- Alkermes will spin off its cancer drug research as part of a plan to focus exclusively on neuroscience drug development, the company said Wednesday.
- Following a strategic review, the company’s board approved a deal to put Alkermes’ oncology portfolio into an independent, publicly traded company with a new management team. The split will turn Alkermes into a neurology-focused business with marketed products for schizophrenia and addiction as well as some early-stage research programs. It’ll be led by current CEO and chairman Richard Pops.
- The unnamed oncology company, meanwhile, will continue to develop the cancer drugs discovered by Alkermes. That portfolio includes an experimental immunotherapy in late-stage testing for multiple solid tumor types. Alkermes said the new company’s leadership team will be disclosed at a later date and that the separation, if successful, should close by the second half of 2023.
The planned spinoff is the latest step in a yearslong transformation for Alkermes, a decades-old biotech that began as a drug delivery specialist before turning into a maker of novel medicines for brain diseases and cancer.
The transition hasn’t always gone smoothly. A depression drug Alkermes developed was panned by advisers to the Food and Drug Administration and subsequently rejected by the regulator in 2019, triggering a stock crash and a restructuring. A schizophrenia and bipolar disorder treatment, Lybalvi, was approved in 2021 but faces tough commercial competition. Its top cancer drug, meanwhile, is aimed at a cancer drug target called IL-2 that’s bedeviled pharmaceutical companies for years.
At about $23 a share, shares are currently worth roughly what they were a decade ago.
But Alkermes says it sees positive signs in the sales trajectory of Lybalvi, which is on pace to generate close to $100 million in revenue this year. However, the launch coincides with late-stage development for its IL-2 immunotherapy nemvaleukin alfa, meaning competition for Alkermes’ limited resources.
Alkermes believes splitting into two companies will solve that problem while allowing shareholders to “better assess the value, potential and performance” of each business, Pops said on a conference call Wednesday.
“Allocating capital to the growth of Lybalvi makes all the sense in the world and decoupling it from the oncology business just allows investors to focus on that,” he added.
Public disclosures from Alkermes suggest the company spends about $100 million per year on cancer drug research, Umer Raffat, an analyst at Evercore ISI, wrote in a Wednesday note to clients.
According to chief financial officer Iain Brown, the company is investing about $80 million per year directly in nemvaleukin alfa, which will be the top prospect of the new company. The drug is in two trials that could support approval in a type of melanoma and ovarian cancer. Both studies are recruiting, with data respectively expected in 2024 and 2025, according to a federal clinical trials database.
Interim results could potentially come earlier, though. “By the time we spin, we'll have very precise understandings about readouts, interim looks and any other data,” Pops said.
The drug has competition as well as investor skepticism to overcome. It’s one of many IL-2-targeting medicines in development. Others from Nektar Therapeutics and Sanofi have either failed or disappointed in clinical testing. That’s one reason Stifel analyst Paul Matteis expects the spinoff “will be viewed positively by investors,” according to a note he sent to clients Wednesday.
“We did not necessarily have high hopes for their IL-2 candidate given the [Nektar] failure and the lack of partnership despite the drug being in clinical development for a fairly long period of time,” Matteis wrote.
The new company will have two other preclinical cancer drugs behind nemvaleukin alfa that also target inflammatory cytokines.