The Bearish Case for Alkermes (ALKS)

Over the past three months, Alkermes (ALKS) has been in a sideways trading range and has formed a rectangle pattern…

Alkermes (ALKS) is a fully integrated global biotechnology company that applies its proprietary technologies to research, develop, and commercialize pharmaceutical products designed for unmet medical needs in major therapeutic areas.

The company has a diversified portfolio of drugs that target central nervous system disorders such as addiction, depression, multiple sclerosis, and schizophrenia. Revenues are being primarily driven by Vivitrol and Aristada. Vivitrol treats alcohol and opioid dependence and Aristada treats schizophrenia. ALKS also has a strong drug pipeline.

ALKS has a long term debt of $373 million, but cash of $533 million as of the end of the last quarter. The company’s current ratio of 3.0 indicates enough cash on hand to handle short term debt. Though ALKS negative net margin is worrisome.

The company has shown stable sales growth and is expected to grow revenues 11.0% next year. EPS is expected to grow 340% over the same time period. Keep a close eye on ALKS this week, as the stock reports its latest quarterly results on October 29th. The consensus estimate is -$0.14.

In terms of valuation, the company has a Price to Sales ratio of 2.2 and a Price to Book ratio of 2.4. Both numbers are below the industry average. The stock has shown bearish momentum over the short, mid, and long term and a grade of “D” for Trade Grade in our POWR Ratings system, which brings us to its chart.

Take a look at the 1-year chart of ALKS below with added notations…

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