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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 March 31, 2021

 

OR

 

 

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 4Ireland, 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 April 23, 2021 was 160,451,949 shares.

 

 

 

 

 

 


 

 

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

 

 

 

 

 

Page No.

PART I - FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (unaudited):

 

 

Condensed Consolidated Balance Sheets — March 31, 2021 and December 31, 2020

6

 

Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three Months Ended March 31, 2021 and 2020

7

 

Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2021 and 2020

8

 

Condensed Consolidated Statements of Shareholders’ Equity — For the Three Months Ended March 31, 2021 and 2020

9

 

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

37

Item 5.

Other Information

37

Item 6.

Exhibits

38

Signatures

39

 

2


 

 

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

 

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

 

our expectations regarding the competitive, payer, legislative, regulatory and policy 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 legislation, regulations, executive orders, guidance 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 collaborations, licensing arrangements and other significant agreements with third parties relating to our products and 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 ongoing novel coronavirus (“COVID-19”) pandemic on our business and operations; and

 

other expectations discussed elsewhere in this Form 10-Q.

Actual results might differ materially from those expressed or implied by these forward-looking statements because these forward-looking statements are subject to risks, assumptions and uncertainties. These risks, assumptions and uncertainties include, among others:

 

our business, financial condition and results of operations have been, and may continue to be, adversely affected by the COVID-19 pandemic or other similar outbreaks of contagious diseases;

 

we receive substantial revenue from our key proprietary products and our success depends on our ability to maintain or increase sales of such products;

 

we rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue and, if our licensees are not effective, our revenues could be materially adversely affected;

3


 

 

we face competition in the biopharmaceutical industry;

 

our revenues may decrease or grow at a slower than expected rate due to many factors;

 

revenues generated by sales of our products depend on the availability from third-party payers of reimbursement for our products and the extent of cost-sharing arrangements for patients (e.g., patient co-payment, co-insurance, deductible obligations) and cost-control measures imposed, and any reductions in payment rate or reimbursement or increases in our financial obligation to payers could result in decreased sales of our products and/or decreased revenues;

 

clinical trials for our product candidates are expensive, may take several years to complete, and their outcomes are uncertain;

 

preliminary, topline or interim data from our clinical trials that we may announce, publish or report from time to time may change as more patient data become available or based on subsequent audit and verification procedures, and may not be indicative of final data from such trials;

 

the U.S. Food and Drug Administration (the “FDA”) or other regulatory agencies may not agree with our regulatory approval strategies or components of our filings for our products, including our clinical trial designs, conduct and methodologies and the adequacy of the data and other information included in our submissions, and may not approve our products or may delay approval;

 

the FDA or other regulatory agencies may impose limitations or post approval requirements on approvals for our products;

 

we are subject to risks related to the manufacture of our products;

 

we rely on third parties to provide services in connection with the manufacture and distribution of the products we manufacture;

 

patent and other IP protection for our products is key to our business and our competitive position but is uncertain;

 

uncertainty over IP in the biopharmaceutical industry has been the source of litigation, which is inherently costly and unpredictable, could significantly delay or prevent approval or negatively impact commercialization of our products, and could adversely affect our business;

 

we or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers;

 

litigation or arbitration filed against Alkermes, including securities litigation, or regulatory actions (such as citizens petitions) filed against regulatory agencies in respect of our products, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our products, or otherwise negatively impact our business;

 

if there are changes in, or we fail to comply with, the extensive legal and regulatory requirements affecting the healthcare industry, we could face costs, penalties and a loss of business;

 

we may not become profitable on a sustained basis;

 

our level of indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business;

 

the business combination of Alkermes, Inc. and the drug technology business of Elan Corporation, plc may limit our ability to use our tax attributes to offset taxable income, if any, generated from such business combination;

 

the market price for our ordinary shares has been volatile and may continue to be volatile in the future, and could decline significantly;

 

our business could be negatively affected as a result of the actions of activist shareholders; and

 

security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

4


 

For additional discussion regarding these risks, assumptions and uncertainties, and other material risks to our business, see “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”).  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.

