-- Unit Sales of RISPERDAL(R) CONSTA(R) Increased More Than 16 Percent Quarter Over Quarter --
-- Company Updates Financial Expectations for Fiscal 2009 --
-
Profitable quarter on a GAAP basis, with net income of
$112.3 million . -
Quarterly revenues of
$155.7 million , including the recognition of$120.7 million of one-time milestone and deferred revenue. -
Worldwide sales of RISPERDAL® CONSTA® by
Janssen,
Division of Ortho-McNeil-Janssen Pharmaceuticals , Inc. and Janssen–Cilag (Janssen) were$318.8 million . On a unit basis, worldwide sales of RISPERDAL CONSTA increased 16.3 percent compared to the same period in 2007. Sales of RISPERDAL CONSTA were$999.5 million for the first nine months of fiscal 2009. -
Strong financial position, with cash and total investments of
$423.6 million . The business generated$4.0 million in cash from operations in the third quarter and$43.2 million for the first nine months of fiscal 2009. -
Repurchase of an additional 487,300 shares of common stock as part of
an ongoing stock repurchase program. To date, the company has
repurchased over 8.5 million shares of common stock for approximately
$111.3 million .
“Alkermes is positioned for success in 2009. RISPERDAL CONSTA sales
continue to grow on a unit basis, and a phase 1 study of a four-week
formulation of this product is underway. Throughout the calendar year,
we also expect significant progress across our proprietary portfolio,
including topline data from multiple development programs,” commented
Key operating results for the quarter ended
-
Net income was
$112.3 million or a basic earnings per share of$1.18 and diluted earnings per share of$1.17 , including$3.3 million in share-based compensation expense and$120.6 million of one-time net income related to the company’s previous agreements withCephalon, Inc. (Cephalon ) for the commercialization of VIVITROL®. For the same period in 2007, net income was$168.9 million or a basic earnings per share of$1.66 and a diluted earnings per share of$1.63 , which included$5.2 million in share-based compensation expense and$171.3 million of net income from the sale of the company’s stake inReliant Pharmaceuticals, Inc. (Reliant). -
Pro forma net loss was
$5.0 million or a basic and diluted loss per share of$0.05 , compared to a net income of$2.8 million or a basic and diluted earnings per share of$0.03 for the same period in 2007.
Pro Forma Diluted (Loss) Earnings | Impact of the Termination of the Collaborative Agreements with Cephalon | Income from Sale of Stake in Reliant, Net of Taxes | Share-Based Compensation Expense | Reported GAAP Diluted Earnings | ||||||
Q3 FY 2009 | $(0.05) | $1.27 | -- | $(0.03) | $1.17 | |||||
Q3 FY 2008 | $0.03 | -- | $1.65 | $(0.05) | $1.63 |
Note: Amounts may not sum due to rounding. Pro forma per share calculations in Q3 FY 2009 exclude the effect of potential outstanding shares, such as stock options and restricted stock units, as the inclusion of such shares would be anti-dilutive.
