On July 29, 2020 Alkermes plc (Nasdaq: ALKS) reported financial results for the second quarter of 2020 and provided updated financial expectations for full-year 2020 (Press release, Alkermes, JUL 29, 2020, View Source [SID1234562494]). The company had previously withdrawn its 2020 financial expectations due to uncertainties regarding the impact of the COVID-19 pandemic on its business.
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"During the second quarter, we adapted in response to the changing conditions in a complex environment. As we enter the second half of 2020, we are focused on three strategic imperatives. The first is commercial execution, as we drive to maximize the opportunities for ARISTADA and VIVITROL and prepare for the potential launch of ALKS 3831. The second is aggressive development of our pipeline programs, focusing on high-value opportunities that we believe have the potential to address patient needs and drive significant value in the near- and long-term. ALKS 4230, our lead oncology candidate, is the most prominent of these opportunities. The third is efficient management of our operating structure, with a focus on rigorous expense management and careful prioritization of our investments," said Richard Pops, Chief Executive Officer of Alkermes.
"We distinguish ourselves from other biopharmaceutical companies through our efforts in serious mental illness and addiction — chronic, highly prevalent conditions that affect millions of people and represent some of the most challenging public health issues of our time. We have built our organization with purpose and invested in specialized commercial capabilities to navigate fragmented treatment systems as we help address the complex challenges that patients with these diseases face," continued Mr. Pops. "As the nation’s response to COVID-19 continues, it is critical that we work to mitigate the pandemic’s secondary impacts related to social isolation, economic hardship and anxiety. For many patients struggling with serious mental illness and addiction, the current environment has amplified the barriers to treatment that Alkermes has worked for many years to address. We believe it is our responsibility to help ensure that the treatment system continues to function for these patients."
Quarter Ended June 30, 2020 Financial Highlights
Total revenues for the quarter were $247.5 million, compared to $279.9 million for the same period in the prior year.
Net loss according to generally accepted accounting principles in the U.S. (GAAP) was $29.4 million for the quarter, or a GAAP net loss per share of $0.19. This compared to GAAP net loss of $42.0 million, or a GAAP net loss per share of $0.27, for the same period in the prior year.
Non-GAAP net income was $8.9 million for the quarter, or a non-GAAP basic and diluted earnings per share of $0.06. This compared to non-GAAP net income of $13.7 million, or a non-GAAP basic and diluted earnings per share of $0.09, for the same period in the prior year.
Quarter Ended June 30, 2020 Financial Results
Revenues
Net sales of proprietary products were $130.4 million, compared to $136.6 million for the same period in the prior year.
Net sales of VIVITROL were $71.6 million, compared to $88.2 million for the same period in the prior year, representing a decrease of approximately 19%, driven primarily by a decline in new patient starts and more restricted access to healthcare providers that resulted from COVID-19-related disruptions.
Net sales of ARISTADA1 were $58.8 million, compared to $48.4 million for the same period in the prior year, representing an increase of approximately 21% driven primarily by increased breadth of the ARISTADA provider base and growth of the ARISTADA two-month dose.
Manufacturing and royalty revenues were $116.5 million, compared to $127.9 million for the same period in the prior year.
Manufacturing and royalty revenues from RISPERDAL CONSTA, INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA were $83.1 million, compared to $91.9 million for the same period in the prior year, primarily driven by a decrease in manufacturing and royalty revenues related to RISPERDAL CONSTA.
Costs and Expenses
Total operating expenses were $281.2 million, compared to $315.8 million for the same period in the prior year.
Research and Development (R&D) expenses were $94.2 million, compared to $104.4 million for the same period in the prior year.
Selling, General and Administrative (SG&A) expenses were $132.0 million, compared to $155.1 million for the same period in the prior year.
Balance Sheet
At June 30, 2020, Alkermes recorded cash, cash equivalents and total investments of $539.6 million, compared to $549.7 million at March 31, 2020. Cash on hand at June 30, 2020 significantly exceeded the company’s total debt outstanding of $276.1 million under its term loan, which matures in March 2023.
