UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
OR
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
+
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company |
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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 21, 2023 was
ALKERMES PLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
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Page No. |
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Item 1. |
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Condensed Consolidated Balance Sheets — June 30, 2023 and December 31, 2022 |
5 |
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6 |
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Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2023 and 2022 |
7 |
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8 |
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10 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
35 |
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Item 4. |
35 |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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38 |
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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”) may include, without limitation, statements regarding:
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, 2022, filed
3
with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 16, 2023, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 26, 2023 (our “Annual Report”) and “Part II, Item 1A—Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (our “Q1 Quarterly 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 and “Part II, Item 1A—Risk Factors” in our Q1 Quarterly 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 neurological 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 or its affiliated companies; CABENUVA®—ViiV Healthcare UK (No.3) Limited; 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.
4
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
ALKERMES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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June 30, 2023 |
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December 31, 2022 |
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(In thousands, except share and per share amounts) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Investments—short-term |
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Inventory |
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Contract assets |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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PROPERTY, PLANT AND EQUIPMENT, NET |
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INVESTMENTS—LONG-TERM |
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RIGHT-OF-USE ASSETS |
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INTANGIBLE ASSETS, NET |
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GOODWILL |
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DEFERRED TAX ASSETS |
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OTHER ASSETS |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable and accrued expenses |
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$ |
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$ |
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Accrued sales discounts, allowances and reserves |
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Operating lease liabilities—short-term |
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Contract liabilities—short-term |
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Current portion of long-term debt |
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Total current liabilities |
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LONG-TERM DEBT |
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OPERATING LEASE LIABILITIES—LONG-TERM |
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OTHER LONG-TERM LIABILITIES |
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Total liabilities |
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SHAREHOLDERS’ EQUITY: |
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Preferred shares, par value, $ |
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Ordinary shares, par value, $ |
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Treasury shares, at cost ( |
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( |
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( |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ALKERMES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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(In thousands, except per share amounts) |
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REVENUES: |
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Product sales, net |
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$ |
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$ |
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$ |
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$ |
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Manufacturing and royalty revenues |
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License revenue |
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— |
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— |
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— |
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Research and development revenue |
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Total revenues |
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EXPENSES: |
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Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below) |
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Research and development |
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Selling, general and administrative |
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Amortization of acquired intangible assets |
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Total expenses |
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OPERATING INCOME (LOSS) |
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( |
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( |
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OTHER INCOME (EXPENSE), NET: |
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Interest income |
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Interest expense |
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( |
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( |
) |
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( |
) |
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( |
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Change in the fair value of contingent consideration |
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— |
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— |
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( |
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Other (expense) income, net |
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( |
) |
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( |
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Total other income (expense), net |
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( |
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INCOME (LOSS) BEFORE INCOME TAXES |
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( |
) |
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( |
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INCOME TAX PROVISION (BENEFIT) |
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( |
) |
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( |
) |
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( |
) |
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NET INCOME (LOSS) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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EARNINGS (LOSS) PER ORDINARY SHARE: |
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Basic |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Diluted |
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( |
) |
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( |
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WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING: |
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Basic |
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Diluted |
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COMPREHENSIVE INCOME (LOSS): |
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Net income (loss) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Holding gain (loss), net of a tax provision (benefit) of $ |
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( |
) |
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( |
) |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
ALKERMES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended |
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June 30, |
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2023 |
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2022 |
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(In thousands) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to cash flows from operating activities: |
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Depreciation and amortization |
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Share-based compensation expense |
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Deferred income taxes |
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( |
) |
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( |
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Change in the fair value of contingent consideration |
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— |
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Other non-cash charges |
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Changes in assets and liabilities: |
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Receivables |
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( |
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Contract assets |
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( |
) |
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Inventory |
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( |
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( |
) |
Prepaid expenses and other assets |
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( |
) |
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( |
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Right-of-use assets |
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Accounts payable and accrued expenses |
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( |
) |
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Accrued sales discounts, allowances and reserves |
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( |
) |
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( |
) |
Contract liabilities |
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( |
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( |
) |
Operating lease liabilities |
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( |
) |
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( |
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Other long-term liabilities |
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Cash flows provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions of property, plant and equipment |
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( |
) |
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( |
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Proceeds from the sale of equipment |
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— |
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Proceeds from contingent consideration |
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— |
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Return of Fountain Healthcare Partners II, L.P. investment |
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— |
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Purchases of investments |
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( |
) |
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( |
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Sales and maturities of investments |
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Cash flows provided by (used in) investing activities |
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( |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from the issuance of ordinary shares under share-based compensation arrangements |
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Employee taxes paid related to net share settlement of equity awards |
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( |
) |
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( |
) |
Principal payments of long-term debt |
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( |
) |
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( |
) |
Cash flows used in financing activities |
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( |
) |
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( |
) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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( |
) |
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CASH AND CASH EQUIVALENTS—Beginning of period |
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CASH AND CASH EQUIVALENTS—End of period |
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$ |
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$ |
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SUPPLEMENTAL CASH FLOW DISCLOSURE: |
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Non-cash investing and financing activities: |
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Purchased capital expenditures included in accounts payable and accrued expenses |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
ALKERMES PLC AND SUBSIDIARIES
(unaudited)
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Ordinary Shares |
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Additional |
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Accumulated Other Comprehensive |
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Accumulated |
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Treasury Stock |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Shares |
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Amount |
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Total |
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(In thousands, except share data) |
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BALANCE — December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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( |
) |
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$ |
( |
) |
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$ |
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Issuance of ordinary shares under employee stock plans |
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— |
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— |
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— |
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— |
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Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized gain on marketable securities, net of tax provision of $ |
|
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
BALANCE — March 31, 2023 |
|
|
|
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$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of ordinary shares under employee stock plans |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized gain on marketable securities, net of tax provision of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
BALANCE — June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
|
|
Ordinary Shares |
|
|
Additional |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
|
|
||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Total |
|
||||||||
|
|
(In thousands, except share data) |
|
|||||||||||||||||||||||||||||
BALANCE — December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of ordinary shares under employee stock plans |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized loss on marketable securities, net of tax benefit of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
BALANCE — March 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of ordinary shares under employee stock plans |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized loss on marketable securities, net of tax provision of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
BALANCE — June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
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 the fields of neuroscience and oncology. Alkermes has 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 neurological 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.
On November 2, 2022, the Company announced its intent, as approved by its board of directors, to separate its neuroscience business and oncology business. The Company is planning a separation of the oncology business into an independent, publicly-traded company (referred to herein as “Mural Oncology”) following a review of strategic alternatives for the oncology business. Following the planned separation, the Company would retain its focus on driving growth of its proprietary commercial products: LYBALVI, ARISTADA/ARISTADA INITIO and VIVITROL, and advancing the development of pipeline programs focused on neurological disorders. The Company also expects to retain manufacturing and royalty revenues, including those related to its licensed products and third-party products using its proprietary technologies under license. Mural Oncology would focus on the discovery and development of cancer therapies, including the continued development of nemvaleukin alfa and the Company’s portfolio of novel, preclinical engineered cytokines. The separation, if consummated, is expected to be completed in the second half of 2023 and is subject to customary closing conditions, including final approval by the Company’s board of directors and receipt of a private letter ruling from the U.S. Internal Revenue Service and/or a tax opinion from the Company’s tax advisor. Subsequent to the planned separation, the historical results of the oncology business will be reflected as discontinued operations in the Company’s consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company for the three and six months ended June 30, 2023 and 2022 are unaudited and have been prepared on a basis substantially consistent with the audited financial statements for the year ended December 31, 2022. 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 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 Company’s 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 accompanying 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 Company’s 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 Company 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, but not limited to, those related to revenue
10
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
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 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 conditions or using different assumptions.
