$3.15
$14.34
bear $3.15
base $9.50
bull $14.34
margin of safety $5.25
market price* $41.22
Business condition attached to the margin of safety
Two consecutive quarters of positive operating cash flow after the Avadel acquisition, showing LUMRYZ and the new debt (about $1.5 billion of term loans) are covering their own cost.
Alkermes sells long-acting injectable medicines for addiction and mental illness: VIVITROL (alcohol and opioid dependence, $468M of 2025 revenue), ARISTADA (schizophrenia, $370M) and LYBALVI (schizophrenia and bipolar I, $347M). It also earns royalties from Janssen's long-acting INVEGA products and from Biogen's VUMERITY. In February 2026 it completed the acquisition of Avadel (narcolepsy drug LUMRYZ), financed with new term loans of up to $750M and $775M. How we measure earnings. We use cash from operations, remove swings in working capital, and subtract share-based pay (about $99M in 2025) and the capital spending needed to stay in business ($40M). On that basis owner earnings were $262M in 2025, or $1.56 per share, versus $2.41 in 2024 and $1.80 in 2023. The 2023 and 2024 figures include large INVEGA SUSTENNA royalties ($486M in 2023, $236M for all long-acting INVEGA products in 2024). The U.S. SUSTENNA royalty expired in August 2024, so those years describe a business that no longer exists. We therefore anchor on 2025 alone. Earlier years (2020 to 2022) were loss-making, partly because of the oncology business spun off in 2023, and are not used. Growth check. Owner earnings per share fell 35% in 2025. We assume no growth for 2026 (0%, not a rebound), because 2025 already reflects the full loss of the SUSTENNA royalty; we assume no reversal of the decline. Product sales did grow (LYBALVI +24%, ARISTADA +7% in 2025), but that rests on prescription growth and share gains rather than anything contracted, so we do not credit it in the base case. Base case: $9.50 per share. Owner earnings stay at about $262M in 2026 and 2027. VIVITROL then loses exclusivity: a 2019 settlement lets Amneal launch a generic in the U.S. beginning sometime in 2028 (or earlier in certain circumstances), and the company signed an authorized-generic supply agreement with Amneal in September 2025. We assume VIVITROL revenue falls 20% in 2028, 40% in 2029, 55% in 2030 and 65% from 2031, with about half of the lost revenue coming out of owner earnings. INVEGA TRINZA and HAFYERA royalties (about $110M in 2025) run through specified dates in 2030 and then end. After that we credit about $130M a year from ARISTADA (patents to 2039), LYBALVI (patents to 2041, under challenge), and VUMERITY royalties, falling to about $80M in 2039 to 2041, and nothing after. The Avadel deal is treated as roughly value-neutral: we do not count LUMRYZ earnings and do not count the cost of the debt. Bear case: $3.15 per share. The Avadel debt (roughly $1.5 billion at about SOFR plus 2.75%) costs more than LUMRYZ earns, a drag we set at $50M a year through 2031. VIVITROL revenue falls 40% in 2028, 70% in 2029 and 85% from 2030; INVEGA royalties are halved from 2028; and a LYBALVI generic arrives in 2032, the earliest of its challenged patent dates, ending earnings by 2033. Cost cuts hold owner earnings near $20M to $40M in the middle years. Bull case: $14.34 per share. VIVITROL erodes slowly (10%, 25%, 40%, then 50%), and LYBALVI and ARISTADA keep growing at 8% and 5% a year through 2030 before levelling off, with LYBALVI and ARISTADA protection lasting to 2041 and 2039. Owner earnings peak near $320M, settle near $183M from 2031, fall to about $128M in 2040 and 2041 as ARISTADA and LYBALVI patents run out, and then to about $60M for four more years. What we left out: orexin and other pipeline programs (R&D was $324M in 2025 and is counted as a cost, but no pipeline revenue is credited), and any Avadel synergies. Research spending has produced several products over the years, but we could not tie future launches to named, dated evidence. What could make this wrong. A later or weaker VIVITROL generic (a patent challenge by Teva is pending) would raise value; the company's own accounts show VIVITROL is 32% of revenue and among its most profitable products. Results after the acquisition are not reconciled: operating cash flow for the first half of 2026 was negative $21M and net loss about $66M, and we cannot separate one-time deal costs from the ongoing run rate from the data available. Share count and debt after the acquisition were not modelled beyond the assumptions above. The company holds Irish domicile; nearly all sales are in the United States.