Alkermes stock plummeted Monday to its lowest price since last December on disappointing test results for its experimental narcolepsy treatment.
The company tested its treatment in four patients with type 1 narcolepsy. On average, it lengthened the amount of time before patients fell asleep by 18, 30 and 37 minutes — depending on the dosage. In comparison, the placebo led to a one-minute delay before patients fell asleep.
Evercore ISI analyst Umer Raffat says Alkermes' drug is "clearly very active. There is zero debate on that." But Mizuho Securities analyst Uy Ear says the drug has a narrow therapeutic window. That's the length of time after dosing a drug remains active. There are also concerns the same drug couldn't be used in other types of sleep disorders.
"We believe the sell-off is likely an overreaction on limited preliminary Phase 1b results based on four type 1 narcolepsy patients and more data are needed to appropriately assess the optimal dose for (the drug called) ALKS 2680," Ear said in a report.
Alkermes stock tumbled 9.6% to 24.43 in high volume. Shares plummeted below the lower bounds of a consolidation with a buy point at 33.71, according to MarketSmith.com.
Alkermes Stock: Outperforming Takeda
Heading into Alkermes' presentation at the World Sleep conference, investors were looking for the company's narcolepsy treatment to outdo a discontinued drug from Takeda Pharmaceutical, Mizuho's Ear said.
"We believe ALKS 2680 has delivered on this expectation at significantly lower doses that could avoid the liver toxicity issue seen in the two higher TAK-994 doses," he said.
At the highest dose, 8 milligrams, patients were able to stay awake for 40 minutes and up to 10 hours. The only drug-related side effects occurred with that dose and included insomnia, urinary urgency or frequency, or excessive salivation. None of the side effects led patients to stop taking the medicine.
Ear kept his buy rating on Alkermes stock.
Evercore's Raffat noted Alkermes will have to increase the dosage to treat more challenging sleep disorders like type 2 narcolepsy or idiopathic hypersomnia.
"As such, evolving safety data for Alkermes at higher doses will be critical," he said.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