Segment Information
The Company operates as
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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 accounting pronouncements that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Product Sales, Net
The Company’s product sales, net consist of sales in the U.S. of VIVITROL, ARISTADA and ARISTADA INITIO and, following its commercial launch in October 2021, LYBALVI, primarily to wholesalers, specialty distributors and pharmacies.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
VIVITROL |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
ARISTADA and ARISTADA INITIO |
|
|
|
|
|
|
|
|
|
|
|
|
||||
LYBALVI |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total product sales, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Manufacturing and Royalty Revenues
During the three and six months ended June 30, 2023 and 2022, the Company recorded manufacturing and royalty revenues from its collaboration arrangements as follows:
|
|
Three Months Ended June 30, 2023 |
|
|
Six Months Ended June 30, 2023 |
|
||||||||||||||||||
(In thousands) |
|
Manufacturing Revenue |
|
|
Royalty Revenue |
|
|
Total |
|
|
Manufacturing Revenue |
|
|
Royalty Revenue |
|
|
Total |
|
||||||
Long-acting INVEGA products(1) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
VUMERITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
RISPERDAL CONSTA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Three Months Ended June 30, 2022 |
|
|
Six Months Ended June 30, 2022 |
|
||||||||||||||||||
(In thousands) |
|
Manufacturing Revenue |
|
|
Royalty Revenue |
|
|
Total |
|
|
Manufacturing Revenue |
|
|
Royalty Revenue |
|
|
Total |
|
||||||
Long-acting INVEGA products(1) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
VUMERITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
RISPERDAL CONSTA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
11
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
In November 2021, the Company received notice of partial termination of an exclusive license agreement with Janssen Pharmaceutica N.V., a subsidiary of Johnson & Johnson (“Janssen Pharmaceutica”). Under this license agreement, the Company provided Janssen Pharmaceutica with rights to, and know-how, training and technical assistance in respect of, the Company’s small particle pharmaceutical compound technology, known as NanoCrystal technology, which was used to develop the Long-acting INVEGA products. When the partial termination became effective in February 2022, Janssen Pharmaceutica ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. Accordingly, the Company ceased recognizing royalty revenue related to U.S. sales of these products in February 2022. In April 2022, the Company commenced binding arbitration proceedings related to, among other things, Janssen Pharmaceutica’s partial termination of this license agreement and its royalty and other obligations under the agreement. On May 31, 2023, the arbitral tribunal (the “Tribunal”) in the arbitration proceedings issued a final award (the “Final Award”) which concluded the arbitration proceedings. The Final Award provided, among other things, that the Company was due back royalties of $
Following issuance of the Final Award, the Company recognized royalty revenues related to the back royalties noted above and resumed recognizing royalty revenue related to ongoing U.S. sales of the Long-acting INVEGA products. During the three months ended June 30, 2023, the Company recorded $
Contract Assets
Contract assets include unbilled amounts resulting from sales under certain of the Company’s manufacturing contracts where revenue is recognized over time. The amounts included in the contract assets table below are classified as “Current assets” in the accompanying condensed consolidated balance sheets, as they relate to manufacturing processes that are completed in
Total contract assets at June 30, 2023 were as follows:
(In thousands) |
|
Contract Assets |
|
|
Contract assets at December 31, 2022 |
|
$ |
|
|
Additions |
|
|
|
|
Transferred to receivables, net |
|
|
( |
) |
Contract assets at June 30, 2023 |
|
$ |
— |
|
12
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
Contract Liabilities
Contract liabilities consist of contractual obligations related to deferred revenue. At June 30, 2023 and December 31, 2022, $
Total contract liabilities at June 30, 2023 were as follows:
(In thousands) |
|
Contract Liabilities |
|
|
Contract liabilities at December 31, 2022 |
|
$ |
|
|
Additions |
|
|
( |
) |
Amounts recognized into revenue |
|
|
( |
) |
Contract liabilities at June 30, 2023 |
|
$ |
|
|
4. INVESTMENTS
Investments consisted of the following (in thousands):
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
Losses |
|
|
|
|
||||||||
|
|
Amortized |
|
|
|
|
|
Less than |
|
|
Greater than |
|
|
Estimated |
|
|||||
June 30, 2023 |
|
Cost |
|
|
Gains |
|
|
One Year |
|
|
One Year |
|
|
Fair Value |
|
|||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||
U.S. government and agency debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Non-U.S. government debt securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total short-term investments |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
U.S. government and agency debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Held-to-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total long-term investments |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Total investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||
U.S. government and agency debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Non-U.S. government debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Total short-term investments |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
U.S. government and agency debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Non-U.S. government debt securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Held-to-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total long-term investments |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Total investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
13
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
At June 30, 2023, the Company reviewed its investment portfolio to assess whether the unrealized losses on its available-for-sale investments were temporary. Investments with unrealized losses consisted primarily of corporate debt securities and debt securities issued and backed by U.S. agencies and the U.S. government. At June 30, 2023,
Realized gains and losses on the sales and maturities of investments, which were identified using the specific identification method, were as follows:
|
|
Six Months Ended June 30, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Proceeds from the sales and maturities of investments |
|
$ |
|
|
$ |
|
||
Realized gains |
|
$ |
— |
|
|
$ |
— |
|
Realized losses |
|
$ |
— |
|
|
$ |
— |
|
The Company’s available-for-sale and held-to-maturity securities at June 30, 2023 had contractual maturities in the following periods:
|
|
Available-for-sale |
|
|
Held-to-maturity |
|
||||||||||
|
|
Amortized |
|
|
Estimated |
|
|
Amortized |
|
|
Estimated |
|
||||
(In thousands) |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
||||
Within 1 year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
After 1 year through 5 years |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
5. FAIR VALUE
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy and the valuation techniques that the Company utilized to determine such fair value:
|
|
June 30, |
|
|
|
|
|
|
|
|
|
|
||||
(In thousands) |
|
2023 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. government and agency debt securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Non-U.S. government debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
||||
|
|
2022 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. government and agency debt securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Non-U.S. government debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
14
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
The Company transfers its financial assets and liabilities, measured at fair value on a recurring basis, between the fair value hierarchies at the end of each reporting period.
There were
The Company’s investments in U.S. government and agency debt securities, non-U.S. government agency debt securities and corporate debt securities classified as Level 2 within the fair value hierarchy were initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing market-observable data. The market-observable data included reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validated the prices developed using the market-observable data by obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.
In April 2015, the Company sold its Gainesville, GA manufacturing facility, the related manufacturing and royalty revenue associated with certain products manufactured at the facility, and the rights to intravenous/intramuscular (“IV/IM”) and parenteral forms of Meloxicam to Recro Pharma, Inc. (“Recro”) and Recro Gainesville LLC (such transaction the “Gainesville Transaction”). The Gainesville Transaction included in the purchase price contingent consideration, including milestone payments and royalties on net sales of the IV/IM and parenteral forms of Meloxicam and other products covered under the relevant agreements (such products, the “Meloxicam Products”).
In November 2019, Recro spun out its acute care segment to Baudax Bio, Inc. (“Baudax”), a publicly-traded pharmaceutical company. As part of this transaction, Recro’s obligations to pay certain contingent consideration from the Gainesville Transaction were assigned and/or transferred to Baudax.
In March 2022, Baudax reduced its workforce by approximately
In March 2023, the Company and Baudax entered into an agreement pursuant to which Baudax transferred to the Company the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO and agreed to the termination of all prior agreements between the parties and any and all financial and other obligations thereunder.
The carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, contract assets, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term nature.
The estimated fair value of the Company’s long-term debt under its amended and restated credit agreement (such debt, the “2026 Term Loans”), which was based on quoted market price indications (Level 2 in the fair value hierarchy) and which may not be representative of actual values that could have been, or will be, realized in the future, was $
15
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
6. INVENTORY
Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Inventory consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods(1) |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Building and improvements |
|
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consisted of the following:
|
|
|
|
June 30, 2023 |
|
|||||||||
(In thousands) |
|
Weighted Amortizable Life (Years) |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|||
Goodwill |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|||
Collaboration agreements |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Capitalized IP |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Based on the Company’s most recent analysis, amortization of intangible assets included in the accompanying condensed consolidated balance sheet at June 30, 2023 is expected to be approximately $
16
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
9. LEASES
Future lease payments under non-cancelable leases at June 30, 2023 and December 31, 2022 consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
2023 |
|
$ |
|
|
$ |
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total operating lease payments |
|
$ |
|
|
$ |
|
||
Less: imputed interest |
|
|
( |
) |
|
|
( |
) |
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Total accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
A summary of the Company’s current provision for sales discounts, allowances and reserves is as follows:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Medicaid rebates |
|
$ |
|
|
$ |
|
||
Product discounts |
|
|
|
|
|
|
||
Medicare Part D |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued sales discounts, allowances and reserves |
|
$ |
|
|
$ |
|
||
Included in accounts payable was approximately $
17
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
11. LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
2026 Term Loans, due March 12, 2026 |
|
$ |
|
|
$ |
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Long-term debt |
|
$ |
|
|
$ |
|
||
The 2026 Term Loans mature on
The 2026 Term Loans have an incremental facility capacity in the amount of $
12. SHARE-BASED COMPENSATION
The following table presents share-based compensation expense included in the accompanying condensed consolidated statements of operations and comprehensive loss:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of goods manufactured and sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
At June 30, 2023 and December 31, 2022, $
13. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per ordinary share is calculated based upon net income (loss) available to holders of ordinary shares divided by the weighted average number of ordinary shares outstanding. For the calculation of diluted earnings (loss) per ordinary share, the Company adjusts the weighted average number of ordinary shares outstanding for the effect of outstanding ordinary share equivalents such as stock options and restricted stock unit awards.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of ordinary shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Restricted stock unit awards |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Dilutive ordinary share equivalents |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Shares used in calculating diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
18
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
The following potential ordinary share equivalents were not included in the net earnings (loss) per share calculation because the effect would have been anti-dilutive:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock unit awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
14. INCOME TAXES
The Company recognizes income taxes under the asset and liability method. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In determining future taxable income, the Company is responsible for assumptions that it utilizes, including the amount of Irish and non-Irish pre‑tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company uses to manage the underlying business.
