Alkermes plc — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter report. Alkermes is an Ireland-incorporated biopharmaceutical company with proprietary neuroscience products and partnered product royalties and manufacturing revenue.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $1,111.8 million | $1,173.8 million |
| Operating loss | $142.3 million | $29.3 million |
| Net loss | $158.3 million | $48.2 million |
| Loss per share, diluted | $0.97 | $0.30 |
| Cash from operating activities | $21.0 million | $101.7 million |
- Revenue declined 5.3% year over year. Net product sales increased 23.9% to $777.6 million, while manufacturing and royalty revenue fell 38.7% to $332.0 million.
- Product sales by product: VIVITROL $379.5 million; ARISTADA and ARISTADA INITIO $302.1 million; LYBALVI $96.0 million. LYBALVI’s increase reflects its first full year after its October 2021 launch.
- Operating margin was approximately negative 12.8% and net margin approximately negative 14.2%, compared with approximately negative 2.5% and negative 4.1%, respectively, in 2021.
- Operating expenses rose to $1,254.1 million from $1,203.0 million. SG&A increased $44.7 million, partly reflecting LYBALVI launch spending and higher professional fees; R&D expense decreased $12.7 million to $393.8 million.
- Cash, cash equivalents and investments totaled $740.1 million at year-end, versus $765.7 million a year earlier. Current assets were $1,130.3 million and current liabilities $497.7 million.
- Principal outstanding under the 2026 Term Loans was $294.8 million; the balance-sheet carrying amount, net of financing costs and discount, was $293.3 million. The loans mature in March 2026, with a $285.8 million final scheduled payment. The company reported covenant compliance.
Material changes and notable items
- Janssen’s partial termination of the NanoCrystal license took effect in February 2022. Alkermes stopped recognizing U.S. royalties on the long-acting INVEGA products; reported revenue from those products fell to $115.7 million from $303.1 million. An interim arbitration award supported Alkermes’ position on royalties for products developed during the agreement, but a final award remained pending.
- VUMERITY revenue increased to $115.5 million from $87.4 million, reflecting higher royalty revenue as reported net sales by Biogen rose to $553.4 million from $410.0 million.
- An arbitration ruling required Alkermes to repay Acorda $18.3 million and reverse $3.2 million of AMPYRA royalty revenue. Acorda later sought approximately $66 million in additional damages in a court petition; Alkermes said it would contest the petition.
- Alkermes recorded a $21.8 million expense from reducing contingent consideration related to Baudax to zero, citing collection concerns.
- Operating cash flow fell substantially, and the company attributed the decrease principally to its larger net loss and a $15.3 million early lease payment, partly offset by working-capital movements.
Outlook, risks and contingencies
- Management expected net product sales to continue growing through VIVITROL market penetration, ARISTADA and ARISTADA INITIO market-share gains, and continued LYBALVI launch activity. The filing does not provide clear numeric revenue or earnings guidance.
- Management stated that available cash, cash equivalents and investments were expected to fund anticipated working capital and other requirements for at least 12 months from issuance of the financial statements. Planned 2023 capital expenditures were approximately $35–$40 million.
- In November 2022, Alkermes announced it was exploring a separation of its oncology business into a separate public company, potentially in the second half of 2023. Completion, timing, benefits and tax treatment were uncertain and subject to approvals and other conditions.
- Key risks include dependence on a concentrated group of proprietary products and licensees, pricing and reimbursement pressure, competition and generic entry, manufacturing and supply-chain disruptions, clinical and regulatory uncertainty, intellectual-property litigation, and the impact of the Janssen dispute. The filing also notes VIVITROL-related government inquiries and product-liability litigation; the company said it was cooperating with authorities and intended to defend the cases.
- The Inflation Reduction Act introduces Medicare drug-price negotiation and inflation-rebate provisions on statutory timetables. The company also identified U.S. R&D-expense capitalization rules as increasing cash tax requirements.
- Auditors issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. Medicaid rebate accruals were identified as a critical audit matter because of estimation uncertainty.
Important facts for investors to verify
- Final Janssen arbitration outcome, any resumption or recovery of U.S. INVEGA royalties, and the resulting revenue outlook.
- Status and potential exposure from Acorda’s approximately $66 million damages petition, VIVITROL patent litigation and government inquiries.
- Progress, structure, costs, tax treatment and approval requirements for the proposed oncology separation.
- Whether product-sales growth and cash generation can offset lower partnered royalties and increased expenses.
- Liquidity and debt-service capacity, including the 2026 balloon payment, interest-rate exposure and planned capital spending.
- Potential effects of Medicaid rebate estimates, pricing and reimbursement changes, and R&D tax rules on reported earnings and operating cash flow.