The following financial results are reported on a GAAP basis and include share-based compensation expense:
Revenues
-
Manufacturing revenues for the quarter ended
December 31, 2008 , were$20.5 million compared to$14.3 million for the same period in 2007, an increase of 44 percent year over year. Manufacturing revenues for the quarter endedDecember 31, 2008 , consisted of$21.3 million for RISPERDAL CONSTA and$(0.8) million for VIVITROL, compared to$12.9 million for RISPERDAL CONSTA and$1.4 million for VIVITROL for the same period in 2007. In the quarter endedDecember 31, 2008 , the company reversed$0.8 million of manufacturing revenue for VIVITROL previously sold toCephalon , whichAlkermes is now selling in the end-market. -
Royalty revenues for the quarter ended
December 31, 2008 , were$8.0 million compared to$7.4 million for the same period in 2007. Royalty revenues were based on RISPERDAL CONSTA sales of$318.8 million for the quarter endedDecember 31, 2008 , compared to$295.1 million for the same period in 2007. -
Research and development (R&D) revenue under collaborative
arrangements for the quarter ended
December 31, 2008 , was$3.7 million , compared to$24.0 million for the same period in 2007, due to an increased focus on proprietary programs as compared to partnered programs. -
Net collaborative profit for the quarter ended
December 31, 2008 , was$123.4 million , compared to$5.1 million for the same period in 2007. Net collaborative profit for the quarter endedDecember 31, 2008 , included the recognition of$120.7 million of one-time milestone and deferred revenue related to the company’s previous agreements withCephalon and$1.2 million of deferred revenue prepaid byCephalon to cover its share of VIVITROL losses. -
During the quarter,
Alkermes regained commercial rights to VIVITROL in the U.S. and, effectiveDecember 1, 2008 , changed the revenue recognition policy for the product. Under the previous policy which recognized sales upon shipment into the distribution channel, gross sales of VIVITROL during the quarter would have been$4.7 million , of which$3.1 million were recognized by the collaboration in October andNovember 2008 . Due to the introduction of a return policy,Alkermes deferred its VIVITROL net sales inDecember 2008 as the company establishes a return history. The company expects to recognize product sales beginning inJanuary 2009 as product is shipped out of the distribution channel.
Costs and Expenses
-
Cost of goods manufactured for the quarter ended
December 31, 2008 , was$5.5 million , of which$5.0 million related to RISPERDAL CONSTA and$0.5 million related to VIVITROL, compared to$7.5 million for the same period in 2007, of which$5.9 million related to RISPERDAL CONSTA and$1.6 million related to VIVITROL. In the quarter endedDecember 31, 2008 , the company reversed$0.7 million of cost of goods sold for VIVITROL related to product previously sold toCephalon whichAlkermes is now selling in the end-market. -
R&D expenses for the quarter ended
December 31, 2008 , were$22.7 million , compared to$30.4 million for the same period in 2007. -
Selling, general and administrative (SG&A) expenses for the quarter
ended
December 31, 2008 , were$14.6 million , compared to$15.2 million for the same period in 2007. -
Share-based compensation expense (included in the expenses above) for
the quarter ended
December 31, 2008 , was$3.3 million , of which$0.3 million related to cost of goods manufactured,$0.5 million related to R&D expenses and$2.5 million related to SG&A expenses. Share-based compensation expense for the quarter endedDecember 31, 2007 , was$5.2 million , of which$0.3 million related to cost of goods manufactured,$2.1 million related to R&D expenses and$2.8 million related to SG&A expenses. -
Interest income for the quarter ended
December 31, 2008 , was$2.6 million , compared to$4.3 million for the same period in 2007. Interest expense for the quarter endedDecember 31, 2008 , was$2.8 million , compared to$4.1 million for the same period in 2007. -
Income tax benefit for the quarter ended
December 31, 2008 , was$0.3 million , compared to an income tax expense of$3.2 million for the same period in 2007.