The Company recorded an income tax provision of $
At December 31, 2022, the Company maintained a valuation allowance of $
15. COMMITMENTS AND CONTINGENT LIABILITIES
Litigation
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. On a quarterly basis, the Company reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss. Because of uncertainties related to claims and litigation, accruals are based on the Company’s best estimates, utilizing all available information. On a periodic basis, as additional information becomes available, or based on specific events such as the outcome of litigation or settlement of claims, the Company may reassess the potential liability related to these matters and may revise these estimates, which could result in material adverse adjustments to the Company’s operating results. At June 30, 2023, there were
19
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
Janssen Arbitration Proceedings
In April 2022, Alkermes Pharma Ireland Limited commenced binding arbitration proceedings to settle, among other things, whether, notwithstanding Janssen Pharmaceutica’s partial termination of
INVEGA SUSTENNA ANDA Litigation
Janssen Pharmaceutica and Janssen Pharmaceuticals, Inc. initiated patent infringement lawsuits in the U.S. District Court for the District of New Jersey (the “NJ District Court”) in January 2018 against Teva Pharmaceuticals USA, Inc. (“Teva”) and Teva Pharmaceuticals Industries, Ltd. (“Teva PI”) (such lawsuit, the “Teva Lawsuit”), in August 2019 against Mylan Laboratories Limited (“Mylan Labs”) and other Mylan entities (the “Mylan Lawsuit”), in December 2019 against Pharmascience, Inc. (“Pharmascience”), Mallinckrodt plc, and SpecGX LLC (the “Pharmascience Lawsuit”), and in February 2022 against Accord Healthcare, Inc., Accord Healthcare, Ltd. and Intas Pharmaceuticals, Ltd (“Accord” and such lawsuit, the “Accord Lawsuit”), and in the U.S. District Court for the District of Delaware (the “DE District Court”) in December 2021 against Tolmar Holding, Inc., Tolmar Pharmaceuticals, Inc., Tolmar Therapeutics, Inc., and Tolmar, Inc. (“Tolmar” and such lawsuit, the “Tolmar Lawsuit”), following the respective filings by each of Teva, Mylan Labs, Pharmascience, Accord and Tolmar of an Abbreviated New Drug Application (“ANDA”) seeking approval from the FDA to market a generic version of INVEGA SUSTENNA before the expiration of U.S. Patent No. 9,439,906. In October 2021, the NJ District Court entered a judgment in favor of the Janssen entities in the Teva Lawsuit. In December 2021, the NJ District Court entered a judgment in favor of the Janssen entities in the Mylan Lawsuit, based on the parties’ prior stipulation to be bound by the judgment in the Teva Lawsuit. The Teva entities and Mylan Labs each filed notices of appeal of their respective judgments with the U.S. Court of Appeals for the Federal Circuit, which were consolidated in January 2022 (the “Teva Appeal”). A trial has been scheduled in the Tolmar Lawsuit for October 2023. The Pharmascience Lawsuit and the Accord Lawsuit were administratively terminated in July 2022, pending the outcome of the Teva Appeal. The Company is not a party to any of these proceedings.
INVEGA TRINZA ANDA Litigation
In September 2020, Janssen Pharmaceutica, Janssen Pharmaceuticals, Inc., and Janssen Research & Development, LLC initiated a patent infringement lawsuit in the NJ District Court against Mylan Labs, Mylan, and Mylan Institutional LLC following the filing by Mylan Labs of an ANDA seeking approval from the FDA to market a generic version of INVEGA TRINZA before the expiration of U.S. Patent No. 10,143,693 (the “’693 Patent”). Requested judicial remedies include recovery of litigation costs and injunctive relief. On May 15, 2023, the NJ District Court issued an opinion in favor of the Janssen entities on the issues of infringement and validity of the ’693 Patent. On May 23, 2023, the Mylan entities filed a notice of appeal of the decision. The Company is not a party to this proceeding.
VIVITROL ANDA Litigation
In September 2020, Alkermes, Inc. and Alkermes Pharma Ireland Limited filed a patent infringement lawsuit in the NJ District Court against Teva and Teva PI following the filing by Teva of an ANDA seeking approval from the FDA to
20
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)
engage in the commercial manufacture, use or sale of a generic version of VIVITROL (naltrexone for extended-release injectable suspension) before the expiration of the Company’s U.S. Patent No. 7,919,499.
A bench trial was held in February 2023 and closing arguments were heard in June 2023. The Company anticipates a decision in the third quarter of 2023. The Company intends to continue to vigorously defend its IP.
VUMERITY ANDA Litigation
On July 6, 2023, Biogen Inc., Biogen Swiss Manufacturing GmbH and Alkermes Pharma Ireland Limited filed a patent infringement lawsuit in the DE District Court against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc. and Zydus Lifesciences Limited (collectively, “Zydus”) following the filing by Zydus of an ANDA seeking approval from the FDA to engage in the commercial manufacture, use or sale of a generic version of VUMERITY (diroximel fumarate) delayed-release capsules for oral use, 231 mg, before expiration of the Company’s U.S. Patent Nos. 8,669,281; 9,090,558; and 10,080,733. The filing of the lawsuit triggered a stay of FDA approval of the ANDA for up to 30 months in accordance with the U.S. Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”).
Government Matters
The Company has received a subpoena and civil investigative demands from U.S. state and federal governmental authorities for documents related to VIVITROL. The Company is cooperating with the investigations.
Product Liability and Other Legal Proceedings
16. SUBSEQUENT EVENT
On July 12, 2023, in conjunction with the Company’s ongoing review of operations and the planned separation of the oncology business, the Company executed a restructuring plan, which included the elimination of approximately
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the accompanying condensed consolidated financial statements and related notes beginning on page 5 in this Form 10-Q, and “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements and notes thereto accompanying our Annual Report.
Executive Summary
Net income was $237.1 million and $195.2 million or $1.43 and $1.18 per ordinary share—basic and $1.38 and $1.14 per ordinary share—diluted, for the three and six months ended June 30, 2023, respectively, as compared to net loss of $30.1 million and $66.0 million or $0.18 and $0.40 per ordinary share—basic and diluted, for the three and six months ended June 30, 2022, respectively.
The net income during the three and six months ended June 30, 2023, as compared to the net loss during the three and six months ended June 30, 2022, was primarily due to increases of $300.6 million and $268.3 million, respectively, in manufacturing and royalty revenues, primarily from the Long-acting INVEGA products following the successful outcome of the arbitration proceedings in respect of such products, and increases of $40.7 million and $84.1 million, respectively, in product sales, net, partially offset by increases of $54.9 million and $84.3 million, respectively, in selling, general and administrative expense, and increases of $7.9 million and $5.6 million, respectively, in R&D expenses.
These items are discussed in greater detail later in the “Results of Operations” section in this “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.
COVID-19 Impact
A number of the marketed products from which we derive revenue, including manufacturing and royalty revenue, are injectable medications administered by healthcare professionals, which have been adversely impacted to varying degrees as a result of COVID-19 related closures, restrictions, labor shortages and other disruptions that transpired during the pandemic.
The COVID-19 pandemic has caused, and may continue to cause, varying degrees of disruption to our employees and our business operations. While we have continued to operate our manufacturing facilities and supply our medicines, we have at times experienced labor or supply chain disruptions at our manufacturing facilities and may continue to experience such disruptions while the pandemic persists, which could impact our ability to manufacture our products and the third-party products from which we receive revenue in a timely manner or at all. In addition, while we have continued to conduct R&D activities, including our ongoing clinical trials, the COVID-19 pandemic at times impacted the timelines of certain of our early-stage discovery efforts and clinical trials, and may continue to impact such timelines if the pandemic persists. We have worked with our internal teams, our clinical investigators, R&D vendors and critical supply chain vendors, and will continue to do so as needed, to assess, and mitigate, any potential impacts of COVID-19 on our manufacturing operations and R&D activities.
The degree to which the COVID-19 pandemic may continue to impact our employees, business, financial condition and results of operations will depend on the manner in which it may continue to evolve, including the emergence, prevalence and severity of new COVID-19 variants, and future developments in response thereto. For information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, our financial condition or our results of operations, see “Item 1A—Risk Factors” in our Annual Report and specifically the section entitled “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.”