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 may also 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. 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 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 portfolio of proprietary commercial products focused on addiction and schizophrenia, and a pipeline of product candidates in development for schizophrenia, bipolar I disorder, neurodegenerative disorders and cancer. Use of terms such as “us,” “we,” “our,” “Alkermes” or the “Company” in this Form 10-Q is meant to refer to Alkermes plc and its consolidated subsidiaries. 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®, LYBALVITM, NanoCrystal® and VIVITROL®.

The following are trademarks of the respective companies listed: AMPYRA® and FAMPYRA®—Acorda Therapeutics, Inc. (“Acorda”); ANJESOTM—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.

5


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

March 31, 2021

 

December 31, 2020

 

 

(In thousands, except share and per share amounts)

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$205,028

 

$272,961

Investments—short-term

 

335,967

 

362,066

Receivables, net

 

243,514

 

275,143

Contract assets

 

9,279

 

14,401

Inventory

 

134,178

 

125,738

Prepaid expenses and other current assets

 

78,043

 

60,662

Total current assets

 

1,006,009

 

1,110,971

PROPERTY, PLANT AND EQUIPMENT, NET

 

346,327

 

350,003

RIGHT-OF-USE ASSETS

 

127,430

 

131,718

INTANGIBLE ASSETS, NET

 

101,785

 

111,191

GOODWILL

 

92,873

 

92,873

DEFERRED TAX ASSETS

 

81,124

 

86,228

INVESTMENTS—LONG-TERM

 

86,448

 

24,780

CONTINGENT CONSIDERATION

 

19,412

 

24,651

OTHER ASSETS

 

16,813

 

17,315

TOTAL ASSETS

 

$1,878,221

 

$1,949,730

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable and accrued expenses

 

$339,088

 

$412,171

Operating lease liabilities—short-term

 

15,833

 

15,732

Contract liabilities—short-term

 

7,921

 

7,512

Current portion of long-term debt

 

3,000

 

2,843

Total current liabilities

 

365,842

 

438,258

LONG-TERM DEBT

 

294,702

 

272,118

OPERATING LEASE LIABILITIES—LONG-TERM

 

115,504

 

119,464

CONTRACT LIABILITIES—LONG-TERM

 

14,745

 

16,397

OTHER LONG-TERM LIABILITIES

 

36,273

 

36,511

Total liabilities

 

827,066

 

882,748

COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 163,835,905 and 162,269,220 shares issued; 160,198,009 and 159,161,141 shares outstanding at March 31, 2021 and December 31, 2020, respectively

 

1,638

 

1,620

Treasury shares, at cost (3,637,896 and 3,108,079 shares at March 31, 2021 and December 31, 2020, respectively)

 

(136,500)

 

(126,087)

Additional paid-in capital

 

2,703,234

 

2,685,647

Accumulated other comprehensive loss

 

(1,950)

 

(1,349)

Accumulated deficit

 

(1,515,267)

 

(1,492,849)

Total shareholders’ equity

 

1,051,155

 

1,066,982

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$1,878,221

 

$1,949,730

 

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

6


 

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands, except per share amounts)

 

REVENUES:

 

 

 

 

 

 

 

 

Product sales, net

 

$

129,963

 

 

$

129,726

 

Manufacturing and royalty revenues

 

 

119,847

 

 

 

116,251

 

License revenue

 

 

1,500

 

 

 

 

Research and development revenue

 

 

120

 

 

 

243

 

Total revenues

 

 

251,430

 

 

 

246,220

 

EXPENSES:

 

 

 

 

 

 

 

 

Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)

 

 

41,020

 

 

 

47,211

 

Research and development

 

 

92,268

 

 

 

93,279

 

Selling, general and administrative

 

 

125,168

 

 

 

133,372

 

Amortization of acquired intangible assets

 

 

9,406

 

 

 

9,728

 

Total expenses

 

 

267,862

 

 

 

283,590

 

