On October 23, 2019 Alkermes plc (Nasdaq: ALKS) reported financial results for the third quarter of 2019 and the implementation of a restructuring plan following a review of the company’s operations, cost structure and growth opportunities (Press release, Alkermes, OCT 23, 2019, View Source [SID1234542432]).
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"As the profile of Alkermes changes, our executional priorities are clear: maximize the value of our commercial products and development candidates, streamline our cost structure and position the company for sustained future profitability. The restructuring is designed to further focus our R&D efforts on specific high-potential programs within CNS and oncology, improve financial efficiencies in our SG&A organization and drive growth," commented Richard Pops, Chief Executive Officer of Alkermes. "VIVITROL and ARISTADA provide a strong and growing foundation for our commercial business and the anticipated commercial launch of VUMERITYTM will provide a profitable new source of royalty revenues. We also continue to advance our pipeline programs, with the planned submission of the ALKS 3831 New Drug Application for both schizophrenia and bipolar I disorder this quarter, and the planned presentation of new data from ALKS 4230, our phase 1/2 immuno-oncology asset, at an upcoming medical meeting."
Quarter Ended Sept. 30, 2019 Financial Highlights
Total revenues for the quarter were $255.2 million, compared to $248.7 million for the same period in the prior year, primarily driven by approximately 20% growth in net sales of our proprietary products, partially offset by a decrease in AMPYRAi revenues resulting from generic entry in 2018.
Net loss according to generally accepted accounting principles in the U.S. (GAAP) was $52.9 million for the quarter, or a basic and diluted GAAP net loss per share of $0.34. This compared to GAAP net loss of $34.4 million, or a basic and diluted GAAP net loss per share of $0.22, for the same period in the prior year.
Non-GAAP net loss was $7.0 million for the quarter, or a non-GAAP basic and diluted net loss per share of $0.04. This compared to non-GAAP net income of $11.6 million, or a non-GAAP basic and diluted net earnings per share of $0.07, for the same period in the prior year.
Quarter Ended Sept. 30, 2019 Financial Results
Revenues
Net sales of VIVITROL were $85.2 million, compared to $79.9 million for the same period in the prior year, representing an increase of approximately 7%.
Net sales of ARISTADAii were $53.6 million, compared to $36.1 million for the same period in the prior year, representing an increase of approximately 48%.
Manufacturing and royalty revenues from RISPERDAL CONSTA, INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA were $76.7 million, compared to $77.2 million for the same period in the prior year, reflecting lower manufacturing revenues from RISPERDAL CONSTA.
Manufacturing and royalty revenues from AMPYRA/FAMPYRA were $7.7 million, compared to $20.3 million for the same period in the prior year, due to generic competition to AMPYRA entering the market in 2018 in the U.S.
Research and development revenues were $12.7 million, compared to $16.3 million for the same period in the prior year. These revenues were primarily related to the collaboration with Biogen for VUMERITY.
Costs and Expenses
Operating expenses were $308.9 million, compared to $285.9 million for the same period in the prior year, primarily reflecting increased investment in the commercialization of VIVITROL and ARISTADA and in the development of ALKS 4230.
"Our third quarter results reflect solid year-over-year growth of VIVITROL and ARISTADA. We are committed to further improving our financial efficiency and focusing the investments we are making to support our future growth," commented James Frates, Chief Financial Officer of Alkermes. "As we approach the end of the year, we are refining our financial expectations for 2019, including an increase in our expectations for non-GAAP net income, to reflect our results year-to-date, expectations for the fourth quarter and the impact of the restructuring announced today."
Restructuring
In October 2019, Alkermes completed a review of the company’s operations, cost structure and growth opportunities and implemented a restructuring plan. The restructuring included the elimination of approximately 160 current positions across the organization, a decrease in the company’s expected near-term hiring plans and implementation of cost-saving measures related to external spend. These efforts are expected to result in cost savings of approximately $150 million. The company expects to record a charge of approximately $15 million in the fourth quarter of 2019 as a result of the restructuring, consisting of one-time termination benefits for employee severance, benefits and related costs.
Financial Expectations for 2019
The following outlines the company’s updated financial expectations for 2019, which include the impact of the restructuring announced today:
Revenues: The company continues to expect total revenues to range from $1.14 billion to $1.19 billion.