Products
Marketed Products
The key marketed products discussed below have generated, or are expected to generate, significant revenues for us. See the descriptions of the marketed products below and “Part I, Item 1A—Risk Factors” in our Annual Report for important factors that could adversely affect our marketed products. See the “Patents and Proprietary Rights” section in
22
“Part I, Item 1—Business” in our Annual Report for information with respect to the IP protection for these marketed products.
Proprietary Products
The following provides summary information regarding our proprietary products that we commercialize:
Product |
|
Indication(s) |
|
|
Territory |
|
|
|
|
|
|
|
|
Initiation or re-initiation of ARISTADA for the treatment of Schizophrenia |
|
|
U.S. |
|
Schizophrenia
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schizophrenia; Bipolar I disorder
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcohol dependence; Opioid dependence |
|
|
U.S. |
23
Key Third-Party Products Using Our Proprietary Technologies
The following provides summary information regarding certain key third-party products using our proprietary technologies under license and our key licensed product, in each case that are commercialized by our licensees:
Product |
|
Indication(s) |
|
Licensee |
|
Licensed Territory |
|
|
|
|
|
|
|
RISPERDAL CONSTA |
|
Schizophrenia; Bipolar I disorder |
|
Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica International, a division of Cilag International AG (“Janssen International”)
|
|
Worldwide |
|
|
|
|
|
|
|
INVEGA SUSTENNA / XEPLION |
|
INVEGA SUSTENNA: Schizophrenia; Schizoaffective disorder
XEPLION: Schizophrenia |
|
Janssen Pharmaceutica (together with Janssen Pharmaceuticals, Inc., Janssen International and their affiliates “Janssen”) |
|
Worldwide |
INVEGA TRINZA / TREVICTA |
|
Schizophrenia |
|
Janssen |
|
Worldwide |
INVEGA HAFYERA / BYANNLI |
|
Schizophrenia |
|
Janssen |
|
Worldwide |
Our Key Licensed Product
Product |
|
Indication(s) |
|
Licensee |
|
Licensed Territory |
|
|
|
|
|
|
|
VUMERITY |
|
Multiple sclerosis |
|
Biogen |
|
Worldwide |
The following sections provide more detailed information regarding our proprietary products, licensed products and products using our proprietary technology.
Proprietary Products
We have developed and now commercialize products designed to help address the unmet needs of people living with opioid dependence, alcohol dependence, schizophrenia and bipolar I disorder. See the “Patents and Proprietary Rights” section in “Part I, Item 1—Business” in our Annual Report for information with respect to the IP protection for our proprietary products.
24
ARISTADA
ARISTADA (aripiprazole lauroxil) is an extended-release intramuscular injectable suspension approved in the U.S. for the treatment of schizophrenia. ARISTADA utilizes our proprietary LinkeRx technology. ARISTADA is a prodrug; once in the body, ARISTADA is likely converted by enzyme-mediated hydrolysis to N-hydroxymethyl aripiprazole, which is then hydrolyzed to aripiprazole. ARISTADA is available in four dose strengths with once-monthly dosing options (441 mg, 662 mg and 882 mg), a six-week dosing option (882 mg) and a two-month dosing option (1064 mg). ARISTADA is packaged in a ready-to-use, pre-filled syringe product format. We exclusively manufacture and commercialize ARISTADA in the U.S.
ARISTADA INITIO
ARISTADA INITIO (aripiprazole lauroxil) leverages our proprietary LinkeRx and NanoCrystal technologies and provides an extended-release formulation of aripiprazole lauroxil in a smaller particle size compared to ARISTADA, thereby enabling faster dissolution and more rapid achievement of relevant levels of aripiprazole in the body. ARISTADA INITIO, combined with a single 30 mg dose of oral aripiprazole, is indicated for the initiation of ARISTADA when used for the treatment of schizophrenia in adults. The first ARISTADA dose may be administered on the same day as the ARISTADA INITIO regimen or up to 10 days thereafter. We exclusively manufacture and commercialize ARISTADA INITIO in the U.S.
LYBALVI
LYBALVI (olanzapine and samidorphan) is a once-daily, oral atypical antipsychotic drug approved in the U.S. for the treatment of adults with schizophrenia and for the treatment of adults with bipolar I disorder, as a maintenance monotherapy or for the acute treatment of manic or mixed episodes, as monotherapy or an adjunct to lithium or valproate. LYBALVI is a combination of olanzapine, an atypical antipsychotic, and samidorphan, an opioid antagonist, in a single bilayer tablet. LYBALVI was launched commercially in October 2021 and is available in fixed dosage strengths composed of 10 mg of samidorphan and 5 mg, 10 mg, 15 mg or 20 mg of olanzapine. We exclusively manufacture and commercialize LYBALVI in the U.S.
VIVITROL
VIVITROL (naltrexone for extended-release injectable suspension) is a once-monthly, non-narcotic, injectable medication approved in the U.S. for the treatment of alcohol dependence in patients able to abstain from alcohol in an outpatient setting prior to initiation of treatment with VIVITROL and for the prevention of relapse to opioid dependence, following opioid detoxification. VIVITROL uses our polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levels in the body through one intramuscular injection every four weeks. We exclusively manufacture and commercialize VIVITROL in the U.S.
For a discussion of legal proceedings related to VIVITROL, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our Annual Report and specifically the sections entitled “—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”.
Licensed Products and Products Using Our Proprietary Technologies
We have licensed products to third parties for commercialization and have licensed our proprietary technologies to third parties to enable them to develop, commercialize and/or manufacture products. See the “Proprietary Technology Platforms” and “Patents and Proprietary Rights” sections in “Part I, Item 1—Business” in our Annual Report for information with respect to our proprietary technologies and the IP protection for these products. We receive royalties and/or manufacturing and other revenues from the commercialization of these products under our collaborative arrangements with these third parties. Such arrangements include the following:
25
Key Products Using Our Proprietary Technologies
INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI
The Long-acting INVEGA products are long-acting atypical antipsychotics owned and commercialized worldwide by Janssen. We believe that these products incorporate our technologies.
INVEGA SUSTENNA is approved in the U.S. for the treatment of schizophrenia and for the treatment of schizoaffective disorder as either a monotherapy or adjunctive therapy. Paliperidone palmitate extended-release injectable suspension is approved in the European Union (“EU”) and other countries outside of the U.S. for the treatment of schizophrenia and is marketed and sold under the trade name XEPLION. INVEGA SUSTENNA/XEPLION is manufactured by Janssen.
INVEGA TRINZA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA SUSTENNA for at least four months. TREVICTA is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically stable on XEPLION. INVEGA TRINZA/TREVICTA is manufactured by Janssen.
INVEGA HAFYERA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA SUSTENNA for at least four months or INVEGA TRINZA for at least three months. BYANNLI is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically stable on XEPLION or TREVICTA. INVEGA HAFYERA/BYANNLI is manufactured by Janssen.
For information about the arbitration proceedings related to the Long-acting INVEGA Products, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for information about risks relating to our collaborative arrangements, see “Part I, Item 1A—Risk Factors” in our Annual Report and specifically the section entitled “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, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected.” For a discussion of legal proceedings related to certain of the patents covering INVEGA SUSTENNA and INVEGA TRINZA, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our Annual Report and specifically the section entitled “We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers.”
RISPERDAL CONSTA
RISPERDAL CONSTA (risperidone long-acting injection) is a long-acting atypical antipsychotic owned and commercialized worldwide by Janssen that incorporates our proprietary technologies. RISPERDAL CONSTA is approved in the U.S. for the treatment of schizophrenia and as both monotherapy and adjunctive therapy to lithium or valproate in the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA is approved in numerous countries outside of the U.S. for the treatment of schizophrenia and the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA uses our polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levels in the body through just one intramuscular injection every two weeks. RISPERDAL CONSTA microspheres are exclusively manufactured by us.
Licensed Product
VUMERITY
VUMERITY (diroximel fumarate) is a novel, oral fumarate with a distinct chemical structure that is approved in the U.S., the EU and several other countries for the treatment of relapsing forms of multiple sclerosis in adults, including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.
Under our license and collaboration agreement with Biogen, Biogen holds the exclusive, worldwide license to develop and commercialize VUMERITY. For more information about the license and collaboration agreement with Biogen, see the “Collaborative Arrangements—Biogen” section in “Part I, Item 1—Business” in our Annual Report. For a discussion of legal proceedings related to certain of the patents covering VUMERITY, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for
26
information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our Annual Report and specifically the section entitled “We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers.”