At
Recent Highlights
Highlights of Alkermes’ third quarter and recent activities include the following:
-
Clinical development initiated for a four-week long-acting
injectable formulation of risperidone: In January,
Johnson & Johnson Pharmaceutical Research & Development , L.L.C. (J&JPRD) initiated a phase 1 study for a four-week long-acting injectable formulation of risperidone for the treatment of schizophrenia. The single-dose, open-label study is designed to assess the pharmacokinetics, safety and tolerability of a gluteal injection of this risperidone formulation in approximately 26 patients diagnosed with chronic, stable schizophrenia. -
Proprietary pipeline progress: In December,
Alkermes initiated a phase 1 study in healthy volunteers of ALKS 33, an oral opioid modulator for the potential treatment of addiction and other central nervous system (CNS) disorders. ALKS 33 is the company’s first novel, small molecule drug candidate to enter the clinic. Also in December, the company initiated a pharmacokinetic study of ALKS 29, a potential treatment for alcohol dependence.Alkermes expects to report topline results from these two studies in the second half of calendar 2009. -
Continued progress with the DURATION studies for exenatide once
weekly: In December,
Amylin Pharmaceuticals, Inc. ,Eli Lilly and Company andAlkermes announced the initiation of DURATION-4, a superiority study designed to evaluate exenatide once weekly as a monotherapy treatment compared to either metformin, a thiazolidinedione (TZD) or a dipeptidyl peptidase-4 (DPP-4) inhibitor. The double-blind study is expected to include approximately 800 type 2 diabetes patients. The companies also announced completion of enrollment in DURATION-3, an open-label, superiority study designed to compare exenatide once weekly with insulin glargine on a background of oral agent therapy in approximately 450 type 2 diabetes patients. -
Full U.S. rights to VIVITROL regained: On
December 1, 2008 ,Alkermes regained fromCephalon full commercialization rights to VIVITROL in the U.S. following a portfolio review byCephalon .Cephalon paidAlkermes $11 million as part of its obligations, andAlkermes paidCephalon $16 million to purchase manufacturing equipment for the product.
Updated Financial Expectations for Fiscal 2009
-
Manufacturing Revenues: The company expects manufacturing
revenues to remain in the range of
$111 to $122 million . -
Royalty Revenues: The company is adjusting its expectation for
royalty revenues from RISPERDAL CONSTA to a range of
$33 to $35 million , revised from an expectation of$34 to $36 million , due to the impact of currency fluctuations. -
Product Sales: The company is adjusting its expectation for net
sales from VIVITROL to a range of
$4 to $6 million , revised from an expectation of$5 to $8 million , due to the deferral of revenue in December. For fiscal 2009, based on the previous collaboration revenue recognition policy, the company expects gross sales of VIVITROL to remain in the range of$19 to $24 million . -
R&D Revenues: The company is adjusting its expectation for
R&D revenues to a range of
$41 to $45 million , revised from an expectation of$45 to $50 million , primarily due to the early completion of work performed on the exenatide once weekly program. -
Net Collaborative Profit: The company expects net collaborative
profit to remain in the range of
$125 to $130 million . -
Total Revenues: The company is adjusting its expectation for
total revenues for fiscal 2009 to a range of
$314 to $338 million , revised from an expectation of$320 to $346 million . -
Cost of Goods Manufactured: The company expects cost of goods
manufactured to remain in the range of
$40 to $45 million . -
R&D Expenses: The company expects R&D expenses to remain in
the range of
$92 to $97 million . -
SG&A Expenses: The company expects SG&A expenses to remain
in the range of
$53 to $58 million . -
Operating Income: The company is adjusting its expectation for
operating income to a range of
$129 to $138 million , revised from an expectation of$135 to $146 million . -
Other Income/Expense: The company is adjusting its expectation
for other income/expense to a net expense of
$3 to $5 million , revised from an expectation of net interest income/expense of $0. -
Income Taxes: The company continues to expect income taxes of
$1 million . -
GAAP Net Income: The company is adjusting its expectation for
GAAP net income to a range of
$125 to $132 million or a basic earnings per share in the range of$1.32 to $1.39 , revised from an expectation of$134 to $145 million or a basic earnings per share in the range of$1.41 to $1.53 . These per share calculations are based on the current share count of 95 million shares outstanding. -
Cash Flow from Operations: The company expects cash flow from
operations to remain in the range of
$50 to $55 million . -
SFAS 123R: The company expects share-based compensation expense
to remain in the range of
$15 to $20 million .