OPERATING LOSS

 

 

(16,432

)

 

 

(37,370

)

OTHER (EXPENSE) INCOME, NET:

 

 

 

 

 

 

 

 

Interest income

 

 

864

 

 

 

2,760

 

Interest expense

 

 

(3,970

)

 

 

(2,857

)

Change in the fair value of contingent consideration

 

 

1,278

 

 

 

6,800

 

Other expense, net

 

 

(393

)

 

 

(658

)

Total other (expense) income, net

 

 

(2,221

)

 

 

6,045

 

LOSS BEFORE INCOME TAXES

 

 

(18,653

)

 

 

(31,325

)

INCOME TAX PROVISION

 

 

3,765

 

 

 

7,329

 

NET LOSS

 

$

(22,418

)

 

$

(38,654

)

LOSS PER ORDINARY SHARE:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.14

)

 

$

(0.24

)

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

159,634

 

 

 

158,095

 

COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

 

Net loss

 

$

(22,418

)

 

$

(38,654

)

Holding (loss) gain, net of a tax (benefit) provision of $(174) and $87, respectively

 

 

(601

)

 

 

317

 

COMPREHENSIVE LOSS

 

$

(23,019

)

 

$

(38,337

)

 

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

7


 

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(22,418

)

 

$

(38,654

)

Adjustments to reconcile net loss to cash flows from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

19,643

 

 

 

20,608

 

Share-based compensation expense

 

 

15,451

 

 

 

19,813

 

Deferred income taxes

 

 

5,255

 

 

 

3,665

 

Change in the fair value of contingent consideration

 

 

(1,278

)

 

 

(6,800

)

Loss on debt extinguishment

 

 

171

 

 

 

 

Payment made for debt modification

 

 

(248

)

 

 

 

Other non-cash charges

 

 

195

 

 

 

283

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

31,648

 

 

 

10,370

 

Contract assets

 

 

5,122

 

 

 

(5,813

)

Inventory

 

 

(8,652

)

 

 

(6,842

)

Prepaid expenses and other assets

 

 

(16,807

)

 

 

13,615

 

Right-of-use assets

 

 

4,177

 

 

 

3,926

 

Accounts payable and accrued expenses

 

 

(71,949

)

 

 

(51,254

)

Contract liabilities

 

 

(1,243

)

 

 

(859

)

Operating lease liabilities

 

 

(3,996

)

 

 

(2,378

)

Other long-term liabilities

 

 

(217

)

 

 

48

 

Cash flows used in operating activities

 

 

(45,146

)

 

 

(40,272

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions of property, plant and equipment

 

 

(7,986

)

 

 

(19,799

)

Proceeds from the sale of equipment

 

 

176

 

 

 

3

 

Proceeds from contingent consideration

 

 

6,430

 

 

 

 

Purchases of investments

 

 

(122,545

)

 

 

(27,212

)

Sales and maturities of investments

 

 

86,193

 

 

 

64,500

 

Cash flows (used in) provided by investing activities

 

 

(37,732

)

 

 

17,492

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from the issuance of ordinary shares under share-based compensation arrangements

 

 

2,053

 

 

 

3,070

 

Employee taxes paid related to net share settlement of equity awards

 

 

(10,413

)

 

 

(7,283

)

Proceeds from the issuance of long-term debt

 

 

23,567

 

 

 

 

Payment made for debt extinguishment

 

 

(262

)

 

 

 

Principal payments of long-term debt

 

 

 

 

 

(711

)

Cash flows provided by (used in) financing activities

 

 

14,945

 

 

 

(4,924

)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(67,933

)

 

 

(27,704

)

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

272,961

 

 

 

203,771

 

CASH AND CASH EQUIVALENTS—End of period

 

$

205,028

 

 

$

176,067

 

SUPPLEMENTAL CASH FLOW DISCLOSURE:

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchased capital expenditures included in accounts payable and accrued expenses

 

$

995

 

 

$

5,242

 

 

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

 

 

8


 

 

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, 2020

 

