Alkermes plc — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing reports full-year results; the supplied text does not provide a standalone fourth-quarter income statement.
Business context
Alkermes is an Ireland-incorporated biopharmaceutical company developing, manufacturing and commercializing medicines, primarily in neuroscience and oncology. Its U.S. proprietary products include VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI, launched in October 2021. It also earns royalties and manufacturing revenue from partnered products, including long-acting INVEGA products, RISPERDAL CONSTA and VUMERITY.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $1,173.8 million | $1,038.8 million |
| Product sales, net | $627.4 million | $551.8 million |
| Manufacturing and royalty revenue | $541.8 million | $484.0 million |
| Operating loss | $29.3 million | $112.4 million |
| Net loss | $48.2 million | $110.9 million |
| Operating cash flow | $101.7 million | $82.8 million |
- Revenue increased 13.0% year over year. Product sales, net, increased 13.7%; gross product sales were $1,315.1 million, with deductions of $687.7 million, or 52.2% of gross sales.
- VIVITROL net sales were $343.9 million, ARISTADA and ARISTADA INITIO combined were $275.4 million, and LYBALVI contributed $8.2 million following launch.
- Long-acting INVEGA revenue was $303.1 million, up from $274.2 million; VUMERITY revenue was $87.4 million, up from $22.5 million. RISPERDAL CONSTA revenue declined to $50.9 million from $71.4 million.
- R&D expense was $406.5 million versus $394.6 million; selling, general and administrative expense was $561.0 million versus $538.8 million. Operating loss narrowed mainly because revenue growth exceeded the increase in expenses.
- Cash and cash equivalents were $337.5 million; total cash and investments were $765.7 million, compared with $659.8 million a year earlier. Cash used in investing activities was $66.2 million, including increased net investment purchases. FY2021 capital expenditures were $28.0 million.
- Borrowings were $295.8 million at year-end, under term loans due March 2026. The loans bear interest at LIBOR plus 2.5%, with a 0.5% floor; the company reported covenant compliance. Management said available cash and investments should fund anticipated needs for at least 12 months after issuance of the financial statements.
- The company reported no cash dividends and did not repurchase shares under its repurchase program in 2021.
Material changes, outlook and notable items
- In November 2021, Janssen notified Alkermes of partial U.S. termination of the license agreement for INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA, asserting the products do not use Alkermes’ licensed NanoCrystal technology. Alkermes disputes the assertion. The termination took effect in February 2022; Alkermes stopped recognizing U.S. royalties on these products. The company reported $192.2 million of 2021 royalty revenue related to U.S. sales of the products and warned of a resulting revenue impact.
- Management expects proprietary product sales to continue growing through VIVITROL market penetration, ARISTADA share gains and the LYBALVI launch. It expects revenues from XEPLION, TREVICTA and BYANNLI to decline over time, and RISPERDAL CONSTA and AMPYRA revenues to decrease. The filing does not provide clear numerical revenue or earnings guidance.
- VUMERITY sales growth increased its royalty and manufacturing revenue. Biogen has initiated a manufacturing technology transfer and may assume responsibility for some or all supply, in exchange for increased royalties on the portion it manufactures.
- COVID-19 continued to weigh on access to healthcare providers and injectable treatment settings and created potential labor, supply-chain, clinical-trial and regulatory delays. Alkermes reported continued product supply without interruption but noted intermittent labor or supply disruptions and trial-timeline effects.
- Alkermes made a $25.0 million development milestone payment related to its Rodin acquisition. Up to $825.0 million of additional clinical, regulatory and sales milestone payments remain possible; no liability was recorded because triggering events were not considered probable.
- The company expects $35–$40 million of capital expenditures in 2022. It also warned that U.S. tax rules requiring capitalization and amortization of R&D costs beginning in 2022 are expected to increase tax payments and reduce operating cash flow.
Risks, contingencies and controls
- Revenue is concentrated in key products and partners: Janssen contributed approximately 30% of FY2021 revenue. The Janssen license dispute, generic competition, payer access and reimbursement pressure could materially affect results.
- Patent disputes include VIVITROL generic litigation with Teva and ongoing proceedings involving partnered products. Alkermes also disclosed government subpoenas and civil investigative demands concerning VIVITROL and product-liability cases; it reported no probable material litigation loss at year-end.
- Other risks include manufacturing concentration at the Wilmington and Athlone facilities, third-party supply dependence, clinical and regulatory uncertainty, foreign-exchange exposure, indebtedness and the potential impact of drug-pricing reforms.
- Management and the auditor concluded that internal control over financial reporting was effective. PwC issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- How the Janssen dispute is resolved, and the actual effect on U.S. INVEGA royalties and future cash flows.
- Whether growth in VIVITROL, ARISTADA, LYBALVI and VUMERITY can offset declining or at-risk partnered-product revenue and expenses.
- Generic entry timing and outcomes of patent litigation involving VIVITROL, INVEGA products and RISPERDAL CONSTA.
- Cash-flow and tax effects of the 2022 R&D capitalization rules, alongside planned capital expenditures and debt service.
- Progress and outcomes in the nemvaleukin ARTISTRY clinical program, including the Phase 3 ovarian cancer study, and the commercial trajectory of the recently launched LYBALVI.