Conference Call
About
Certain statements set forth above may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including, but not limited to: statements concerning
future business and operating results, cash flow and profitability; the
continued growth of RISPERDAL CONSTA sales; and the successful
continuation of development activities for proprietary and partnered
programs, including RISPERDAL CONSTA and exenatide once weekly. Although
the company believes that such statements are based on reasonable
assumptions within the bounds of its knowledge of its business and
operations, the forward-looking statements are neither promises nor
guarantees and the company's business is subject to significant risk and
uncertainties and there can be no assurance that its actual results will
not differ materially from its expectations. These risks and
uncertainties include, among others: the current credit and financial
climate; any changes to the reimbursement of pharmaceutical products by
public and private payors; actions or decisions by the company’s
partners with regard to development, regulatory strategy, timing and
funding of the company's partnered product candidates, which are out of
the company’s control; the outcome of clinical and preclinical work the
company is pursuing, both on its own and with partners; decisions by the
(tables follow)
VIVITROL® is a registered trademark of
Alkermes, Inc. and Subsidiaries | |||||||
Selected Financial Information (Unaudited) | |||||||
Three Months | Three Months | ||||||
Ended | Ended | ||||||
Condensed Consolidated Statements of Income | December 31, | December 31, | |||||
(In thousands, except per share data) | 2008 | 2007 | |||||
Revenues: | |||||||
Manufacturing revenues | $20,533 | $14,275 | |||||
Royalty revenues | 7,970 | 7,384 | |||||
Research and development revenue under collaborative arrangements | 3,736 | 23,985 | |||||
Net collaborative profit | 123,422 | 5,127 | |||||
Total Revenues | 155,661 | 50,771 | |||||
Expenses: | |||||||
Cost of goods sold | 5,536 | 7,499 | |||||
Research and development | 22,669 | 30,395 | |||||
Selling, general and administrative | 14,568 | 15,249 | |||||
Total Expenses | 42,773 | 53,143 | |||||
Operating Income (Loss) | 112,888 | (2,372) | |||||
Other (Expense) Income: | |||||||
Gain on sale of investment in Reliant Pharmaceuticals, Inc. | - | 174,631 | |||||
Interest income | 2,574 | 4,292 | |||||
Interest expense | (2,829) | (4,088) | |||||
Other (expense) income, net | (641) | (393) | |||||
Total Other (Expense) Income | (896) | 174,442 | |||||
Income before Income Taxes | 111,992 | 172,070 | |||||
Income tax (benefit) provision | (330) | 3,189 | |||||
Net Income | $112,322 | $168,881 | |||||
Earnings per Common Share: | |||||||
Basic | $1.18 | $1.66 | |||||
Diluted | $1.17 | $1.63 | |||||
Weighted Average Number of Common Shares Outstanding (GAAP and Pro Forma): | |||||||
Basic | 95,316 | 101,703 | |||||
Diluted | 95,818 | 103,914 | |||||
Pro Forma Reconciliation: | |||||||
Net Income - GAAP | $112,322 | $168,881 | |||||
Share-based compensation expense | 3,281 | 5,182 | |||||
Impact of the termination of the collaboration agreements with Cephalon, Inc. for VIVITROL | (120,582) | - | |||||
Gain on sale of investment in Reliant Pharmaceuticals, Inc. (net of income taxes) | - | (171,294) | |||||
Net increase in the fair value of warrants | - | 2 | |||||
Net (Loss) Income - Pro Forma | ($4,979) | $2,771 | |||||
Pro Forma (Loss) Earnings per Common Share: | |||||||
Basic | ($0.05) | $0.03 | |||||
Diluted | ($0.05) | $0.03 | |||||
Condensed Consolidated Balance Sheets | December 31, | March 31, | |||||
(In thousands) | 2008 | 2008 | |||||
Cash, cash equivalents and total investments | $423,593 | $460,361 | |||||
Receivables | 26,713 | 47,249 | |||||
Inventory | 21,113 | 18,884 | |||||
Prepaid expenses and other current assets | 15,448 | 5,720 | |||||
Property, plant and equipment, net | 107,299 | 112,539 | |||||
Other assets | 3,029 | 11,558 | |||||
Total Assets | $597,195 | $656,311 | |||||
