SEC Filing | Alkermes plc

View:

Download DOC

Download PDF

Download XLS

Download XBRL

alks-10q_20200630.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35299

ALKERMES PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)


Ireland		98-1007018
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Connaught House

1 Burlington Road

Dublin 4, Ireland, D04 C5Y6

(Address of principal executive offices)

+ 353-1-772-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, $0.01 par value		ALKS		Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The number of the registrant’s ordinary shares, $0.01 par value, outstanding as of July 24, 2020 was 159,043,691 shares.

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020


		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets — June 30, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three and Six Months Ended June 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2020 and 2019	7
	Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Six Months Ended June 30, 2020 and 2019	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

Cautionary Note Concerning Forward-Looking Statements

This document contains and incorporates by reference “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, these statements can be identified by the use of forward‑looking terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “continue,” “believe,” “plan,” “estimate,” “intend,” or other similar words. These statements discuss future expectations and contain projections of results of operations or of financial condition, or state trends and known uncertainties or other forward‑looking information. Forward-looking statements in this Quarterly Report on Form 10-Q (this “Form 10-Q”) include, without limitation, statements regarding:

•

our expectations regarding our financial performance, including revenues, expenses, liquidity, capital expenditures and income taxes;

•

our expectations regarding our products, including those expectations related to product development, regulatory filings, regulatory approvals and regulatory timelines, therapeutic and commercial scope and potential, and the costs and expenses related to such activities;

•

our expectations regarding the initiation, timing and results of clinical trials of our products;

•

our expectations regarding the competitive, payer and legal landscape, and changes therein, related to our products, including competition from generic forms of our products or competitive products and competitive development programs, barriers to access or coverage of our products and changes in reimbursement of our products, and legal measures (legislation, regulations or other measures) that may limit pricing and reimbursement of, and access to, our products;

•

our expectations regarding the financial impact of currency exchange rate fluctuations and valuations;

•

our expectations regarding future amortization of intangible assets;

•

our expectations regarding our collaborations, licensing arrangements and other significant agreements with third parties relating to our products, including our development programs;

•

our expectations regarding the impact of new legislation, rules, regulations and the adoption of new accounting pronouncements;

•

our expectations regarding near‑term changes in the nature of our market risk exposures or in management’s objectives and strategies with respect to managing such exposures;

•

our expectations regarding our ability to comply with restrictive covenants of our indebtedness and our ability to fund our debt service obligations;

•

our expectations regarding future capital requirements and capital expenditures and our ability to finance our operations and capital requirements;

•

our expectations regarding the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our products and intellectual property (“IP”), including our patents;

•

our expectations regarding the impact of the novel coronavirus (“COVID-19”) on our business and operations; and

•

other factors discussed elsewhere in this Form 10-Q.

Actual results might differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are subject to risks, assumptions and uncertainties. In light of these risks, assumptions and uncertainties, the forward-looking events discussed in this Form 10-Q might not occur. You are cautioned not to place undue reliance on the forward-looking statements in this Form 10-Q, which speak only as of the date of this Form 10-Q. All subsequent written and oral forward-looking statements concerning the matters addressed in this Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements

contained or referred to in this section. Except as required by applicable law or regulation, we do not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For more information regarding the risks, assumptions and uncertainties of our business, see “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) and “Part II, Item 1A—Risk Factors” in this Form 10-Q.

This Form 10-Q may include data that we obtained from industry publications and third-party research, surveys and studies. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. This Form 10-Q also may include data based on our own internal estimates and research. Our internal estimates and research have not been verified by any independent source and, while we believe the industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data. Such third-party data and our internal estimates and research are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Part I, Item 1A—Risk Factors” in our Annual Report and “Part II, Item 1A—Risk Factors” in this Form 10-Q. These and other factors could cause our results to differ materially from those expressed in this Form 10-Q.

Note Regarding Company and Product References

Alkermes plc (as used in this report, together with our subsidiaries, “Alkermes,” the “Company,” “us,” “we” and “our”) is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to research, develop and commercialize, both with partners and on its own, pharmaceutical products that are designed to address unmet medical needs of patients in major therapeutic areas. We have a diversified portfolio of marketed products focused on central nervous system (“CNS”) disorders such as addiction and schizophrenia and a pipeline of product candidates in the fields of neuroscience and oncology. Except as otherwise suggested by the context, (a) references to “products” or “our products” in this Form 10-Q include our marketed products, marketed products using our proprietary technologies, our product candidates and product candidates using our proprietary technologies, (b) references to the “biopharmaceutical industry” in this Form 10-Q are intended to include reference to the “biotechnology industry” and/or the “pharmaceutical industry” and (c) references to “licensees” in this Form 10-Q are used interchangeably with references to “partners.”

