It's not easy to reinvent yourself in the biotechnology sector, but that's exactly the path that Alkermes CEO Richard Pops has decided to take his company.

Source: Michael Chen, Flickr.

Over the last half-decade, we've witnessed a huge surge in the number of biotech companies that are geared toward treating orphan diseases (those that affect 200,000 or fewer people). There's absolutely nothing wrong with this given that people with rare diseases need treatment as well, and there can often be big profits in it for companies that put in the time and research dollars.

Alexion Pharmaceuticals , for example, is currently worth more than $21 billion because of its focus on rare diseases. Its lone drug approved by the Food and Drug Administration, Soliris, is the most expensive drug in the world and is approved to treat a rare blood disorder known as paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome. This year alone, Soliris is expected to top $1.5 billion in sales.


The downside is that rare-disease drugs sometimes cost more to make than the company can actually recoup. That and competition among peers is growing with companies realizing what potential rare disease research can offer.

This is why Pops decided he needed to steer his company down a different path and focus Alkermes on treating chronic diseases -- but with a twist.

Headed in a new direction
Yesterday, during its annual research and development meeting with analysts and investors, Alkermes unveiled its new plan: target large chronic diseases, but also specific subsets of the population within those diseases that may benefit from its improvements and technology. Alkermes plans to accomplish this by introducing three new early-stage compounds, and focusing on the development of other ongoing mid- and late-stage studies.

The bulk of the excitement stems from Alkermes' soon to be early stage clinical studies: an MMF prodrug to treat multiple sclerosis, ALKS-7106 for the treatment of pain, and RBD-1419, a cancer immunotherapy based on IL-2 and its receptors. 

Monkey see, monkey do (better)
I believe the "wow" of Alkermes analyst day was the company's assertion that it's going to attempt to formulate a next-generation version of Biogen Idec's recently approved MS-relapse reducing drug Tecfidera. Without getting too technical, Tecfidera is a dimethyl fumarate prodrug, whereas Alkermes is attempting to develop a drug that'll convert to monomethyl fumarate, or MMF, in the body. The goal being to potentially develop an MS treatment that could be taken as little as once a day to help with patient dosing, and that's considerably safer than Tecfidera, especially for those who have to take the drug over the long term. Tecfidera in its own right is a considerably safer MS drug than many of its competitors, so this could be a tough drug to dethrone. Alkermes plans to initiate early-stage studies on its MMF prodrug by mid-2014.

ALKS-7106 for the treatment of pain has big potential as it encompasses a broad audience, but it'll need to overcome the common stigma of pain drugs with regard to easy abuse potential. According to the press release, Alkermes will be introducing newer technology that will make its opioid-based drug more resistant to abuse. It should be curious to see how well this performs as there aren't many successful abuse-resistant drugs, or companies developing those drugs for that matter. Acura Pharmaceuticals , for instance, successfully brought moderate-to-severe painkiller Oxecta to market in 2011 (which it subsequently licensed to Pfizer) and a bioequivalent version of decongestant pseudoephedrine to market last year, but sales of neither drug has exactly taken off. Like with its MMF prodrug, Alkermes anticipates a mid-2014 clinical trial launch date.

The third exciting early-stage candidate is RBD-1419, a cancer immunotherapy that's designed to stimulate and enhance the body's own immune system to deliver an effective anti-tumor response against malignant and metastatic cancer. Specifically, RBD enhances interleukin-2, a protein responsible for sending messages between white blood cells, which may encourage them to more aggressively attack cancerous cells -- which in Alkermes' model is based on metastatic lung cancer. Alkermes anticipates engaging in investigation new drug-enabling activities with RBD-1419 sometime next year.

But there's much more
Investors certainly seemed pleased with Alkermes' new studies, but let's not forget that it also announced the initiation of a mid-stage study on its antipsychotic medication ALKS-3831, and has other late-stage studies in the works.

ALKS-3831 could represent a major improvement for those suffering from schizophrenia. The drug is a combination of a new opioid modulator, ALKS-33, and Eli Lilly's Zyprexa that will target a level of equal of better treatment of symptoms while looking to lessen or eliminate one of the most serious side effects of taking Zyprexa -- rapid weight gain. In addition to patients who experience weight gain, Alkermes' press release notes ALKS-3831 could be effective in patients who receive a dual diagnosis of substance abuse disorder. Top-line results from this study should be available by the first half of 2015. 

ALKS-5461 is another exciting mental disorder drug candidate that Alkermes recently reported positive mid-stage data on. Designed to treat major depressive disorder, Alkermes' oral, non-addictive, opioid-modulating drug met its primary endpoint of changing the baseline in depressive symptoms over the course of four weeks for a patient pool of 142 people. Peak sales estimates for the drug are around $500 million, but it could have far higher potential given the difficult nature of the disease to treat. Let's not forget that Vanda Pharmaceuticals reported in January that tasimelteon failed to meet its primary endpoint in treating MDD in an early phase trial, so bringing an effective treatment to market isn't nearly as easy as it might sound.

What's a shareholder to do?
What to do next if you're an Alkermes shareholder is probably the toughest question to answer.

On one hand, Alkermes has already moved higher by nearly 100% from its 52-week lows and is years away from bringing these novel early-stage studies to market. On the other hand, the full-year earnings report from Alkermes' existing product pipeline delivered robust growth. For fiscal 2013, Alkermes delivered revenue growth of 48% to $575.5 million.

The bottom line is that Alkermes is healthfully profitable and saw cash flow generation soar from just $23 million in 2012 to $157.3 million in fiscal 2013. This cash flow is the key to funding new research and certainly makes Alkermes a compelling biopharmaceutical company that should, at minimum, be on your watchlist considering the forthcoming nature of CEO Richard Pops regarding the company's pipeline.

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The article Say Hello to the New Alkermes originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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