Alkermes joins Bristol Myers in IL-2 exit with oncology business spinoff

Instead of the garden-variety symphony music favored by most pharma companies before entering a conference call, Alkermes selected Fleetwood Mac’s breakup anthem “Go Your Own Way.”

It was a clever way for the Dublin-based company to set the mood for announcing its intention to split in two, during its third-quarter earnings report. The 35-year-old firm will separate its oncology sector from its neuroscience business, creating an independent publicly traded company.

Underpinning the move is Alkermes’ belief in the blockbuster potential of schizophrenia and bipolar disorder drug Lybalvi. Separating its oncology sector—which is in the development stage—will allow Alkermes to focus on commercialization of Lybalvi, which it launched in October of last year.

“Our decision at the board level to spin was largely predicated on our growing confidence in the long-term value of Lybalvi,” Alkermes CEO Richard Pops said during the call. “The CNS side of the business is still really now maturing to the point where it has this bespoke commercial capability.”

But another factor is at play as well as Alkermes’ primary oncology nemvaleukin is likely devalued after recent failures by others in its IL-2 immunotherapy class. Alkermes is investigating nemvaleukin as a treatment for both platinum-resistant ovarian cancer and mucosal melanoma.

Bristol Myers Squibb and Nektar Thaerapeutics' have canned their IL-2 candidate bempeg after a trial of it as a combo agent showed that it may do more harm than good. And last week, Sanofi reported "lower than projected" efficacy data on a candidate that it acquired in a $2.5 billion takeover of Synthorx.

Alkermes reported revenue of $252 million for the third quarter, with $27 million coming from Lybalvi, which was a 35% increase from the second quarter. The company has raised its annual guidance for Lybalvi to between $88 million and $95 million, “based on strong underlying demand and prescriber adoption,” chief commercial officer Todd Nichols said.

“This represents a strong first year in the market and puts Lybalvi on an exciting growth trajectory,” Nichols added. “The strong demand was due largely to increased prescriber breadth—which is an important indicator of interest in the product.”

At the end of the quarter, roughly 6,000 doctors had written a prescription for the drug, a 41% increase from the end of the second quarter, Alkermes reported.

Alkermes' other CNS assets are Vivitrol, which garnered sales of $96 million in the quarter for an increase of 9% year over year, and Aristada, which logged $76 million in revenue for a 10% increase.

Operating separately would allow each to establish distinct management teams with relevant scientific expertise, Alkermes said. It also would simplify capital allocation decisions, increase flexibility to pursue growth and investment strategies more directly aligned with goals, and enable capital markets to better assess each business value.

Another motivation for the separation, according to Alkermes, is the Inflation Reduction Act, which will give manufacturers of small molecule and biologic drugs nine and 13 years respectively of exclusivity before they face Medicare negotiation prices.

“The inflation reduction act has made biologic medicines more valuable,” Pops said. “But in order to realize that value drug developers must adapt their development programs to accommodate the finite window of exclusivity imposed by the legislation and invest in populations of interest earlier in the development cycle in order to yield greater economic returns.”