Note Regarding Trademarks

We are the owner of various United States (“U.S.”) federal trademark registrations (“^®”) and other trademarks (“^TM”), including ALKERMES^®, ARISTADA^®, ARISTADA INITIO^®, LinkeRx^®, NanoCrystal^® and VIVITROL^®.

The following are trademarks of the respective companies listed: ANJESO^TM—Baudax Bio, Inc.; INVEGA SUSTENNA^®, INVEGA TRINZA^®, TREVICTA^®, XEPLION^®, and RISPERDAL CONSTA^®—Johnson & Johnson (or its affiliates); VUMERITY^®—Biogen MA Inc. (together with its affiliates, “Biogen”); and ZYPREXA^®—Eli Lilly and Company. Other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q are referred to without the ^® and ^TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30, 2020	December 31, 2019
	(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$189,002	$203,771
Investments—short-term	343,561	331,208
Receivables, net	237,393	257,086
Contract assets	9,240	8,386
Inventory	116,458	101,803
Prepaid expenses and other current assets	51,705	59,716
Total current assets	947,359	961,970
PROPERTY, PLANT AND EQUIPMENT, NET	361,807	362,168
INTANGIBLE ASSETS, NET	131,025	150,643
RIGHT-OF-USE ASSETS	111,338	12,379
GOODWILL	92,873	92,873
DEFERRED TAX ASSETS	88,453	96,558
INVESTMENTS—LONG-TERM	7,033	79,391
CONTINGENT CONSIDERATION	45,063	32,400
OTHER ASSETS	17,386	17,021
TOTAL ASSETS	$1,802,337	$1,805,403
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$295,688	$373,037
Operating lease liabilities—short-term	15,294	8,466
Contract liabilities—short-term	7,589	6,766
Long-term debt—short-term	2,843	2,843
Total current liabilities	321,414	391,112
LONG-TERM DEBT	273,207	274,295
OPERATING LEASE LIABILITIES—LONG-TERM	99,438	5,342
CONTRACT LIABILITIES—LONG-TERM	18,881	22,068
OTHER LONG-TERM LIABILITIES	27,551	27,144
Total liabilities	740,491	719,961
COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
SHAREHOLDERS’ EQUITY:
Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at June 30, 2020 and December 31, 2019, respectively	—	—
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 162,119,961 and 160,489,888 shares issued; 159,028,355 and 157,779,002 shares outstanding at June 30, 2020 and December 31, 2019, respectively	1,618	1,602
Treasury shares, at cost (3,091,606 and 2,710,886 shares at June 30, 2020 and December 31, 2019, respectively)	(125,792)	(118,386)
Additional paid-in capital	2,636,194	2,586,030
Accumulated other comprehensive loss	(101)	(1,816)
Accumulated deficit	(1,450,073)	(1,381,988)
Total shareholders’ equity	1,061,846	1,085,442
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$1,802,337	$1,805,403