Key Development Programs
Our R&D is focused on the development of innovative medicines in the fields of neuroscience and oncology that are designed to address unmet patient needs. As part of our ongoing R&D efforts, we have devoted, and will continue to devote, significant resources to conducting preclinical work and clinical studies to advance the development of new pharmaceutical products. The discussion below highlights our current key development programs. Drug development involves a high degree of risk and investment, and the status, timing and scope of our development programs are subject to change. Important factors that could adversely affect our drug development efforts are discussed in “Part I, Item 1A—Risk Factors” in our Annual Report. See the “Patents and Proprietary Rights” section in “Part I, Item 1—Business” in our Annual Report for information with respect to the IP protection for our key development programs.
Nemvaleukin alfa
Nemvaleukin alfa (“nemvaleukin”) is an investigational, novel, engineered fusion protein comprised of modified interleukin-2 (“IL-2”) and the high affinity IL-2 alpha receptor chain, designed to preferentially expand tumor-killing immune cells while avoiding the activation of immunosuppressive cells by selectively binding to the intermediate-affinity IL-2 receptor complex. The selectivity of nemvaleukin is designed to leverage the proven anti-tumor effects of existing IL-2 therapy while mitigating certain limitations.
ARTISTRY is our clinical development program evaluating nemvaleukin as a potential immunotherapy for cancer. The ARTISTRY program is comprised of multiple clinical trials evaluating intravenous (“IV”) and subcutaneous (“SC”) dosing of nemvaleukin, both as a monotherapy and in combination with the anti-PD-1 therapy KEYTRUDA (pembrolizumab) in patients with advanced solid tumors. ARTISTRY-6 is an ongoing phase 2 study evaluating the anti-tumor activity, safety and tolerability of IV nemvaleukin monotherapy in patients with mucosal melanoma and SC nemvaleukin monotherapy in patients with advanced cutaneous melanoma. ARTISTRY-7 is an ongoing phase 3 study evaluating the efficacy, safety and tolerability of IV nemvaleukin as monotherapy and in combination with pembrolizumab compared to investigator’s choice chemotherapy in patients with platinum-resistant ovarian cancer.
In March 2021 and August 2021, we announced that the FDA granted Orphan Drug designation and Fast Track designation, respectively, to nemvaleukin for the treatment of mucosal melanoma. In October 2021, we announced that the FDA granted Fast Track designation to nemvaleukin in combination with pembrolizumab for the treatment of platinum-resistant ovarian cancer. In January 2023, we announced that the Medicines and Healthcare products Regulatory Agency (“MHRA”), the regulatory body of the United Kingdom (“UK”), had granted an Innovation Passport designation for nemvaleukin for the treatment of mucosal melanoma under the UK’s Innovative Licensing and Access Pathway (“ILAP”).
27
Results of Operations
Product Sales, Net
Our product sales, net, consist of sales of VIVITROL, ARISTADA and ARISTADA INITIO, and, following its commercial launch in the U.S. in October 2021, LYBALVI, primarily to wholesalers, specialty distributors and pharmacies. The following table presents the adjustments deducted from product sales, gross to arrive at product sales, net, for sales of VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI during the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
||||||||||||||||||||||||||||
|
June 30, |
|
|
|
June 30, |
|
|
||||||||||||||||||||||||||||
(In millions, except for % of Sales) |
2023 |
|
|
% of Sales |
|
|
|
2022 |
|
|
% of Sales |
|
|
|
2023 |
|
|
% of Sales |
|
|
|
2022 |
|
|
% of Sales |
|
|
||||||||
Product sales, gross |
$ |
469.8 |
|
|
|
100.0 |
|
% |
|
$ |
386.8 |
|
|
|
100.0 |
|
% |
|
$ |
903.7 |
|
|
|
100.0 |
|
% |
|
$ |
729.2 |
|
|
|
100.0 |
|
% |
Adjustments to product sales, gross: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Medicaid rebates |
|
(112.4 |
) |
|
|
(23.9 |
) |
% |
|
|
(88.7 |
) |
|
|
(22.9 |
) |
% |
|
|
(210.3 |
) |
|
|
(23.3 |
) |
% |
|
|
(165.2 |
) |
|
|
(22.7 |
) |
% |
Chargebacks |
|
(46.9 |
) |
|
|
(10.0 |
) |
% |
|
|
(41.5 |
) |
|
|
(10.7 |
) |
% |
|
|
(92.5 |
) |
|
|
(10.2 |
) |
% |
|
|
(75.3 |
) |
|
|
(10.3 |
) |
% |
Product discounts |
|
(34.8 |
) |
|
|
(7.4 |
) |
% |
|
|
(30.8 |
) |
|
|
(8.0 |
) |
% |
|
|
(69.1 |
) |
|
|
(7.6 |
) |
% |
|
|
(57.7 |
) |
|
|
(7.9 |
) |
% |
Medicare Part D |
|
(18.2 |
) |
|
|
(3.9 |
) |
% |
|
|
(16.5 |
) |
|
|
(4.3 |
) |
% |
|
|
(37.1 |
) |
|
|
(4.1 |
) |
% |
|
|
(32.5 |
) |
|
|
(4.5 |
) |
% |
Other |
|
(26.0 |
) |
|
|
(5.5 |
) |
% |
|
|
(18.5 |
) |
|
|
(4.8 |
) |
% |
|
|
(48.5 |
) |
|
|
(5.4 |
) |
% |
|
|
(36.4 |
) |
|
|
(4.9 |
) |
% |
Total adjustments |
|
(238.3 |
) |
|
|
(50.7 |
) |
% |
|
|
(196.0 |
) |
|
|
(50.7 |
) |
% |
|
|
(457.5 |
) |
|
|
(50.6 |
) |
% |
|
|
(367.1 |
) |
|
|
(50.3 |
) |
% |
Product sales, net |
$ |
231.5 |
|
|
|
49.3 |
|
% |
|
$ |
190.8 |
|
|
|
49.3 |
|
% |
|
$ |
446.2 |
|
|
|
49.4 |
|
% |
|
$ |
362.1 |
|
|
|
49.7 |
|
% |
The following table compares product sales, net earned during the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
VIVITROL |
$ |
102.0 |
|
|
$ |
96.1 |
|
|
$ |
5.9 |
|
|
$ |
198.7 |
|
|
$ |
181.0 |
|
|
$ |
17.7 |
|
ARISTADA and ARISTADA INITIO |
|
82.4 |
|
|
|
74.6 |
|
|
|
7.8 |
|
|
|
162.5 |
|
|
|
147.1 |
|
|
|
15.4 |
|
LYBALVI |
|
47.1 |
|
|
|
20.1 |
|
|
|
27.0 |
|
|
|
85.0 |
|
|
|
34.0 |
|
|
|
51.0 |
|
Product sales, net |
$ |
231.5 |
|
|
$ |
190.8 |
|
|
$ |
40.7 |
|
|
$ |
446.2 |
|
|
$ |
362.1 |
|
|
$ |
84.1 |
|
VIVITROL product sales, gross, increased by 12% and 17% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 5% and 7%, respectively, in the number of VIVITROL units sold and a 6% increase in the selling price of VIVITROL that went into effect in January 2023. ARISTADA and ARISTADA INITIO product sales, gross, increased by 15% and 14% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 11% and 10%, respectively, in the number of ARISTADA and ARISTADA INITIO units sold and a 3% increase in the selling price of ARISTADA and ARISTADA INITIO that went into effect in January 2023. LYBALVI product sales, gross, increased by 134% and 148% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 121% and 145%, respectively, in the number of LYBALVI units sold and a 6% increase in the selling price of LYBALVI that went into effect in November 2022.
28
Manufacturing and Royalty Revenues
The following table compares manufacturing and royalty revenues earned during the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
Manufacturing and royalty revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Long-acting INVEGA products |
$ |
321.2 |
|
|
$ |
26.6 |
|
|
$ |
294.6 |
|
|
$ |
334.8 |
|
|
$ |
63.7 |
|
|
$ |
271.1 |
|
VUMERITY |
|
32.3 |
|
|
|
26.2 |
|
|
|
6.1 |
|
|
|
61.2 |
|
|
|
56.8 |
|
|
|
4.4 |
|
RISPERDAL CONSTA |
|
5.1 |
|
|
|
10.4 |
|
|
|
(5.3 |
) |
|
|
16.1 |
|
|
|
27.8 |
|
|
|
(11.7 |
) |
Other |
|
27.3 |
|
|
|
22.1 |
|
|
|
5.2 |
|
|
|
46.7 |
|
|
|
42.2 |
|
|
|
4.5 |
|
Manufacturing and royalty revenues |
$ |
385.9 |
|
|
$ |
85.3 |
|
|
$ |
300.6 |
|
|
$ |
458.8 |
|
|
$ |
190.5 |
|
|
$ |
268.3 |
|
Our agreements with Janssen related to the Long-acting INVEGA products provide for tiered royalty payments, which consist of a patent royalty and a know-how royalty, both of which are determined on a country-by-country basis. The patent royalty, which equals 1.5% of net sales, is payable in each country until the expiration of the last of the patents with valid claims applicable to the product in such country. The know-how royalty is a tiered royalty of 3.5% on calendar year net sales up to $250 million; 5.5% on calendar year net sales of between $250 million and $500 million; and 7.5% on calendar year net sales exceeding $500 million. The know-how royalty rate resets to 3.5% at the beginning of each calendar year and is payable until 15 years from the first commercial sale of a product in each individual country, subject to expiry of the agreement. For more information about the license agreement with Janssen in respect of the Long-acting INVEGA products, see the “Collaborative Arrangements—Janssen” section in “Part I, Item 1—Business” in our Annual Report.
