Alkermes plc — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results; comparisons are with the three months ended March 31, 2022 unless otherwise noted. Alkermes is a global biopharmaceutical company with proprietary neuroscience products, licensed-product and manufacturing revenues, and a development pipeline in neuroscience and oncology.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $287.6 million | $278.5 million |
| Operating loss | $47.5 million | $26.6 million |
| Net loss | $41.8 million | $35.9 million |
| Loss per share, basic and diluted | $0.25 | $0.22 |
| Operating cash flow | $(21.3) million | $21.7 million |
- Product sales, net, rose to $214.7 million from $171.3 million. LYBALVI sales were $38.0 million, versus $13.9 million; VIVITROL was $96.7 million, versus $84.9 million; ARISTADA and ARISTADA INITIO were $80.1 million, versus $72.5 million.
- Manufacturing and royalty revenue fell to $72.9 million from $105.2 million, largely reflecting lower long-acting INVEGA royalties following Janssen’s partial license termination. License revenue was zero, versus $2.0 million.
- Total expenses rose to $335.1 million from $305.1 million. SG&A increased $29.4 million to $174.5 million, primarily from commercial marketing and personnel costs, as well as professional fees related to the potential oncology separation. R&D decreased $2.4 million to $93.6 million.
- Cash and cash equivalents were $321.4 million at March 31, 2023; short- and long-term investments totaled $371.1 million. Combined cash and investments were $692.5 million, compared with $740.1 million at year-end 2022.
- Debt carrying value was $292.6 million, including $3.0 million current; the stated principal balance was $294.0 million. The 2026 Term Loans mature March 2026. The company reported compliance with debt covenants.
- Operating cash use was mainly associated with the net loss and working-capital movements; deferred taxes were a significant offset in the reconciliation. Investing activities provided $72.8 million, principally due to net investment sales. Financing activities used $22.6 million, including $24.7 million of employee tax payments on equity awards.
Changes, outlook and commentary
- Revenue increased $9.1 million, but expenses increased $30.0 million. Net loss widened by $5.9 million. Management attributed the higher loss chiefly to increased SG&A, partly offset by higher product sales and lower other expense. The prior-year period included a $19.1 million reduction in contingent consideration fair value.
- Management said existing cash, cash equivalents and investments were expected to fund anticipated working capital and other cash needs for at least 12 months after issuance of the financial statements. No specific full-year revenue or earnings guidance is provided in the supplied filing text.
- The company was exploring a separation of its oncology business into a separately traded company, with completion expected in the second half of 2023, subject to customary conditions, final board approval and tax-related requirements. Separation-related professional fees contributed to higher G&A.
- On April 19, 2023, after quarter-end, an arbitration tribunal issued a second interim award in the Janssen dispute. It found approximately $194 million of 2022 back royalties, including interest, due to Alkermes and specified royalty terms for certain products, including U.S. CABENUVA through December 31, 2036. Further proceedings, including interest and any remaining issues, were still to be addressed before a final award. The filing does not provide a clear value for any Q1 financial-statement recognition of this award.
- Key risks include dependence on licensees and disputes over royalty rights; potential generic competition and patent litigation; product liability and government investigations involving VIVITROL; market and interest-rate risks affecting investments and debt costs; and possible banking-system or third-party liquidity disruptions. Alkermes said it had no cash deposits or securities at SVB and reported no adverse impact from its closure as of the filing.
- The company said it anticipated a decision in the second half of 2023 in its VIVITROL patent trial against Teva. Acorda sought an additional approximately $66 million in damages in a court petition concerning an arbitration award; Alkermes said it considered the petition without merit. The company reported no potential material litigation losses that it deemed probable at March 31, 2023.
Important facts for investors to verify
- Developments and final resolution of the Janssen arbitration, including collection and timing of the reported back royalties and future royalty streams.
- Progress, approvals, tax treatment and costs of the proposed oncology-business separation.
- Product-sales trends and commercial spending, especially LYBALVI growth and whether higher sales translate into improved operating results.
- Effects of generic competition, patent cases and the VIVITROL-related proceedings and investigations.
- Cash generation, investment liquidity and unrealized investment losses, alongside debt service and covenant compliance.