 

162,269,220

 

 

$

1,620

 

 

$

2,685,647

 

 

$

(1,349

)

 

$

(1,492,849

)

 

 

(3,108,079

)

 

$

(126,087

)

 

$

1,066,982

 

Issuance of ordinary shares under employee stock plans

 

 

134,163

 

 

 

4

 

 

 

2,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,053

 

Receipt of Alkermes’ shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards

 

 

1,432,522

 

 

 

14

 

 

 

(14

)

 

 

 

 

 

 

 

 

(529,817

)

 

 

(10,413

)

 

 

(10,413

)

Share-based compensation

 

 

 

 

 

 

 

 

15,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,552

 

Unrealized loss on marketable securities, net of tax benefit of $174

 

 

 

 

 

 

 

 

 

 

 

(601

)

 

 

 

 

 

 

 

 

 

 

 

(601

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,418

)

 

 

 

 

 

 

 

 

(22,418

)

BALANCE — March 31, 2021

 

 

163,835,905

 

 

$

1,638

 

 

$

2,703,234

 

 

$

(1,950

)

 

$

(1,515,267

)

 

 

(3,637,896

)

 

$

(136,500

)

 

$

1,051,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

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

 

 

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

 

 

 

9


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited)

 

 

1. THE COMPANY

Alkermes plc 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. Alkermes has a portfolio of proprietary commercial products focused on addiction and schizophrenia, and a pipeline of product candidates in development for schizophrenia, bipolar I disorder, neurodegenerative disorders and cancer. Headquartered in Dublin, Ireland, the Company has a research and development (“R&D”) center in Waltham, Massachusetts; an R&D and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company for the three months ended March 31, 2021 and 2020 are unaudited and have been prepared on a basis substantially consistent with the audited financial statements for the year ended December 31, 2020. The year-end condensed consolidated balance sheet data, which is presented for comparative purposes, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the U.S. (commonly referred to as “GAAP”). In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, that are necessary to state fairly the results of operations for the reported periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company, which are contained in the Annual Report. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for any full fiscal year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Alkermes plc and its wholly-owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies, in the “Notes to Consolidated Financial Statements” accompanying the Annual Report. Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires that management make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, judgments and methodologies, including those related to revenue from contracts with its customers and related allowances, impairment and amortization of intangibles and long-lived assets, share-based compensation, income taxes including the valuation allowance for deferred tax assets, valuation of investments, contingent consideration and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Segment Information

The Company operates as one business segment, which is the business of developing, manufacturing and commercializing medicines. The Company’s chief decision maker, the Chief Executive Officer and Chairman of the Company’s board of directors, reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.

10


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

Risks and Uncertainties

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns and/or shutdowns in affected areas. Ireland, all U.S. states, and many local jurisdictions and countries around the world have, at times during the pandemic, issued “shelter-in-place” orders, quarantines, executive orders and similar government orders, restrictions, and recommendations for their residents to control the spread of COVID-19. Such orders, restrictions and/or recommendations, and/or the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses, including healthcare systems that serve people living with opioid dependence, alcohol dependence and schizophrenia, work stoppages, slowdowns and/or delays, work-from-home policies and travel restrictions, among other effects.

The Company continues to closely monitor and respond to the ongoing impact of COVID-19 on its employees, communities and business operations. Due to numerous uncertainties surrounding the ongoing COVID-19 pandemic, the actual impact of the pandemic on the Company’s financial condition and operating results may differ from current projections. These uncertainties include, among others, the ultimate severity and duration of the pandemic; governmental, business or other actions that have been, are being or will be, taken in response to the pandemic, including restrictions on travel and mobility, business closures and operating restrictions, and imposition of social distancing measures; impacts of the pandemic on the Company’s employees, the vendors or distribution channels in the Company’s supply chain and on the Company’s ability to continue to manufacture its products; impacts of the pandemic on the conduct of the Company’s clinical trials, including with respect to enrollment rates, availability of investigators and clinical trial sites, and monitoring of data; impacts of the pandemic on healthcare systems that serve people living with opioid dependence, alcohol dependence and schizophrenia; impacts of the pandemic on the regulatory agencies with which the Company interacts in the development, review, approval and commercialization of its medicines; impacts of the pandemic on reimbursement for the Company’s products, including the Company’s Medicaid rebate liability, and for services related to the use of its products; and impacts of the pandemic on the Irish, U.S. and global economies more broadly.

