One blue insider buy in a sea of red sales

Some weeks it is difficult to find an insider buy with purpose. The past week was loaded with habitual buyers that invest no matter what and have a spotty track record. There were a bunch of special purpose acquisition company (SPAC) buys used to fund the entity. Most of the other purchases were smallish with the look of automatic, scheduled buys.

Alkermes plc (ALKS) director Brian McKeon’s purchase was the only one worth mentioning, in our opinion. The fact that insiders sold a combined $104 million of ALKS shares versus $542,980 in buys for the past five years just jumps off the page. A bunch of red with three spikes of blue. (1)

McKeon’s investment of $264,269 accounts for nearly half of the purchase total for the last half-decade. It was also the director’s lone outlay since 2017. Otherwise, he’s either trafficked in options or been a seller. (2) The mostly seller’s change of heart comes on the heels of couple positive news announcements.

  • Alkermes reported better than expected earning and sales for their most recently completed quarter while increasing its outlook for the rest of 2021. (3)
  • The Dublin, Ireland-based biotech also received an FDA fast tracked designation for nemvaleukin alfa, a treatment for mucosal melanoma. (4)

Approval of nemvaleukin alfa would add to the fully integrated, global biopharmaceutical company’s innovative medicines in the fields of neuroscience and oncology. The company has a portfolio of proprietary commercial products focused on addiction, schizophrenia, and bipolar I disorder, and a pipeline of product candidates in development for neurodegenerative disorders and cancer.

McKeon’s timing is also a bit curious as the biotech just broke out and is bumping its head against its 52-week high of $28.91. The director bought at $26.43 and ALKS trades at $28.56 as we type. Investors that want to follow the insider’s lead might be patient and hope for a pullback.

Shares currently have a Relative Strength reading well above 70. Generally speaking, 70 marks the beginning of what is considered overbought by chart watchers. It would not be surprising to see Alkermes dip back to the $26-$27 range in the near-term.

Longer-term, Wall Street forecasts consensus earnings per share (EPS) of $0.51 and $1.25 billion in revenue for 2022. (5) Alkermes plc doesn’t have much history as a profit producing company; therefore, we’ll focus on sales to develop possible price targets. In the last half-half decade, the biotech traded at an average of 5.98 times sales (P/S), currently trades with a P/S ratio of 4.15 compared to the industry average of 3.4.

Potential Price Targets based on analysts’ 2022 consensus revenue estimate:

  • ALKM’s five-year average P/S ratio: $46.33
  • ALKM’S current P/S ratio: $32.15
  • Current industry average P/S ratio: $26.34

Overview: An overall market decline notwithstanding, Alkermes plc (ALKS) could offer limited downside to attractive upside to potential shareholders in the next 12-18 months, based on projected revenue and possible price-to-sale ratios. In the immediate-term, ALKS’ price could be prone to some profit taking as it may have moved too high too fast. Patient investors might wait to see if they can secure a better entry price.


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