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
	(In thousands, except per share amounts)
REVENUES:
Product sales, net	$	130,415		$	136,635		$	260,141		$	236,116
Manufacturing and royalty revenues		116,505			127,897			232,756			236,812
Research and development revenue		609			14,340			852			29,046
License revenue		—			1,000			—			1,000
Total revenues		247,529			279,872			493,749			502,974
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)		45,053			46,223			92,264			91,584
Research and development		94,222			104,435			187,501			207,005
Selling, general and administrative		132,025			155,075			265,397			296,295
Amortization of acquired intangible assets		9,890			10,062			19,618			20,014
Total expenses		281,190			315,795			564,780			614,898
OPERATING LOSS		(33,661	)		(35,923	)		(71,031	)		(111,924	)
OTHER INCOME (EXPENSE), NET:
Interest income		1,788			3,706			4,548			7,276
Interest expense		(2,122	)		(3,520	)		(4,979	)		(7,020	)
Change in the fair value of contingent consideration		5,900			(6,500	)		12,700			(29,100	)
Other income, net		2,337			1,851			1,679			130
Total other income (expense), net		7,903			(4,463	)		13,948			(28,714	)
LOSS BEFORE INCOME TAXES		(25,758	)		(40,386	)		(57,083	)		(140,638	)
INCOME TAX PROVISION (BENEFIT)		3,673			1,604			11,002			(2,250	)
NET LOSS	$	(29,431	)	$	(41,990	)	$	(68,085	)	$	(138,388	)
LOSS PER ORDINARY SHARE:
Basic and diluted	$	(0.19	)	$	(0.27	)	$	(0.43	)	$	(0.88	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic and diluted		158,895			156,991			158,495			156,665
COMPREHENSIVE LOSS:
Net loss	$	(29,431	)	$	(41,990	)	$	(68,085	)	$	(138,388	)
Unrealized gain, net of a tax provision of $409, $265, $496 and $494, respectively		1,398			896			1,715			1,666
COMPREHENSIVE LOSS	$	(28,033	)	$	(41,094	)	$	(66,370	)	$	(136,722	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended
	June 30,
	2020			2019
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(68,085	)	$	(138,388	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		40,946			39,556
Share-based compensation expense		42,659			52,861
Deferred income taxes		7,665			(2,401	)
Change in the fair value of contingent consideration		(12,700	)		29,100
Other non-cash charges		690			675
Changes in assets and liabilities:
Receivables		19,731			30,996
Contract assets		(854	)		(4,460	)
Inventory		(13,782	)		(3,928	)
Prepaid expenses and other assets		7,645			737
Right-of-use assets		8,594			4,229
Accounts payable and accrued expenses		(68,260	)		(9,918	)
Contract liabilities		(2,364	)		1,030
Operating lease liabilities		(6,940	)		(4,593	)
Other long-term liabilities		351			3,539
Cash flows used in operating activities		(44,704	)		(965	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment		(30,372	)		(39,542	)
Proceeds from the sale of equipment		5			291
Proceeds from contingent consideration		—			10,000
Purchases of investments		(85,649	)		(121,809	)
Sales and maturities of investments		147,859			79,104
Cash flows provided by (used in) investing activities		31,843			(71,956	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares under share-based compensation arrangements		6,919			12,608
Employee taxes paid related to net share settlement of equity awards		(7,406	)		(9,074	)
Principal payments of long-term debt		(1,421	)		(1,421	)
Cash flows (used in) provided by financing activities		(1,908	)		2,113
NET DECREASE IN CASH AND CASH EQUIVALENTS		(14,769	)		(70,808	)
CASH AND CASH EQUIVALENTS—Beginning of period		203,771			266,762
CASH AND CASH EQUIVALENTS—End of period	$	189,002		$	195,954
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses	$	4,431		$	2,994

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)

								Accumulated
					Additional			Other
	Ordinary Shares				Paid-In			Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Capital			Loss			Deficit			Shares			Amount			Total
	(In thousands, except share data)
BALANCE — December 31, 2019		160,489,888		1,602		2,586,030			(1,816	)		(1,381,988	)		(2,710,886	)		(118,386	)		1,085,442
Issuance of ordinary shares under employee stock plans		258,137		3		3,068			—			—			—			—			3,071
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		1,020,510		10		(10	)		—			—			(372,846	)		(7,283	)		(7,283	)
Share-based compensation expense		—		—		20,125			—			—			—			—			20,125
Unrealized gain on marketable securities, net of tax provision of $87		—		—		—			317			—			—			—			317
Net loss		—		—		—			—			(38,654	)		—			—			(38,654	)
BALANCE — March 31, 2020		161,768,535	$	1,615	$	2,609,213		$	(1,499	)	$	(1,420,642	)		(3,083,732	)	$	(125,669	)	$	1,063,018
Issuance of ordinary shares under employee stock plans		327,251		3		3,845			—			—			—			—			3,848
Receipt of Alkermes' shares for the purchase of stock options or to satisfy minimum tax withholding obligations related to share-based awards		24,175		—		—			—			—			(7,874	)		(123	)		(123	)
Share-based compensation expense		—		—		23,136			—			—			—			—			23,136
Unrealized gain on marketable securities, net of tax provision of $409		—		—		—			1,398			—			—			—			1,398
Net loss		—		—		—			—			(29,431	)		—			—			(29,431	)
BALANCE — June 30, 2020		162,119,961	$	1,618	$	2,636,194		$	(101	)	$	(1,450,073	)		(3,091,606	)	$	(125,792	)	$	1,061,846

Accumulated

Additional

Other

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Treasury Stock

Amount

Capital

Loss

Deficit

Amount

Total

(In thousands, except share data)

BALANCE — December 31, 2018

158,180,833

1,579

2,467,323

(3,280

)