The Company relies upon third parties for many aspects of its business, including the provision of goods and services related to the manufacture of its clinical products and its and its partners’ marketed products, the conduct of its clinical trials, and the sale of its proprietary marketed products and the marketed products of its licensees from which the Company receives manufacturing and royalty revenue. Any prolonged material disruption to the third parties on which the Company relies could negatively impact the Company’s ability to conduct business in the manner and on the timelines presently planned, which could have a material adverse impact on the Company’s business, results of operations and financial condition.

The marketed products from which the Company derives revenue, including manufacturing and royalty revenue, are primarily injectable medications administered by healthcare professionals. Given developments that have transpired to date, and may continue to transpire, in response to the pandemic, including business closures, social distancing requirements and other restrictive measures, commercial sales of these marketed products have been adversely impacted to varying degrees and the Company expects commercial sales of these marketed products to continue to be adversely impacted while the pandemic persists.

During the three months ended March 31, 2021, the Company continued to take actions to support uninterrupted access to its proprietary marketed products. However, the Company currently expects commercial sales of its marketed products, particularly VIVITROL, to continue to be impacted by the COVID-19 pandemic over the next few months. These items are discussed in greater detail in the “Results of Operations” section in “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.

The Company continues to operate its manufacturing facilities and supply its medicines. While the Company continues to conduct R&D activities, including its ongoing clinical trials, the COVID-19 pandemic has impacted, and may continue to impact, the timelines of certain of its early-stage discovery efforts and clinical trials. The Company is working with its internal teams, its clinical investigators, R&D vendors and critical supply chain vendors to continually assess, and mitigate, any potential adverse impacts of COVID-19 on its manufacturing operations and R&D activities.

11


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) or other standard-setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This ASU applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This ASU became effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently assessing the impact that this ASU may have on its consolidated financial statements.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Under FASB Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five-step model prescribed under Topic 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract(s); and (v) recognize revenues when (or as) the Company satisfies the performance obligation(s).

 

Product Sales, Net

The Company’s product sales, net consist of sales of VIVITROL and ARISTADA (together with ARISTADA INITIO) in the U.S., primarily to wholesalers, specialty distributors and specialty pharmacies. Product sales, net are recognized when the customer obtains control of the product, which is when the product has been received by the customer.

During the three months ended March 31, 2021 and 2020, the Company recorded product sales, net, as follows:

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2021

 

 

2020

 

VIVITROL

 

$

74,534

 

 

$

78,769

 

ARISTADA and ARISTADA INITIO

 

 

55,429

 

 

 

50,957

 

Total product sales, net

 

$

129,963

 

 

$

129,726

 

 

Manufacturing and Royalty Revenues

During the three months ended March 31, 2021 and 2020, the Company recorded manufacturing and royalty revenues as follows:

 

 

 

Three Months Ended March 31, 2021

 

(In thousands)

 

Manufacturing Revenue

 

 

Royalty Revenue

 

 

Total

 

INVEGA SUSTENNA/XEPLION & INVEGA TRINZA/TREVICTA

 

$

 

 

$

61,570

 

 

$

61,570

 

RISPERDAL CONSTA

 

 

10,683

 

 

 

3,479

 

 

 

14,162

 

AMPYRA/FAMPYRA

 

 

8,078

 

 

 

6,594

 

 

 

14,672

 

VUMERITY

 

 

2,448

 

 

 

10,992

 

 

 

13,440

 

Other

 

 

3,876

 

 

 

12,127

 

 

 

16,003

 

 

 

$

25,085

 

 

$

94,762