On July 26, 2023 Alkermes plc (Nasdaq: ALKS) reported financial results for the second quarter of 2023 (Press release, Alkermes, JUL 26, 2023, View Source [SID1234633429]).
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"The second quarter clearly demonstrated Alkermes’ strong execution against our strategic priorities. We generated double-digit growth of our proprietary commercial products, advanced our development pipeline, and progressed the planned separation of our oncology business," said Richard Pops, Chief Executive Officer of Alkermes. "As we enter the second half of the year, we are well positioned to continue to make meaningful progress across the business and drive shareholder value."
"Our second quarter results reflect solid execution across our portfolio, highlighted by 21% year-over-year growth of our proprietary commercial products and reinstatement of the long-acting INVEGA product royalties in the U.S.," commented Iain Brown, Chief Financial Officer of Alkermes. "We are in a strong financial position with more than $907 million of cash and total investments and, today, we are reiterating our financial expectations for 2023 that were provided in June following receipt of the favorable final award in our arbitration with Janssen. We continue to expect royalty revenues from Janssen for these long-acting INVEGA products to be incrementally accretive to Alkermes’ bottom line in 2023 and beyond, as we continue to manage our business to drive profitability for the benefit of Alkermes’ shareholders."
Quarter Ended June 30, 2023 Financial Results
Revenues
– Total revenues for the quarter were $617.4 million, compared to $276.2 million for the same period in the prior year. Total revenues in the second quarter of 2023 included $248.4 million of back royalties and associated interest related to the successful outcome of the company’s arbitration with Janssen Pharmaceutica N.V. (Janssen), a subsidiary of Johnson & Johnson.
– Net sales of proprietary products for the quarter increased approximately 21% to $231.5 million, compared to $190.8 million for the same period in the prior year.
Net sales of VIVITROL were $102.1 million, compared to $96.1 million for the same period in the prior year, representing an increase of approximately 6%.
Net sales of ARISTADAi were $82.4 million, compared to $74.6 million for the same period in the prior year, representing an increase of approximately 10%.
Net sales of LYBALVI were $47.0 million, compared to $20.1 million for the same period in the prior year, representing an increase of approximately 134%.
– Manufacturing and royalty revenues for the quarter were $385.9 million, compared to $85.3 million for the same period in the prior year.
Royalty revenues from INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI (the long-acting INVEGA products) for the quarter were $321.2 million, which included $195.4 million and $50.2 million of back royalties and associated interest related to U.S. net sales of these products in 2022 and in the first quarter of 2023, respectively. The company recorded royalty revenues from these products of $26.6 million for the same period in the prior year.
Manufacturing and royalty revenues from VUMERITY for the quarter were $32.3 million, compared to $26.2 million for the same period in the prior year.
Costs and Expenses
– Total operating expenses for the quarter were $378.2 million, compared to $310.7 million for the same period in the prior year. The increase was driven primarily by investment in the launch of LYBALVI and expenses associated with the planned separation of the oncology business.
Cost of Goods Manufactured and Sold was $63.3 million, compared to $58.4 million for the same period in the prior year.
Research and Development (R&D) expenses were $100.8 million, compared to $92.9 million for the same period in the prior year, primarily reflecting acceleration in recruitment for the nemvaleukin alfa (nemvaleukin) clinical studies and investment in the ALKS 2680 phase 1 study.
Selling, General and Administrative (SG&A) expenses were $205.3 million, compared to $150.4 million for the same period in the prior year, primarily reflecting increased investment in the direct-to-consumer advertising campaign to support the launch of LYBALVI and certain expenses related to the planned separation of the oncology business.
Profitability
– Net income according to generally accepted accounting principles in the U.S. (GAAP) was $237.1 million for the quarter, or a GAAP basic earnings per share of $1.43 and diluted earnings per share of $1.38, based on 166.3 million and 171.6 million shares outstanding, respectively. This compared to GAAP net loss of $30.1 million, or a basic and diluted GAAP loss per share of $0.18, for the same period in the prior year.
