SEC Filing | Alkermes plc

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alks-10q_20210930.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 September 30, 2021

☐

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 October 22, 2021 was 161,705,367 shares.

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021


		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets — September 30, 2021 and December 31, 2020	6
	Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three and Nine Months Ended September 30, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2021 and 2020	8
	Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Nine Months Ended September 30, 2021 and 2020	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

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 expectations related to product development; regulatory filings, approvals and timelines; therapeutic and commercial value, 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 development programs, barriers to access or coverage of our products and potential changes in reimbursement of our products, and legislation, regulations, executive orders, guidance or other measures that may impact 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 and 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 expenditures for our operations and our ability to finance such capital requirements and expenditures;

•

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 ongoing 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 successfully manufacture and commercialize 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;

•

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, or may delay approval of, our products;

•

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 goods and services in connection with the manufacture and distribution of the products we manufacture;

•

our success largely depends upon our ability to attract and retain key personnel;

•

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 us, 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 business losses;

•

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 could cause our business and reputation to suffer.

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, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 11, 2021, as amended by Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 29, 2021 (as so amended, our “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, schizophrenia and bipolar I disorder, and a pipeline of product candidates in development for 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 licensed products, 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^®, LYBALVI^®, NanoCrystal^® and VIVITROL^®.

The following are trademarks of the respective companies listed: AMPYRA^® and FAMPYRA^®—Acorda Therapeutics, Inc. (“Acorda”); ANJESO^®—Baudax Bio, Inc.; INVEGA SUSTENNA^®, INVEGA TRINZA^®, TREVICTA^®, XEPLION^®, and RISPERDAL CONSTA^®—Johnson & Johnson Corporation (or its affiliates); KEYTRUDA^®—Merck Sharp & Dohme Corp.; and VUMERITY^®—Biogen MA Inc. (together with its affiliates, “Biogen”). 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)

	September 30, 2021	December 31, 2020
	(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$310,444	$272,961
Receivables, net	289,160	275,143
Investments—short-term	249,856	362,066
Inventory	138,696	125,738
Contract assets	3,509	14,401
Prepaid expenses and other current assets	61,341	60,662
Total current assets	1,053,006	1,110,971
PROPERTY, PLANT AND EQUIPMENT, NET	340,594	350,003
INVESTMENTS—LONG-TERM	187,855	24,780
RIGHT-OF-USE ASSETS	118,764	131,718
INTANGIBLE ASSETS, NET	83,659	111,191
GOODWILL	92,873	92,873
DEFERRED TAX ASSETS	84,498	86,228
CONTINGENT CONSIDERATION	17,411	24,651
OTHER ASSETS	16,772	17,315
TOTAL ASSETS	$1,995,432	$1,949,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$428,032	$412,171
Operating lease liabilities—short-term	15,548	15,732
Contract liabilities—short-term	6,404	7,512
Current portion of long-term debt	3,000	2,843
Total current liabilities	452,984	438,258
LONG-TERM DEBT	293,437	272,118
OPERATING LEASE LIABILITIES—LONG-TERM	107,860	119,464
CONTRACT LIABILITIES—LONG-TERM	12,864	16,397
OTHER LONG-TERM LIABILITIES	32,119	36,511
Total liabilities	899,264	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 September 30, 2021 and December 31, 2020, respectively	—	—
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 165,439,188 and 162,269,220 shares issued; 161,686,223 and 159,161,141 shares outstanding at September 30, 2021 and December 31, 2020, respectively	1,654	1,620
Treasury shares, at cost (3,752,965 and 3,108,079 shares at September 30, 2021 and December 31, 2020, respectively)	(139,720)	(126,087)
Additional paid-in capital	2,778,596	2,685,647
Accumulated other comprehensive loss	(2,471)	(1,349)
Accumulated deficit	(1,541,891)	(1,492,849)
Total shareholders’ equity	1,096,168	1,066,982
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$1,995,432	$1,949,730