"Our second quarter results reflect solid execution across the business. The performance of the ARISTADA product family, together with disciplined management of expenses, partially offset the negative impact on VIVITROL net sales that resulted from COVID-19-related decreases in patient visits to healthcare providers and treatment centers. With increased visibility into the expected impact of COVID-19 on our commercial portfolio, today we are issuing financial expectations for 2020 that reflect current trends and underscore our commitment to driving non-GAAP profitability," commented James Frates, Chief Financial Officer of Alkermes. "Over the past five years, we have grown our topline while investing in the future growth drivers of our business. Directly as a result of those investments, we established VIVITROL as an important therapeutic option for patients with opioid and alcohol dependence; we secured FDA approvals for the ARISTADA product family; we developed ALKS 3831 and submitted a New Drug Application for schizophrenia and bipolar I disorder; we built commercial psychiatry capabilities that support the growth of ARISTADA and which are also fully leverageable for ALKS 3831; we successfully developed VUMERITY and entered into a commercial collaboration that will provide 100% gross margin royalty revenues from net sales; we advanced development of ALKS 4230 while retaining optionality for strategic collaboration; and, we acquired a platform of histone deacetylase (HDAC) inhibitors that we believe will provide compelling pipeline opportunities in
neurodegeneration and oncology. We are focused on executing our business strategy and believe these investments have positioned the business to drive long-term profitability and value creation."
Financial Expectations for 2020
The following financial expectations for 2020 reflect the anticipated net impacts of the COVID-19 pandemic on Alkermes’ operating and financial results. Alkermes anticipates that the negative impact of COVID-19 on VIVITROL net sales will be partially offset by a decrease in operating expenses, notably within R&D. The ranges provided are based on current trends and assume that treatment provider practices and patient flow will continue to normalize. Additional wide-spread COVID-19-related restrictions or resurgence of COVID-19 could negatively impact the company’s ability to meet these expectations. All line items are according to GAAP, except as otherwise noted.
Governance Update
"Over the past 12 months, we conducted extensive shareholder outreach and engaged with shareholders representing approximately 60% in value of our outstanding ordinary shares. The Board values the views of our shareholders and, after considering their feedback, is taking actions to further strengthen our business and corporate governance practices. The Board believes these actions will help to position the company for long-term growth as we execute on our strategy," said David Anstice, Lead Independent Director of the Alkermes Board of Directors (the Board).
The company announced today that it plans to take a series of actions as part of its commitment to corporate governance best practices and regular Board refreshment.
First, the Board will recommend that shareholders approve, at the company’s 2021 Annual General Meeting of Shareholders, an amendment to the company’s Articles of Association to declassify the Board. Currently, the Board has three classes of directors, with directors in each class elected to three-year terms. Once the Board is declassified, the directors will be combined into a single class elected annually.
Second, the Board has engaged a leading recruitment firm to identify independent director candidates whose experience and expertise offer valuable insights and strategic leadership at this stage in Alkermes’ evolution. As part of this process, the company expects certain of its longer-serving directors will retire from the Board. This Board refreshment process will continue and build on the efforts undertaken by the company in the fall of 2019 that led to the addition of two highly-qualified, independent directors, Dr. Richard Gaynor and Mr. Andy Wilson, to the Board.
Recent Events
Schizophrenia portfolio
In May 2020, presented new research from the company’s schizophrenia portfolio at the American Society of Clinical Psychopharmacology (ASCP) 2020 Annual Meeting, including data from patient-reported evaluations relating to treatment with ALKS 3831 and satisfaction data relating to treatment with ARISTADA.
In July 2020, announced a new survey conducted by The Harris Poll for Alkermes, which explored the current use and future potential of telepsychiatry services during and after the COVID-19 pandemic.
ALKS 4230
In June 2020, presented positive preclinical data from a study designed to evaluate the combination potential of ALKS 4230, Alkermes’ investigational engineered interleukin-2 (IL-2) variant immunotherapy, with lucitanib, Clovis Oncology, Inc.’s investigational angiogenesis inhibitor, at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Virtual Annual Meeting II.
Corporate citizenship
In June 2020, announced that 10 nonprofit organizations were awarded grants from the company’s COVID-19 Relief Fund, a special edition of the company’s signature Alkermes Inspiration Grants program, that was established to assist nonprofit organizations in their work to rapidly address pandemic-related needs for people living with addiction, serious mental illness, or cancer.
In July 2020, published Alkermes’ latest Corporate Responsibility Report which outlines how the company integrates environmental, social and governance considerations into all aspects of its business. A copy of the report is available on the Responsibility section of Alkermes’ website.
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 29, 2020, to discuss these financial results, financial expectations, 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 will be available from 11:00 a.m. ET (4:00 p.m. BST) on Wednesday, July 29, 2020, through Wednesday, Aug. 5, 2020, and may be accessed by visiting Alkermes’ website or by dialing +1 877 660 6853 for U.S. callers and +1 201 612 7415 for international callers. The replay conference ID is 13707215.