SEC Filing | Alkermes plc

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alks-10q_20220630.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, 2022

☐

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, a 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 22, 2022 was 164,254,275 shares.

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022


		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets — June 30, 2022 and December 31, 2021	5
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income — For the Three and Six Months Ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2022 and 2021	7
	Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Six Months Ended June 30, 2022 and 2021	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	37
Item 4.	Controls and Procedures	37

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
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”) may 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 our 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. In light of these risks, assumptions and uncertainties, the forward-looking expectations 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 information about 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, 2021, filed

with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 16, 2022, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 29, 2022 (our “Annual Report”).

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. While we believe that any industry publications and third-party research, surveys and studies from which data is included in this Form 10-Q are reliable, we have not independently verified any such data. 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 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 or implied 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 alcohol dependence, opioid dependence, 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 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: ANJESO^®—Baudax Bio, Inc.; BYANNLI^®, INVEGA^®, INVEGA HAFYERA^®, 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 may be 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, 2022	December 31, 2021
	(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$254,646	$337,544
Receivables, net	245,840	313,193
Investments—short-term	326,321	198,767
Inventory	155,608	150,335
Contract assets	16,486	13,363
Prepaid expenses and other current assets	47,090	48,967
Total current assets	1,045,991	1,062,169
PROPERTY, PLANT AND EQUIPMENT, NET	337,146	341,054
INVESTMENTS—LONG-TERM	179,010	229,430
RIGHT-OF-USE ASSETS	111,119	115,627
INTANGIBLE ASSETS, NET	56,011	74,043
GOODWILL	92,873	92,873
DEFERRED TAX ASSETS	123,702	81,833
OTHER ASSETS	11,565	27,455
TOTAL ASSETS	$1,957,417	$2,024,484
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$186,814	$208,491
Accrued sales discounts, allowances and reserves	228,973	237,216
Operating lease liabilities—short-term	15,944	16,240
Contract liabilities—short-term	3,787	6,339
Current portion of long-term debt	3,000	3,000
Total current liabilities	438,518	471,286
LONG-TERM DEBT	291,537	292,804
OPERATING LEASE LIABILITIES—LONG-TERM	99,832	104,162
OTHER LONG-TERM LIABILITIES	45,206	43,648
Total liabilities	875,093	911,900
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, 2022 and December 31, 2021, respectively	—	—
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 168,782,701 and 165,790,549 shares issued; 164,232,704 and 161,937,327 shares outstanding at June 30, 2022 and December 31, 2021, respectively	1,688	1,658
Treasury shares, at cost (4,549,997 and 3,853,222 shares at June 30, 2022 and December 31, 2021, respectively)	(160,241)	(142,658)
Additional paid-in capital	2,858,422	2,798,325
Accumulated other comprehensive loss	(10,488)	(3,723)
Accumulated deficit	(1,607,057)	(1,541,018)
Total shareholders’ equity	1,082,324	1,112,584
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$1,957,417	$2,024,484

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) INCOME

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(In thousands, except per share amounts)
REVENUES:
Product sales, net	$	190,787		$	160,808		$	362,055		$	290,771
Manufacturing and royalty revenues		85,326			142,294			190,496			262,141
License revenue		—			—			2,000			1,500
Research and development revenue		106			615			213			735
Total revenues		276,219			303,717			554,764			555,147
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)		58,360			53,124			113,519			94,144
Research and development		92,873			97,473			188,826			189,741
Selling, general and administrative		150,377			139,188			295,429			264,356
Amortization of acquired intangible assets		9,066			9,511			18,032			18,917
Total expenses		310,676			299,296			615,806			567,158
OPERATING (LOSS) INCOME		(34,457	)		4,421			(61,042	)		(12,011	)
OTHER (EXPENSE) INCOME, NET:
Interest income		896			623			1,469			1,487
Interest expense		(2,369	)		(2,407	)		(4,719	)		(6,377	)
Change in the fair value of contingent consideration		870			3,240			(18,197	)		4,518
Other income (expense), net		1,810			(222	)		4,241			(615	)
Total other (expense) income, net		1,207			1,234			(17,206	)		(987	)
(LOSS) EARNINGS BEFORE INCOME TAXES		(33,250	)		5,655			(78,248	)		(12,998	)
INCOME TAX (BENEFIT) PROVISION		(3,114	)		3,291			(12,209	)		7,056
NET (LOSS) INCOME	$	(30,136	)	$	2,364		$	(66,039	)	$	(20,054	)
(LOSS) EARNINGS PER ORDINARY SHARE:
Basic and diluted	$	(0.18	)	$	0.01		$	(0.40	)	$	(0.13	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic		163,839			160,817			163,165			160,229
Diluted		163,839			163,937			163,165			160,229
COMPREHENSIVE (LOSS) INCOME:
Net (loss) income	$	(30,136	)	$	2,364		$	(66,039	)	$	(20,054	)
Holding loss, net of a tax (benefit) provision of $326, $(79), $(1,055) and $(253), respectively		(2,254	)		(272	)		(6,765	)		(873	)
COMPREHENSIVE (LOSS) INCOME	$	(32,390	)	$	2,092		$	(72,804	)	$	(20,927	)