Unearned milestone revenue - current portion | - | $5,927 | |||||
Non-recourse RISPERDAL CONSTA secured 7% notes - current portion | 23,750 | - | |||||
Other current liabilities | 42,015 | 36,093 | |||||
Non-recourse RISPERDAL CONSTA secured 7% notes - long-term portion | 69,613 | 160,324 | |||||
Unearned milestone revenue - long-term portion | - | 111,730 | |||||
Deferred revenue - long-term portion | 5,369 | 27,837 | |||||
Other long-term liabilities | 7,272 | 9,086 | |||||
Total shareholders' equity | 449,176 | 305,314 | |||||
Total Liabilities and Shareholders' Equity | $597,195 | $656,311 |
This selected financial information should be read in conjunction with
the consolidated financial statements and notes thereto included in the
company's Annual Report on Form 10-K for the year ended
VIVITROL Selected Financial Information |
Three Months | Three Months | |||||
Ended | Ended | ||||||
(Unaudited, in thousands) | December 31, | December 31, | |||||
2008 | 2007 | ||||||
VIVITROL Income Statement (1) | |||||||
Alkermes' expenses within the collaboration | $ 2,653 | $ 3,815 | |||||
Cephalon's net losses | 1,257 | 3,105 | |||||
Collaboration net losses | 3,910 | 6,920 | |||||
Alkermes' net losses outside the collaboration (month of December 2008) | 2,316 | - | |||||
VIVITROL net losses | $ 6,226 | $ 6,920 | |||||
Net Collaborative Profit | |||||||
Milestone revenue recognized with respect to the license (2) | $ 875 | $ 1,312 | |||||
Net flow of funds from Cephalon (3) | 737 | 3,815 | |||||
Remaining milestone revenue and deferred revenue recognized upon termination of collaboration (4) | 120,652 | - | |||||
Milestone revenue recognized to offset Cephalon's prepaid share of the net product losses (5) | 1,158 | - | |||||
Net collaborative profit | $ 123,422 | $ 5,127 | |||||
Notes | |||||||
(1) | The collaboration agreements with Cephalon, Inc. ("Cephalon") with respect to VIVITROL terminated effective December 1, 2008. The results provided above, reflect two months (October and November) of collaboration activity and one month (December) during which Alkermes was solely responsible for VIVITROL. | ||||||
(2) | Milestone revenue related to the license commenced upon approval of VIVITROL, by the FDA, on April 13, 2006 and was being recognized on a straight line basis over 10 years, at the rate of approximately $1.3 million per quarter. The recognition of this milestone revenue ceased on December 1, 2008. | ||||||
(3) |
Alkermes was responsible for net losses up to $124.6 million and reimbursed Cephalon for their net losses during this period. Once the $124.6 million was reached in April 2007, Cephalon reimbursed Alkermes for its VIVITROL expenses through December 31, 2007. Between January 1, 2008 and December 1, 2008, the two companies shared net losses on the product. |
||||||
(4) |
Upon termination of the collaboration agreements, Alkermes recognized the remaining unearned milestone revenue ($113.8 million) and deferred revenue ($6.9 million), received from Cephalon during the collaboration. The deferred revenue was net of $16.0 million that Alkermes paid to Cephalon upon termination, for title to two partially completed VIVITROL manufacturing lines. |
||||||
(5) | Upon termination of the collaboration agreements, Cephalon paid Alkermes $11.0 million to cover Cephalon's share of the estimated net losses over the ensuing 12 months. This revenue was deferred and is being recognized using a proportional performance methodology based on net product losses. | ||||||
Upon termination of the collaboration agreements, Alkermes reversed $0.8 million of manufacturing revenue and $0.7 million of associated cost of goods sold, related to VIVITROL inventory that had previously been sold to Cephalon under the collaboration agreements, and which Alkermes will now be selling in the end-market. These transactions were reported through the Alkermes income statement and do not impact the numbers provided above. | |||||||
Source:
Alkermes, Inc.
For Investors:
Rebecca Peterson, 617-583-6378
or
For
Media:
Jennifer Snyder, 617-583-6166