In November 2021, we received notice of partial termination of our license agreement with Janssen under which we provided Janssen with rights to, and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound technology, known as NanoCrystal technology, which was used to develop the Long-acting INVEGA products. The partial termination became effective in February 2022, at which time Janssen ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. Accordingly, we ceased recognizing royalty revenue related to U.S. sales of these products in February 2022. In April 2022, we commenced binding arbitration proceedings related to, among other things, Janssen’s partial termination of this license agreement and Janssen’s royalty and other obligations under the agreement. On May 31, 2023, the Tribunal issued the Final Award, which concluded the arbitration proceedings. The Final Award provided that we were due back royalties of $195.4 million, inclusive of $8.1 million in late-payment interest, related to 2022 U.S. net sales of the Long-acting INVEGA products, which we received from Janssen in the second quarter of 2023, and are entitled to 2023 and future royalty revenues from Janssen related to net sales of INVEGA SUSTENNA through August 20, 2024, INVEGA TRINZA through the second quarter of 2030 (but no later than May 2030 when the license agreement expires) and INVEGA HAFYERA through May 2030 (when the license agreement expires).
Following issuance of the Final Award, we recognized royalty revenues related to the back royalties noted above and resumed recognizing royalty revenue related to U.S. sales of the Long-acting INVEGA products. During the three months ended June 30, 2023, we recorded $195.4 million in royalty revenue related to the back royalties, $50.2 million of royalty revenue related to U.S. net sales of the Long-acting INVEGA products earned during the first quarter of 2023 and $75.7 million of royalty revenue related to worldwide net sales of the Long-acting INVEGA products earned during the second quarter of 2023. During the three and six months ended June 30, 2023, Janssen’s worldwide net sales of the Long-acting INVEGA products were $1,031.0 million and $2,075.0 million, respectively, as compared to $1,054.0 million and $2,102.0 million during the three and six months ended June 30, 2022, respectively.
For additional information regarding the arbitration proceedings with Janssen, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q. For information about risks relating to our collaborative arrangements, see “Part I, Item 1A—Risk Factors” in our Annual Report and specifically the section entitled “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, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected.”
29
We expect royalty revenues from net sales of the Long-acting INVEGA products to decrease over time, as each of INVEGA SUSTENNA and INVEGA TRINZA are currently subject to Paragraph IV litigation in response to companies seeking to market generic versions of such products. Increased competition from new products or generic versions of these products may lead to reduced unit sales of such products and increased pricing pressure. For a discussion of these legal proceedings, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, and for information about risks relating to these legal proceedings, see “Part I, Item 1A—Risk Factors” in our Annual Report, and specifically the section entitled “We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers.”
We receive a 15% royalty on worldwide net sales of VUMERITY manufactured and packaged by us, subject to increases in such royalty rate for VUMERITY manufactured and/or packaged by Biogen or its designees, in the period that the end-market sales of VUMERITY occur. We also recognize manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and, to the extent we package such product, then also when packaged batches of VUMERITY are made available to Biogen. The increases of $4.7 million and $6.0 million in manufacturing revenue from VUMERITY during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, respectively, were due to increases in the number of bulk and packaged batches made available to Biogen. Royalty revenue related to VUMERITY increased by $1.4 million during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, and decreased by $1.6 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The changes in royalty revenue were due to an increase in net sales of VUMERITY from $136.8 million during three months ended June 30, 2022 to $146.2 million during the three months ended June 30, 2023, and a decrease in net sales of VUMERITY from $264.8 million during the six months ended June 30, 2022 to $254.3 million during the six months ended June 30, 2023.
We recognize manufacturing revenue for RISPERDAL CONSTA at the point in time when RISPERDAL CONSTA has been fully manufactured, which is deemed to have occurred when the product is approved for shipment by both us and Janssen. We record royalty revenue, equal to 2.5% of Janssen’s end-market net sales, in the period that the end-market sales of RISPERDAL CONSTA occur. We expect revenues from RISPERDAL CONSTA to continue to decrease over time as patents covering RISPERDAL CONSTA expire in markets where end-market net sales of RISPERDAL CONSTA occur. The latest to expire patent covering RISPERDAL CONSTA expired in 2021 in the EU and in January 2023 in the U.S., and we are aware of potential generic and other competition to RISPERDAL CONSTA that may lead to reduced unit sales and increased pricing pressure. The decreases in revenue from RISPERDAL CONSTA during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to decreases of $3.9 million and $9.0 million, respectively, in manufacturing revenue, which were primarily due to 45% and 13% decreases, respectively, in the average selling price for the product.
Costs and Expenses
Cost of Goods Manufactured and Sold
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
Cost of goods manufactured and sold |
$ |
63.2 |
|
|
$ |
58.4 |
|
|
$ |
4.8 |
|
|
$ |
121.4 |
|
|
$ |
113.5 |
|
|
$ |
7.9 |
|
The increase in cost of goods manufactured and sold during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 was primarily due to an increase of $5.8 million in the cost of goods sold for VIVITROL and an increase of $2.2 million in the cost of goods manufactured for VUMERITY due to increases in the number of units manufactured and sold for each product as discussed above. These increases were partially offset by a decrease in the cost of goods manufactured for certain legacy products that we manufacture due to a decrease in volume of such products.
The increase in cost of goods manufactured and sold during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to increases of $9.7 million and $2.4 million in the cost of goods sold for VIVITROL and LYBALVI, respectively, and an increase of $5.0 million in the cost of goods manufactured for VUMERITY due to increases in the number of units manufactured and sold for each product as discussed above, partially offset by a decrease in the cost of goods manufactured for certain legacy products that we manufacture, as noted above.
30
Research and Development Expenses
For each of our R&D programs, we incur both external and internal expenses. External R&D expenses include fees for clinical and non-clinical activities performed by contract research organizations, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities. Internal R&D expenses include employee-related expenses, occupancy costs, depreciation and general overhead. We track external R&D expenses for each of our development programs; however, with the exception of our oncology-related development programs, internal R&D expenses are not tracked by individual program as they can benefit multiple programs or our technologies in general. We began tracking internal R&D expenses for our oncology-related development programs following the announcement of our intent to explore a separation of our neuroscience business and oncology business.
The following table sets forth our external R&D expenses for the three and six months ended June 30, 2023 and 2022 relating to our then current development programs and our internal R&D expenses, listed by the nature of such expenses:
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
External R&D expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Development programs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
nemvaleukin |
|
$ |
21.3 |
|
|
$ |
17.1 |
|
|
$ |
4.2 |
|
|
$ |
39.0 |
|
|
$ |
36.6 |
|
|
$ |
2.4 |
|
LYBALVI |
|
|
3.3 |
|
|
|
3.4 |
|
|
|
(0.1 |
) |
|
|
6.6 |
|
|
|
9.2 |
|
|
|
(2.6 |
) |
ALKS 2680 |
|
|
10.6 |
|
|
|
3.1 |
|
|
|
7.5 |
|
|
|
12.3 |
|
|
|
4.5 |
|
|
|
7.8 |
|
Other external R&D expenses |
|
|
12.7 |
|
|
|
15.5 |
|
|
|
(2.8 |
) |
|
|
28.3 |
|
|
|
31.5 |
|
|
|
(3.2 |
) |
Total external R&D expenses |
|
|
47.9 |
|
|
|
39.1 |
|
|
|
8.8 |
|
|
|
86.2 |
|
|
|
81.8 |
|
|
|
4.4 |
|
Internal R&D expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Employee-related |
|
|
39.2 |
|
|
|
40.6 |
|
|
|
(1.4 |
) |
|
|
81.2 |
|
|
|
80.7 |
|
|
|
0.5 |
|
Occupancy |
|
|
4.7 |
|
|
|
4.5 |
|
|
|
0.2 |
|
|
|
9.1 |
|
|
|
8.7 |
|
|
|
0.4 |
|
Depreciation |
|
|
2.7 |
|
|
|
2.9 |
|
|
|
(0.2 |
) |
|
|
5.4 |
|
|
|
5.7 |
|
|
|
(0.3 |
) |
Other |
|
|
6.3 |
|
|
|
5.7 |
|
|
|
0.6 |
|
|
|
12.5 |
|
|
|
11.9 |
|
|
|
0.6 |
|
Total internal R&D expenses |
|
|
52.9 |
|
|
|
53.7 |
|
|
|
(0.8 |
) |
|
|
108.2 |
|
|
|
107.0 |
|
|
|
1.2 |
|
Research and development expenses |
|
$ |
100.8 |
|
|
$ |
92.8 |
|
|
$ |
8.0 |
|
|
$ |
194.4 |
|
|
$ |
188.8 |
|
|
$ |
5.6 |
|
These amounts are not necessarily predictive of future R&D expenses. In an effort to allocate our spending most effectively, we continually evaluate our products under development, based on the performance of such products in preclinical and/or clinical trials, our expectations regarding the likelihood of their regulatory approval and our view of their future potential commercial viability, among other factors.
