Analyst Cuts Alkermes Rating As Cancer Drug Seems Less Effective Than Competitor

Shares of Alkermes (ALKS) are sliding after Jefferies analyst Biren Amin downgraded the stock to Hold as he believes the shares are fairly valued. Further, the analyst argued that the company's ALKS-4230 may be weaker on efficacy than Nektar Therapeutics' (NKTR) NKTR-214 and is unlikely to provide upside.

MOVING TO THE SIDELINES: In a research note to investors this morning, Jefferies' Amin downgraded Alkermes to Hold from Buy, with an unchanged price target of $66, saying the shares are fairly valued and price in "significant value" for the late-stage pipeline. The analyst noted that Vivitrol and Aristada continue to experience modest growth and therefore should not drive shares higher. Following a "deep dive" on immuno-oncology candidate ALKS-4230, Amin told investors that he believes preclinical data suggest the drug may be weaker on efficacy than Nektar Therapeutics' interleukin-2 receptor NKTR-214. ALKS-4230 is "inherently different" from NKTR-214 based on cross-comparison of preclinical data, he contended, while pointing out that Nektar signed a blockbuster deal with Bristol-Myers (BMY) where it received a $1.8B upfront for a third of the economics on NKTR-214. From the preclinical data published, Amin believes ALKS-4230 appears less effective in CD8+ T cell expansion compared to NKTR-214 in mouse model, and when evaluating CD8/Treg ratio, ALKS-4230 has a lower ratio compared to NKTR-214.

IMPROVING SAFETY: Jefferies' Amin also noted that there have been many attempts to improve the safety profile of IL-2 but the science on improving safety is somewhat conflicting and it is unclear if Alkermes attempt will result in a better safety profile. Alkermes also suggested that lower Tregs may lead to better safety, but the analyst also finds conflicting evidence here. Additionally, Amin pointed out that he knows of one patient in the Alkermes Phase I/II trial who did receive ALKS-4230 - in the fourth dose cohort - and it seemed the drug was ineffective initially. At a slightly later timepoint, she experienced a drastic reduction in her albumin levels which required a transfusion, he explained, adding that the patient succumbed from her cancer.

PRICE ACTION: In afternoon trading, shares of Alkermes have dropped almost 10% to $57.08. Meanwhile, Nektar's stock has gained about 3.5% to $89.49.

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