The Clear Reason Alkermes Plc's Shares Jumped by as Much as 12%

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What happened

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Shares of Alkermes (NASDAQ: ALKS), an Irish-based commercial-stage drug developer with a focus on central nervous system medicines, jumped by as much as 12% during Thursday's trading session and ultimately ended the day higher by 11%. The reason for the volatile day, which at one point saw Alkermes shares lower by 5%, was the release of its third-quarter operating results.

So what

A topsy-turvy day for Alkermes was highlighted by an earnings report that seemed to head in opposite directions at times.

The company wound up reporting $217.4 million in third-quarter sales, which, while up 21%, fell well short of Wall Street's consensus of $231.3 million. Weaker-than-expected sales of Vivitrol, which came in at $69.2 million for the quarter, were the main culprit for the company's disappointing sales results. Management also lowered its full-year outlook for Vivitrol to net sales of $265 million to $275 million, from a previous forecast of $280 million to $300 million. This sales outlook reduction also affected its full-year sales outlook, which was reduced from a range of $870 million to $920 million to a new expectation of $850 million to $880 million.

While the sales portion of Alkermes' earnings report had investors concerned in the early morning hours, the company's cost-cutting tactics and pipeline had them excited once again by the day's end. The company's third-quarter profit came to $0.03 per share, which was considerably better than the $0.01 per share loss Wall Street had been expecting. Also, some belt-tightening is expected to reduce full-year research and development and selling, general, and administrative expenses. The result is a narrower-than-expected full-year GAAP loss, which was reduced by $20 million on the top and bottom of the range to between $160 million and $190 million. 

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Now what

Though cost controls were the star in the third-quarter report, don't discount the excitement surrounding Alkermes' expected 2018 milestones. CEO Richard Pops had this to say about the upcoming year:

Looking ahead, 2018 will be a transformative year for Alkermes' proprietary development pipeline, with key events across the development portfolio, highlighted by FDA [Food and Drug Administration] review of the ALKS 5461 NDA [new drug application], the phase 3 data readout for ALKS 3831, submission of the ALKS 8700 NDA and important phase 1 data for ALKS 4230.

ALKS 5461 is the company's once-daily oral experimental drug for the treatment of major depressive disorder in patients who've had an inadequate response to standard-of-care antidepressants. It wound up sailing through multiple pivotal phase 3 studies, with Wall Street analysts suggesting it could generate peak annual sales of perhaps $700 million to $1 billion. Given the lowered outlook for Vivitrol, ALKS 5461 has an opportunity, if approved, to become Alkermes' lead drug.

Long story short, shareholders should be ready for a news-packed 2018.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alkermes. The Motley Fool has a disclosure policy.