– Non-GAAP net income was $94.3 million for the quarter, or a non-GAAP basic earnings per share of $0.57 and diluted earnings per share of $0.55, based on 166.3 million and 171.6 million shares outstanding, respectively. Non-GAAP net income excluded back royalties and associated interest paid in the quarter of approximately $197.1 million related to 2022 U.S. net sales of the long-acting INVEGA products and CABENUVA. This compared to non-GAAP net income of $10.5 million, or a non-GAAP basic and diluted earnings per share of $0.06 for the same period in the prior year.
Balance Sheet
– At June 30, 2023, the company recorded cash, cash equivalents and total investments of $907.2 million, compared to $692.5 million at March 31, 2023. The company’s total debt outstanding as of June 30, 2023 was $292.0 million.
Financial Expectations for 2023
Alkermes reiterated its financial expectations for 2023, as set forth in its press release dated June 6, 2023.
Separation of Oncology Business
Alkermes continues to make meaningful progress on the previously announced planned separation of its oncology business into a new, independent publicly-traded company. The separation would allow Alkermes to maintain its focus on researching, developing and commercializing therapies for people living with complex neurological conditions and is expected to accelerate and enhance the profitability of the remaining neuroscience business.
– In June 2023, Alkermes appointed Caroline J. Loew, Ph.D., as the chief executive officer designate of Mural Oncology plc (Mural Oncology), the new independent public company to be established upon the planned separation of Alkermes’ oncology business. Dr. Loew joined Alkermes in June as a strategic advisor and will transition to CEO of Mural Oncology upon completion of the separation.
– Alkermes continues to expect to complete the separation in the second half of 2023, subject to various customary conditions, including final approval from Alkermes’ board of directors and receipt of a private letter ruling from the IRS and/or a tax opinion from the company’s tax advisor.
Recent Events
Corporate
– In June 2023, the company received a final award (the Final Award) from the arbitral tribunal in its arbitration proceedings with Janssen. In connection with the Final Award, the company raised its financial expectations for 2023 by approximately $425 million, reflecting back royalties and associated interest paid related to 2022 U.S. net sales of the long-acting INVEGA products and CABENUVA and anticipated royalty revenues related to 2023 global net sales of these products. Further details regarding the Final Award can be found here.
– In June 2023, the company announced that at its 2023 annual general meeting of shareholders, the company’s shareholders voted to re-elect all seven of Alkermes’ director nominees – Emily Peterson Alva, Shane M. Cooke, Richard B. Gaynor, M.D., Cato T. Laurencin, M.D., Ph.D., Brian P. McKeon, Richard F. Pops and Christopher I. Wright, M.D., Ph.D., and approve all other company proposals presented.
Neuroscience
– In May 2023, the company initiated a phase 1b proof-of-concept study of ALKS 2680, the company’s orexin 2 receptor agonist, which is in clinical development for the treatment of narcolepsy and other hypersomnia conditions.
– In May and June 2023, the company presented research related to its psychiatry portfolio at four scientific conferences. The conferences included: Schizophrenia International Research Society (SIRS) Annual Congress, International Society for Bipolar Disorders (ISBD) Annual Conference, American Psychiatric Association (APA) Annual Meeting, and American Society of Clinical Psychopharmacology (ASCP) Annual Meeting.
Oncology
– In June 2023, the company presented trial-in-progress posters from the actively recruiting phase 2 ARTISTRY-6 clinical trial and phase 3 ARTISTRY-7 clinical trial for nemvaleukin, the company’s novel, investigational, engineered interleukin-2 (IL-2) variant immunotherapy, at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting.
Conference Call
Alkermes will host a conference call and webcast presentation with accompanying slides at 8:00 a.m. ET (1:00 p.m. BST) on Wednesday, July 26, 2023, to discuss these financial results and provide an update on the company. The webcast may be accessed on the Investors section of Alkermes’ website at www.alkermes.com. The conference call may be accessed by dialing +1 877 407 2988 for U.S. callers and +1 201 389 0923 for international callers. In addition, a replay of the conference call may be accessed by visiting Alkermes’ website.