Alkermes: Looking to break out

While drug delivery has often been portrayed as an easy route to company-building, in general the promise has exceeded the reality. Alkermes Inc. believes it will be an exception, which will be witnessed by its turn to profitability next year, along with an NDA for its first home-grown program as a promise for more upside to come.

For ALKS, the value premise is that its delivery technologies can do more than make dosing more convenient, but create what are, in effect, new products that actually improve treatment outcomes.

According to the company, the initial test of that idea is the shift in market share from Johnson & Johnson's Risperdal risperidone to JNJ's Risperdal Consta, which uses Medisorb technology from ALKS (Cambridge, Mass.). The next generation drug for schizophrenia should make ALKS profitable in late calendar 2005. For the company's second fiscal quarter of 2005 ended Sept. 30, ALKS lost $14.9 million ($0.16 per share) versus a loss of $26.4 million ($0.31) for the 2004 quarter.

Also next year, ALKS plans to submit an NDA in the first half for its first internal program - Vivitrex naltrexone to treat alcohol dependence.

"The drug delivery model is a pretty dreary model," said CEO Richard Pops. "The model is inherently flawed if you want to build a big company. It's easy to get to a few hundred million in revenues, but if you're getting 5-15% royalties, you need a lot of billion-dollar products."

Because of the model's limitations, Pops argued, there isn't a profitable, robust cohort of drug delivery companies. "It's a good way of building a company that won't fail in a single, cataclysmic event," he said. "But the question is: how do you build out the infrastructure so you can get to your own proprietary products sooner?"

For Pops, the difference is a matter of leverage.

"The nth product we produce is building on previous experience, based on formulation, regulatory and manufacturing," he said. "For example, the Risperdal Consta program begat the Vivitrex program based on the manufacturing facility we built for the J&J program. So Vivitrex builds on the success of Risperdal, but Vivitrex is entirely owned by us. It's why pulmonary insulin is so important for us. We'll use the same inhaler and the same manufacturing process for other products."

The inhaled

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