Strategic growth, IRA drives Alkermes to consider spin-off of oncology business

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Months after Alkermes burst onto the oncology scene behind immunotherapy drug nemvaleukin alfa, Alkermes is exploring the potential spin-off of its cancer business into an independent, publicly traded company.

The separation would create two new companies. One would focus on neuroscience, where Alkermes has made a name for itself as an established trading company with its drug for schizophrenia and bipolar depression, Lybalvi. The oncology company would focus on nemvaleukin, which is moving into mid- and late-stage studies in solid tumors.

During a conference call with investors, Chief Executive Officer Richard Pops said the split would allow for a strategic focus on each core area of ​​interest. Each unit would be led by separate and distinct management teams that have relevant therapeutic expertise in their areas, Pops noted.

“We believe operating separately will augment each company with the flexibility to pursue growth and investment strategies that better align with their respected focus,” he said.

Post-separation, Alkermes is set to become a purely commercial neuroscience company that can focus on unmet needs in this space, Pops outlined.

Along with Lybalvi, drivers of the neuroscience business include Aristada, a treatment for schizophrenia, and Vivitrol, a drug used to treat opioid addiction.

On the development side, ALKS-2680, an orexin-2 receptor agonist, is expected to enter Phase I proof-of-concept trials in narcolepsy next year.

The oncology business

At the American Society of Clinical Oncology meeting, Alkermes presented data from the ARTISTRY-1 study that highlighted the effect of nemvaleukin on multiple solid tumors.

The drug demonstrated anti-tumor activity with durable responses as a standalone treatment for patients with mucosal melanoma and renal cell carcinoma whose disease progressed after treatment with a checkpoint inhibitor.

With Nemvaleukin now in two potential registration studies, Pops said the separation of the companies will position the experimental oncology drug for success.

Not only does nemvaleukin show promise in mucosal melanoma and RCC, Alkermes believes it may have a role in other solid tumors, too, which will establish it as a fundamental advantage, Pops said. This success is also expected to propel the advancement of Alkermes’ preclinical pipeline of engineered cytokines.

Influence of the anti-inflation law

Beyond the capital investments, Pops pointed to the recently passed Anti-Inflation Act as a catalyst for the potential split.

The law requires drugmakers to pay the federal government a rebate if prices for Medicare-covered drugs and biologics from a single source are increasing faster than the rate of inflation. It has given greater prominence to biologics as a potential treatment for disease, Pops noted.

In the past, even the small molecule or biologic approach was indifferent to drugmakers. The legislation made biologics more valuable, but to realize that value it is important for companies to adjust their development approach to accommodate the limited window of exclusivity imposed by the legislation, he said.

The oncology business would likely be based at the company’s existing campus in Waltham, Mass. If the split goes through, it’s not expected to be finalized until the second half of 2023. Before a full separation, Alkermes would announce the new name of the business unit, as well as its management team and financial details.

In preparation, Alkermes will continue to carefully manage each company’s cost structure, Pops said.

Beyond the announced separation, Chief Financial Officer Iain Brown said the company had a solid financial performance in the third quarter with total revenue of $252.4 million, driven by Alkermes’ commercial portfolio.

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