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						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(In thousands, except per share amounts)
REVENUES:
Product sales, net	$	157,737		$	142,658		$	448,508		$	402,799
Manufacturing and royalty revenues		136,294			120,351			398,435			353,107
License revenue		—			1,050			1,500			1,050
Research and development revenue		110			953			845			1,805
Total revenues		294,141			265,012			849,288			758,761
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)		49,561			43,129			143,705			135,394
Research and development		118,411			94,980			308,152			282,481
Selling, general and administrative		136,213			127,653			400,569			393,049
Amortization of acquired intangible assets		9,615			9,917			28,532			29,535
Total expenses		313,800			275,679			880,958			840,459
OPERATING LOSS		(19,659	)		(10,667	)		(31,670	)		(81,698	)
OTHER (EXPENSE) INCOME, NET:
Interest income		468			1,376			1,955			5,924
Interest expense		(2,437	)		(1,811	)		(8,814	)		(6,790	)
Change in the fair value of contingent consideration		(5,195	)		3,926			(677	)		16,626
Other income (expense), net		288			9,368			(327	)		11,047
Total other (expense) income, net		(6,876	)		12,859			(7,863	)		26,807
(LOSS) INCOME BEFORE INCOME TAXES		(26,535	)		2,192			(39,533	)		(54,891	)
INCOME TAX PROVISION		2,453			2,326			9,509			13,328
NET LOSS	$	(28,988	)	$	(134	)	$	(49,042	)	$	(68,219	)
LOSS PER ORDINARY SHARE:
Basic and diluted	$	(0.18	)	$	(0.00	)	$	(0.31	)	$	(0.43	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic and diluted		161,456			159,062			160,642			158,685
COMPREHENSIVE LOSS:
Net loss	$	(28,988	)	$	(134	)	$	(49,042	)	$	(68,219	)
Holding (loss) gain, net of a tax (benefit) provision of $(72), $(193), $(325) and $303, respectively		(249	)		(659	)		(1,122	)		1,056
COMPREHENSIVE LOSS	$	(29,237	)	$	(793	)	$	(50,164	)	$	(67,163	)

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)

	Nine Months Ended
	September 30,
	2021			2020
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(49,042	)	$	(68,219	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		57,510			61,525
Share-based compensation expense		68,603			65,279
Deferred income taxes		2,015			9,939
Change in the fair value of contingent consideration		677			(16,626	)
Loss on debt extinguishment		171			—
Other non-cash charges		1,803			2,105
Changes in assets and liabilities:
Receivables		(13,991	)		(8,551	)
Contract assets		10,892			(6,009	)
Inventory		(13,375	)		(20,748	)
Prepaid expenses and other assets		(1,507	)		5,597
Right-of-use assets		12,891			13,251
Accounts payable and accrued expenses		15,546			(6,222	)
Contract liabilities		(4,642	)		(3,045	)
Operating lease liabilities		(12,504	)		(11,910	)
Other long-term liabilities		(4,353	)		(867	)
Cash flows provided by operating activities		70,694			15,499
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment		(19,359	)		(36,780	)
Proceeds from the sale of equipment		277			61
Proceeds from contingent consideration		7,908			2,819
Return of Fountain Healthcare Partners II, L.P. investment		—			2,751
Payment made for licensed IP		(1,000	)		—
Purchases of investments		(294,370	)		(151,324	)
Sales and maturities of investments		241,082			206,089
Cash flows (used in) provided by investing activities		(65,462	)		23,616
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares under share-based compensation arrangements		24,810			7,719
Employee taxes paid related to net share settlement of equity awards		(13,633	)		(7,607	)
Proceeds from the issuance of long-term debt		23,567			—
Payment made for debt extinguishment		(993	)		—
Principal payments of long-term debt		(1,500	)		(2,132	)
Cash flows provided by (used in) financing activities		32,251			(2,020	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		37,483			37,095
CASH AND CASH EQUIVALENTS—Beginning of period		272,961			203,771
CASH AND CASH EQUIVALENTS—End of period	$	310,444		$	240,866
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses	$	2,698		$	2,169

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, 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
Issuance of ordinary shares under employee stock plans		1,035,941		11		18,434			—			—			—			—			18,445
Receipt of Alkermes' shares for the purchase of stock options or to satisfy minimum tax withholding obligations related to share-based awards		93,928		1		(1	)		—			—			(31,752	)		(707	)		(707	)
Share-based compensation		—		—		26,917			—			—			—			—			26,917
Unrealized loss on marketable securities, net of tax (benefit) of $(79)		—		—		—			(272	)		—			—			—