep disorders and the substantial market opportunity it addresses.
Alkermes' stock performance and investor sentiment are likely to be influenced by the development and eventual market introduction of ALKS 2680. The company's strategic focus on this promising treatment could play a pivotal role in its future growth and valuation.
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