The increases in expenses related to nemvaleukin in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increased spend on the ARTISTRY-7 study, partially offset by a decrease in spend on the ARTISTRY-1 study. For additional detail on the ARTISTRY development program for nemvaleukin, see the “Key Development Program” section of this “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. The decrease in expenses related to LYBALVI in the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to decreased R&D activities for the product in light of its commercial launch in October 2021, partially offset by continued spend on ongoing clinical studies. The increases in expenses related to ALKS 2680 in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in early-stage development expenses, including chemistry manufacturing and controls expenses and the initiation of a phase 1b proof-of-concept study.
31
Selling, General and Administrative Expense
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
Selling and marketing expense |
|
$ |
137.9 |
|
|
$ |
95.3 |
|
|
$ |
42.6 |
|
|
$ |
256.4 |
|
|
$ |
191.5 |
|
|
$ |
64.9 |
|
General and administrative expense |
|
|
67.3 |
|
|
|
55.0 |
|
|
|
12.3 |
|
|
|
123.3 |
|
|
|
103.9 |
|
|
|
19.4 |
|
Selling, general and administrative expense |
|
$ |
205.2 |
|
|
$ |
150.3 |
|
|
$ |
54.9 |
|
|
$ |
379.7 |
|
|
$ |
295.4 |
|
|
$ |
84.3 |
|
The increases in selling and marketing expense during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in marketing expense of $35.2 million and $49.0 million, respectively, following the launch of the direct-to-consumer campaign for LYBALVI and increases in employee-related expenses of $7.3 million and $15.3 million, respectively, due to a 6% increase in sales and marketing headcount and increases in salaries.
The increases in general and administrative expense during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in employee-related expenses of $6.8 million and $10.7 million, respectively, and increases in professional service fees of $5.6 million and $8.9 million, respectively. The increases in employee-related expenses in the three and six months ended June 20, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in share-based compensation expense of $4.3 million and $6.3 million, respectively, due to the timing of our annual non-employee director grant as compared to the prior year and increases in salary expense of $2.1 million and $2.8 million, respectively, due to a 6% increase in general and administrative headcount and increases in salaries. The increases in professional service fees in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increased spend on fees related to the planned separation of our oncology business and expenses related to activist shareholder activities.
Other Income (Expense), Net
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
Interest income |
|
$ |
6.7 |
|
|
$ |
0.9 |
|
|
$ |
5.8 |
|
|
$ |
11.7 |
|
|
$ |
1.5 |
|
|
$ |
10.2 |
|
Interest expense |
|
|
(5.7 |
) |
|
|
(2.3 |
) |
|
|
(3.4 |
) |
|
|
(11.0 |
) |
|
|
(4.7 |
) |
|
|
(6.3 |
) |
Change in the fair value of contingent consideration |
|
|
— |
|
|
|
0.9 |
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
(18.2 |
) |
|
|
18.2 |
|
Other (expense) income, net |
|
|
(0.4 |
) |
|
|
1.7 |
|
|
|
(2.1 |
) |
|
|
(0.5 |
) |
|
|
4.2 |
|
|
|
(4.7 |
) |
Total other income (expense), net |
|
$ |
0.6 |
|
|
$ |
1.2 |
|
|
$ |
(0.6 |
) |
|
$ |
0.2 |
|
|
$ |
(17.2 |
) |
|
$ |
17.4 |
|
Interest income consists primarily of interest earned on our available-for-sale investments. Interest expense consists of interest incurred on our 2026 Term Loans. The increases in interest income and interest expense in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in interest rates over the past twelve months, as we are in a rising interest rate environment.
The decrease in the change in the fair value of contingent consideration was due to our applying a 100% likelihood that Baudax would default on its obligations and using a 9% recovery rate to amounts owed to us under the arrangement with Baudax in the three months ended March 31, 2022, resulting in a $19.1 million decrease in the fair value of contingent consideration. In the three months ended September 30, 2022, we reduced the remaining fair value under the arrangement to zero and in December 2022, Baudax announced that it would discontinue the sale of ANJESO.
Income Tax Provision (Benefit)
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
|
June 30, |
|
|
|
|
|
June 30, |
|
|
|
|
||||||||||||
(In millions) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
||||||
Income tax provision (benefit) |
|
|
2.7 |
|
|
$ |
(3.1 |
) |
|
$ |
5.8 |
|
|
$ |
(3.3 |
) |
|
$ |
(12.2 |
) |
|
$ |
8.9 |
|
The income tax provision in the three months ended June 30, 2023 related to U.S. federal and state taxes, due primarily to a $2.0 million discrete tax expense related to employee equity activity. The income tax benefit in the six
32
months ended June 30, 2023 and the three and six months ended June 30, 2022 primarily related to enhanced FDII deductions arising from the capitalization of research and development expenses in accordance with Section 174 of the U.S. Internal Revenue Code of 1986, as amended.
At December 31, 2022, we maintained a valuation allowance of $245.8 million against Irish deferred tax assets. During the three and six months ended June 30, 2023, we recorded a taxable profit. Should we continue to demonstrate taxable profitability in the future, the evaluation of the recoverability of such deferred tax assets may change and a portion of the valuation allowance could be released.
Liquidity and Financial Condition
Our financial condition is summarized as follows:
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
(In millions) |
|
U.S. |
|
|
Ireland |
|
|
Total |
|
|
U.S. |
|
|
Ireland |
|
|
Total |
|
||||||
Cash and cash equivalents |
|
$ |
304.4 |
|
|
$ |
361.4 |
|
|
$ |
665.8 |
|
|
$ |
208.4 |
|
|
$ |
84.1 |
|
|
$ |
292.5 |
|
Investments—short-term |
|
|
105.6 |
|
|
|
57.7 |
|
|
|
163.3 |
|
|
|
207.6 |
|
|
|
108.4 |
|
|
|
316.0 |
|
Investments—long-term |
|
|
41.4 |
|
|
|
36.7 |
|
|
|
78.1 |
|
|
|
70.3 |
|
|
|
61.3 |
|
|
|
131.6 |
|
Total cash and investments |
|
$ |
451.4 |
|
|
$ |
455.8 |
|
|
$ |
907.2 |
|
|
$ |
486.3 |
|
|
$ |
253.8 |
|
|
$ |
740.1 |
|
Outstanding borrowings—short and long-term |
|
$ |
292.0 |
|
|
$ |
— |
|
|
$ |
292.0 |
|
|
$ |
293.3 |
|
|
$ |
— |
|
|
$ |
293.3 |
|
At June 30, 2023 our investments consisted of the following:
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
||||||||
|
|
Amortized |
|
|
Unrealized |
|
|
Allowance for |
|
|
Estimated |
|
||||||||
(In millions) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Credit Losses |
|
|
Fair Value |
|
|||||
Investments—short-term available-for-sale |
|
$ |
165.9 |
|
|
$ |
— |
|
|
$ |
(2.6 |
) |
|
$ |
— |
|
|
$ |
163.3 |
|
Investments—long-term available-for-sale |
|
|
79.0 |
|
|
|
— |
|
|
|
(2.7 |
) |
|
|
— |
|
|
|
76.3 |
|
Investments—long-term held-to-maturity |
|
|
1.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.8 |
|
Total |
|
$ |
246.7 |
|
|
$ |
— |
|
|
$ |
(5.3 |
) |
|
$ |
— |
|
|
$ |
241.4 |
|
Sources and Uses of Cash
We generated $194.4 million and $19.4 million of cash from operating activities during the six months ended June 30, 2023 and 2022, respectively. We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash requirements, such as capital expenditures and principal and interest payments on our long‑term debt, for at least the twelve months following the date from which our financial statements were issued. Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain additional financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financing methods or structures. In addition, the 2026 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional potential amounts, provided that we meet certain conditions, including a specified leverage ratio.
