Index-beating firm Primecap Management disclosed today that it boosted its position in Alkermes Plc (ALKS, Financial), a biopharmaceutical company, by 33.11% on Nov. 20.
The California-based firm, whose five primary managers keep a low media profile, has beaten the S&P 500 year to date across each of its strategies. Its Odyssey Stock Fund generated a 23.8% gain, as the total return S&P 500 index rose 20.1% for the year through the end of September. The fund also outperformed the index since the fund’s inception in 2004, posting 10.38% versus 8.66% for the benchmark.
Primecap bases its stock selection on fundamental research and independent decision-making. Often, the investors will hold for the long term until the market catches up to their thinking and raises the stocks’ prices. They fish in out-of-favor sectors and companies for undervalued equities.
Alkermes, which has an $8.36 billion market cap, designs medicines for the treatment of serious and chronic diseases of the central nervous system, including schizophrenia, depression and multiple sclerosis.
Primecap has been building a stake in the company since the second quarter of 2016 when the price averaged around $41 and added to it in each subsequent quarter. The company’s price had risen to $51.45 on the date of the latest purchase. Overall, the managers have an estimate gain on the stake of 5%.
The latest buy totaled 4,340,405 shares, increasing the holding to 17,450,200 shares, which are worth 8.53% of the company.
On Nov. 27, one week after Primecap purchased shares, Alkermes announced it partnered with Biogen (BIIB, Financial) to develop and commercialize ALKS 8700, a small drug molecule in Phase three development for the treatment of multiple sclerosis relapses. The deal dictated that Biogen receive an exclusive, worldwide agreement to commercialize the drug in exchange for paying Aklermes a mid-teens royalty on its net sales.
“We aim to provide patients with a new oral therapy which may bring differentiated benefits,” Michel Vounatsos, Chief Executive Officer at Biogen, said in a statement.
Alkermes has six products in development, with two – for the treatment of major depressive disorder and an initiation product for another therapy – in the final stage, phase 3. The company also owns an injectable antipsychotic for schizophrenia called Aristada. Its second, Vivitrol, is a medication for alcohol dependence and prevention of relapse in opioid dependence.
In the third quarter, Vivitrol had $69.2 million in net sales, an increase from $55.8 million in the third quarter the previous year. Aristada sales reached $24.5 million, beating the prior-year period’s $14.0 million.
Total third-quarter revenue increased 21% from the previous year to $217.4 million. Its net loss totaled $36.3 million, or 24 cents per share, decreased from a loss of $62.7 million, or 41 cents per share.
The company lowered its revenue expectations for 2017 though as its forecasts for Vivitrol sales declined. Aklermes has guided for $850 million to $880 million in revenue, which is a decrease from $870 million to $920 million it previous expected. It lowered Vivitrol sales expectations to a range of $265 million to $275 million from a previously expected range of $280 million to $300 million.
It also improved guidance for a net loss in a range of $160 million to $190 million, decreased from a net loss in the range of $180 million to $210 million it previously forecast.
See Primecap Management’s portfolio here.
