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Life Sciences Roundup

Alkermes building momentum with recent moves

Xconomy.Com / July 11, 2011

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Richard Pops went on hiatus for a while as chief executive of Alkermes and when he returned in September 2009, he vowed to put the company back in “building mode.’’ It could have been dismissed as rah-rah rhetoric, but over the past couple of months, the investment community has started to rally behind Pops’s bold plan to build Alkermes into a much bigger, more stable company.

Alkermes, based in Waltham, has enjoyed a bull run since May 9, seeing its shares climb more than 30 percent after unveiling plans for a $960 million takeover of Ireland-based Elan Drug Technologies.

Those shares received another jolt this past week, when Alkermes and partner Amylin Pharmaceuticals said their experimental diabetes drug Bydureon does not affect electrical activity of the heart, a key safety concern. That greatly improves the drug’s chances of getting the go-ahead from US regulators.

With the Elan deal, investors have been warm from the start. By obtaining the 400-person unit of Elan, Alkermes is putting together a portfolio of 25 commercial products, five of which have potential to be cash cows well into the 2020s.

The “new’’ Alkermes is supposed to be consistently profitable, have more than $450 million in annual revenue, and offer a diversified lineup of products that can help protect it from any potential hiccups (regulatory, commercial, manufacturing, or other) that can damage a company which counts on just one or two drugs.

Ultimately, it’s about taking the company up a notch, into the league of Big Biotechs, where investors care not just about scientific “blue-sky’’ possibilities, but also how much money you can make each year, and how durable all the legs really are on the company stool.

“At first blush, Wall Street’s reaction was ‘Aha, I get it; it’s financially transformative,’ ’’ Pops said during a lunch meeting a couple of weeks ago in downtown Boston. “You go from a money-losing biotech company to one that’s growing revenues, growing margins, growing cash flows for a long time.’’

The acquisition of Elan Drug Technologies, which will technically reincorporate Alkermes into a Dublin-based company, still has to pass a vote of shareholders, which is expected sometime before the end of September. But no real opposition has emerged.

To understand what’s going on here, a little background on the “old’’ Alkermes is needed. The company is best known for technology that helps make biotech drugs remain stable for longer periods of time in the bloodstream, enabling them to be given as less-frequent injections. The company in its current form gets more than 80 percent of its revenue today from one product: Johnson & Johnson’s long-lasting version of risperidone (Risperdal Consta) for treating schizophrenia and bipolar disorder.

Alkermes also has high hopes that its delivery technology will generate significant cash with a new treatment to help wean people off addiction to opioid-based painkillers (Vivitrol), along with its once-weekly Bydureon.

Before this deal was announced, the bears on Wall Street had plenty to chew on. Vivitrol has generated a lot of optimism among drug-treatment officials, but it hasn’t yet translated into big sales.

Most important, investors had been worried that another J&J schizophrenia drug, paliperidone palmitate (Invega Sustenna), would basically steal the market away from Risperdal Consta.

By acquiring Elan, Alkermes tackled all three of these concerns in one fell swoop.

The Elan unit collects a royalty stream from J&J’s sales of Invega Sustenna that’s almost identical to what Alkermes already gets from Risperdal Consta, so Alkermes can collect royalties on both schizophrenia meds. And the company also gets a piece of sales of the new multiple sclerosis drug, (Ampyra), from Acorda Therapeutics. — LUKE TIMMERMAN

■ Allegro Diagnostics, based in Maynard, said it has plumped up its Series A financing by another $5.4 million. The money comes from investors Kodiak Venture Partners and Catalyst Health Ventures. Allegro is developing a diagnostic platform for lung cancer that uses gene expression of normal epithelial cells in the respiratory tract to detect early signs of the disease.

■ Avedro, a medical tech startup, said it has completed a $25 million Series C financing led by SCP Vitalife and Aperture Venture Partners. Existing investors Prism VentureWorks, De Novo Ventures, Flagship Ventures, Borealis Ventures, and Echelon Ventures participated.

Avedro, based in Waltham, said the money will be used to expand commercial operations internationally and to seek FDA clearance in the United States.

The company is commercializing a vision-correction technique that uses a pulse of microwave energy to flatten the cornea to treat myopia and other conditions, as an alternative to Lasik surgery. The technology has its roots in research done at Dartmouth College in the early 2000s.

This report was compiled by the editors of Xconomy, an online news website focused on the business of technology and innovation. For more New England coverage, visit xxx.Xconomy.com/boston.