Alkermes ditches some Elan remnants and bears down on its pipeline

Alkermes ($ALKS) is selling off a manufacturing plant in a deal worth up to $170 million, cashing out of some royalty streams to better invest in its late-stage pipeline of new therapies.

Under the deal, Alkermes is handing its Gainesville, GA, manufacturing facility over to Recro Pharma ($REPH) for $50 million up front, tossing in royalty rights to a handful of marketed drugs and the keys to meloxicam, a Phase III-ready treatment for acute pain. Alkermes is due as much as $120 million more if the drug achieves certain milestones, and the biotech is hanging onto a "low double-digit" stream of royalties on its eventual sales, per the agreement.

Alkermes CFO James Frates

The facility, acquired in Alkermes' 2011 buyout of Elan's manufacturing business for $960 million, is no longer key to the company's mission, CFO James Frates said. Selling it will result in a $40 million reduction in 2015 revenue, the company estimates, but the addition of near-term cash will allow Alkermes to bankroll its most promising projects with an eye on future value.

Meanwhile, Alkermes is barreling ahead with ALKS 8700, an oral multiple sclerosis treatment designed to compete with Biogen Idec's ($BIIB) blockbuster Tecfidera. The biotech is largely focused on therapeutics that allow it to use its know-how in drug delivery and novel formulations to improve upon best-selling drugs, CEO Richard Pops has said, a philosophy that extends to its later-stage pipeline, highlighted by the schizophrenia treatment ALKS 3831 and depression drug ALKS 5461.

As for Recro, the company is working to win back the faith of investors after its lead candidate, Dex-IN, failed in a Phase IIb trial testing whether it can treat postoperative pain in patients who have just had bunions removed. The biotech's shares promptly plummeted, but Recro is moving forward with Dex-IN in a subpopulation of patients with hopes of coming through in a Phase II do-over.

The Alkermes news sent Recro's shares up more than 25% on Monday morning.

- read the statement