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,
	2022			2021
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(66,039	)	$	(20,054	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		38,588			38,119
Share-based compensation expense		41,720			43,003
Deferred income taxes		(40,815	)		10,806
Change in the fair value of contingent consideration		18,197			(4,518	)
Loss on debt extinguishment		—			171
Other non-cash charges		637			1,302
Changes in assets and liabilities:
Receivables		67,382			(22,194	)
Contract assets		(3,123	)		5,607
Inventory		(4,569	)		(11,232	)
Prepaid expenses and other assets		(1,986	)		2,029
Right-of-use assets		8,331			8,595
Accounts payable and accrued expenses		(29,045	)		(52,629	)
Contract liabilities		(4,071	)		(3,108	)
Operating lease liabilities		(8,911	)		(7,821	)
Other long-term liabilities		3,076			(159	)
Cash flows provided by (used in) operating activities		19,372			(12,083	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment		(17,753	)		(14,546	)
Proceeds from the sale of equipment		—			177
Proceeds from contingent consideration		1,043			7,889
Return of Fountain Healthcare Partners II, L.P. investment		485			—
Payment made for licensed Intellectual Property ("IP")		—			(1,000	)
Purchases of investments		(194,879	)		(201,774	)
Sales and maturities of investments		109,925			175,499
Cash flows used in investing activities		(101,179	)		(33,755	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares under share-based compensation arrangements		17,992			20,498
Employee taxes paid related to net share settlement of equity awards		(17,583	)		(11,120	)
Proceeds from the issuance of long-term debt		—			23,567
Payment made for debt extinguishment		—			(977	)
Principal payments of long-term debt		(1,500	)		(750	)
Cash flows (used in) provided by financing activities		(1,091	)		31,218
NET DECREASE IN CASH AND CASH EQUIVALENTS		(82,898	)		(14,620	)
CASH AND CASH EQUIVALENTS—Beginning of period		337,544			272,961
CASH AND CASH EQUIVALENTS—End of period	$	254,646		$	258,341
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses	$	4,863		$	1,023

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, 2021		165,790,549	$	1,658	$	2,798,325	$	(3,723	)	$	(1,541,018	)		(3,853,222	)	$	(142,658	)	$	1,112,584
Issuance of ordinary shares under employee stock plans		1,953,293		19		1,776		—			—			—			—			1,795
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(678,209	)		(17,069	)		(17,069	)
Share-based compensation		—		—		18,494		—			—			—			—			18,494
Unrealized loss on marketable securities, net of tax (benefit) of $(1,382)		—		—		—		(4,511	)		—			—			—			(4,511	)
Net loss		—		—		—		—			(35,903	)		—			—			(35,903	)
BALANCE — March 31, 2022		167,743,842	$	1,677	$	2,818,595	$	(8,234	)	$	(1,576,921	)		(4,531,431	)	$	(159,727	)	$	1,075,390
Issuance of ordinary shares under employee stock plans		1,038,859		11		16,186		—			—			—			—			16,197
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(18,566	)		(514	)		(514	)
Share-based compensation		—		—		23,641		—			—			—			—			23,641
Unrealized loss on marketable securities, net of tax provision of $326		—		—		—		(2,254	)		—			—			—			(2,254	)
Net loss		—		—		—		—			(30,136	)		—			—			(30,136	)
BALANCE — June 30, 2022		168,782,701