Included in this total revenue expectation is the $150 million milestone payment that will be triggered by final approval of VUMERITY by the U.S. Food and Drug Administration (FDA).
The company now expects VIVITROL net sales to range from $330 million to $340 million, revised from the prior expectation of $330 million to $350 million.
The company now expects ARISTADA net sales to range from $185 million to $190 million, revised from the prior expectation of $200 million to $210 million.
Cost of Goods Manufactured and Sold: The company continues to expect cost of goods manufactured and sold to range from $180 million to $190 million.
Research and Development (R&D) Expenses: The company now expects R&D expenses to range from $430 million to $450 million, revised from the prior expectation of $450 million to $480 million.
Selling, General and Administrative (SG&A) Expenses: The company now expects SG&A expenses to range from $590 million to $610 million, revised from the prior expectation of $590 million to $620 million.
Amortization of Intangible Assets: The company continues to expect amortization of intangible assets to be approximately $40 million.
Restructuring: The company expects a restructuring charge of approximately $15 million.
Net Interest Expense: The company now expects net interest expense to range from $0 to $5 million, revised from the prior expectation of $5 million to $10 million.
Other Income/Expense, Net: The company expects a net other expense of approximately $30 million related to the change in fair value of its contingent consideration.
Income Tax Expense: The company now expects income tax expense to range from $0 to $5 million, revised from the prior expectation of $10 million to $15 million.
GAAP Net Loss: The company continues to expect GAAP net loss to range from $135 million to $165 million, or a basic and diluted loss per share of $0.86 to $1.05, based on a weighted average basic and diluted share count of approximately 156 million shares outstanding.
Non-GAAP Net Income: The company now expects non-GAAP net income to range from $70 million to $90 million, or a non-GAAP basic earnings per share of $0.45 to $0.57, based on a weighted average basic share count of approximately 157 million shares outstanding and a non-GAAP diluted earnings per share of $0.44 to $0.57, based on a weighted average diluted share count of approximately 159 million shares outstanding. This compares to the previous expectation of non-GAAP net income in the range of $40 million to $70 million, or a non-GAAP basic earnings per share of $0.26 to $0.45, based on a weighted average basic share count of approximately 156 million shares outstanding and a non-GAAP diluted earnings per share of $0.25 to $0.43, based on a weighted average diluted share count of approximately 161 million shares outstanding.
Share-Based Compensation: The company now expects share-based compensation of approximately $100 million, revised from the prior expectation of approximately $120 million.
Capital Expenditures: The company now expects capital expenditures to range from $80 million to $90 million, revised from the prior expectation of $90 million to $100 million.
Recent Events:
Entered into clinical collaboration with Fred Hutchinson Cancer Research Center for a planned phase 2 multi-site trial to evaluate ALKS 4230 in combination with pembrolizumab in patients with advanced or recurrent head and neck squamous cell cancer.
Received tentative approval from FDA for VUMERITY (diroximel fumarate), a novel oral fumarate with a distinct chemical structure, for the treatment of relapsing forms of MS.
Presented new health economics and outcomes research at the 32nd Annual Psych Congress that highlighted the unmet needs of individuals living with schizophrenia and bipolar I disorder in real-world settings.
Announced the appointment of Richard Gaynor, M.D. and Andy Wilson to the company’s Board of Directors. Dr. Gaynor brings to the Board 18 years of experience in oncology-focused drug development, and Mr. Wilson brings to the Board 30 years of financial expertise and experience in strategic planning and business development. The company also announced the retirement of Floyd Bloom, M.D., a founder of Alkermes, Inc., from the Board.
Announced positive topline results from EVOLVE-MS-2, a phase 3 study designed to evaluate the gastrointestinal (GI) tolerability of VUMERITY compared to TECFIDERA in patients with relapsing-remitting multiple sclerosis.
Entered into a settlement and license agreement with Amneal Pharmaceuticals LLC (Amneal) to resolve Amneal’s inter partes review petition challenging U.S. Patent Number 7,919,499, an Orange Book-listed patent for VIVITROL.
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, Oct. 23, 2019, 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 will be available from 11:00 a.m. ET (4:00 p.m. BST) on Wednesday, Oct. 23, 2019, through Wednesday, Oct. 30, 2019, 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 access code is 13694597.