Our investment objectives are, first, to preserve liquidity and conserve capital and, second, to generate investment income. We mitigate credit risk in our cash reserves by maintaining a well-diversified portfolio that limits the amount of investment exposure as to institution, maturity and investment type. However, the value of these securities may be adversely affected by the instability of the global financial markets, which could, in turn, adversely impact our financial position and our overall liquidity. Our available-for-sale investments consist primarily of short and long-term U.S. government and agency debt securities, corporate debt securities and debt securities issued and backed by non-U.S. governments. Our held-to-maturity investments consist of investments that are held as collateral under certain letters of credit related to certain of our lease agreements.
We classify available‑for‑sale investments in an unrealized loss position that do not mature within twelve months as long‑term investments. We have the intent and ability to hold these investments until recovery, which may be at maturity, and it is more‑likely‑than‑not that we would not be required to sell these securities before recovery of their amortized cost. At June 30, 2023, we performed an analysis of our investments with unrealized losses for impairment and determined that they were not impaired.
33
We have no off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources in the next twelve months.
The following table summarizes our cash flows for the six months ended June 30, 2023 and 2022:
|
|
Six Months Ended June 30, |
|
|||||
(In millions) |
|
2023 |
|
|
2022 |
|
||
Cash and cash equivalents, beginning of period |
|
$ |
292.5 |
|
|
$ |
337.5 |
|
Cash flows provided by operating activities |
|
|
194.4 |
|
|
|
19.4 |
|
Cash flows provided by (used in) investing activities |
|
|
193.7 |
|
|
|
(101.2 |
) |
Cash flows used in financing activities |
|
|
(14.8 |
) |
|
|
(1.1 |
) |
Cash and cash equivalents, end of period |
|
$ |
665.8 |
|
|
$ |
254.6 |
|
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income (loss) for non-cash operating items such as depreciation, amortization and share-based compensation and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.
Operating Activities
Cash flows provided by operating activities for the six months ended June 30, 2023 were $194.4 million and primarily consisted of a net income of $195.2 million adjusted for non-cash items, including share-based compensation of $51.1 million and depreciation and amortization of $37.7 million, partially offset by changes in working capital of $52.2 million and deferred income taxes of $38.1 million. During the six months ended June 30, 2023, net income included receipt of $195.4 million from Janssen, inclusive of $8.1 million in late-payment interest, related to 2022 U.S. net sales of the Long-acting INVEGA products following the successful outcome of the arbitration proceedings in respect of such products.
Cash flows provided by operating activities for the six months ended June 30, 2022 were $19.4 million and primarily consisted of a net loss of $66.0 million, adjusted for non-cash items including share-based compensation of $41.7 million, depreciation and amortization of $38.6 million, change in the fair value of contingent consideration of $18.2 million and changes in working capital of $27.1 million, partially offset by deferred income taxes of $40.8 million.
Investing Activities
Cash flows provided by investing activities for the six months ended June 30, 2023 were primarily due to $210.3 million in net sales of investments, offset by the purchase of $16.6 million of property, plant and equipment. Cash flows used in investing activities for the six months ended June 30, 2022 were primarily due to $85.0 million in net purchases of investments and the purchase of $17.8 million of property, plant and equipment.
Financing Activities
Cash flows used in financing activities for the six months ended June 30, 2023 and 2022 primarily related to $25.3 million and $17.6 million of employee taxes paid related to the net share settlement of equity awards, respectively, partially offset by $12.0 million and $18.0 million of cash that we received upon exercises of employee stock options, respectively.
Debt
At June 30, 2023, the principal balance of our borrowings consisted of $293.3 million outstanding under our 2026 Term Loans. See Note 11, Long-Term Debt, in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for further discussion of our 2026 Term Loans.
34
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different conditions or using different assumptions. See the “Critical Accounting Estimates” section in “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for a discussion of our critical accounting estimates.
New Accounting Standards
See the “New Accounting Pronouncements” section in Note 2, Summary of Significant Accounting Policies in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for discussion of certain recent accounting standards applicable to us.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risks related to our investment portfolio, and the ways we manage such risks, are summarized in “Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report. We regularly review our marketable securities holdings and shift our investment holdings to those that best meet our investment objectives, which are to preserve capital, provide sufficient liquidity to satisfy operating requirements and generate investment income. Apart from such adjustments to our investment portfolio, there have been no material changes to our market risks since December 31, 2022, and we do not anticipate any 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.
We are exposed to non-U.S. currency exchange risk related to manufacturing and royalty revenues that we receive on certain of our products, partially offset by certain operating costs arising from expenses and payables in connection with our Irish operations that are settled predominantly in Euro. These non-U.S. currency exchange rate risks are summarized in “Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report. There has been no material change in our assessment of our sensitivity to non-U.S. currency exchange rate risk since December 31, 2022.
Item 4. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that our disclosure controls and procedures were effective as of June 30, 2023 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
b) Change in Internal Control Over Financial Reporting
During the three months ended June 30, 2023, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings, see the discussion of legal proceedings in Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, which discussion is incorporated into this Part II, Item 1 by reference.
Item 1A. Risk Factors
For a discussion of our risk factors, see “Part I, Item 1A—Risk Factors” in our Annual Report and “Part II, Item 1A—Risk Factors” in our Q1 Quarterly Report. There have been no material changes from the risk factors disclosed in such reports.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 16, 2011, our board of directors authorized the continuation of the Alkermes, Inc. program to repurchase up to $215.0 million of our ordinary shares at the discretion of management from time to time in the open market or through privately negotiated transactions. We did not purchase any shares under this program during the six months ended June 30, 2023. As of June 30, 2023, we had purchased a total of 8,866,342 shares under this program at an aggregate cost of $114.0 million.
During the three months ended June 30, 2023, we acquired 17,822 of our ordinary shares, at an average price of $30.40 per share, to satisfy withholding tax obligations related to the vesting of employee equity awards.
Item 5. Other Information
During the three months ended June 30, 2023, none of the directors or executive officers of the Company
36
Item 6. Exhibits
The following exhibits are filed or furnished as part of this Form 10-Q:
EXHIBIT INDEX
Exhibit No. |
|
Description of Exhibit |
10.1 # |
|
|
10.2 † |
|
|
31.1 # |
|
|
31.2 # |
|
|
32.1 ‡ |
|
|
101.SCH # |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL # |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB # |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE # |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF # |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
104 # |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
# Filed herewith.
‡ Furnished herewith.
† Indicates a management contract or any compensatory plan, contract or arrangement.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
ALKERMES PLC |
|
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Richard F. Pops |
|
|
|
Richard F. Pops |
|
|
|
Chairman and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|||
|
|
|
|
|
By: |
/s/ Iain M. Brown |
|
|
|
Iain M. Brown |
|
|
|
Senior Vice President, Chief Financial Officer |
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
|
|
|
|
|
Date: July 26, 2023 |
|
|
|
38
Exhibit 10.1
AMENDMENT NO. 7 TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 7 TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of June 28, 2023 is entered into by and among Alkermes, Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania (the “Borrower”), Alkermes plc, a company incorporated under the laws of the Republic of Ireland (“Holdings”), Alkermes Pharma Ireland Limited, a private limited company organized under the laws of the Republic of Ireland and a wholly-owned indirect subsidiary of Holdings (“Intermediate Holdco”), Alkermes US Holdings, Inc., a corporation organized under the laws of the State of Delaware and a wholly-owned indirect subsidiary of Holdings (“Holdco”), each of the Guarantors listed on the signature pages hereto, Morgan Stanley Senior Funding, Inc., as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”), and the Lenders party hereto. Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement (as defined below).
PRELIMINARY STATEMENTS:
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto hereby agree as follows:
-2-
-3-
-4-
[Remainder of Page Intentionally Left Blank]
-5-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized officers as of the date first above written.
BORROWER:
ALKERMES, INC., as Borrower
By: /s/ Iain M. Brown
Name: Iain M. Brown
Title: SVP, Chief Financial Officer
[Alkermes, Inc. – Amendment No. 7 to A&R Credit Agreement]
MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent and Collateral Agent
By: Lisa Hanson
Name: Lisa Hanson
Title: Vice President
-7-
Annex A
AMENDMENTS TO THE Credit Agreement
[Attached on the Following Pages]
-8-
Annex A
[Conformed Copy Reflecting Amendment No. 6 to Amended and Restated Credit Agreement, dated as of March 12, 2021]
[Conformed Copy Reflecting Amendment No. 7 to Amended and Restated Credit Agreement, dated as of June 28, 2023]
AMENDED AND RESTATED CREDIT AGREEMENT
among
ALKERMES, INC.,
as Borrower,
ALKERMES PLC,
as Holdings,
ALKERMES PHARMA IRELAND LIMITED,
as Intermediate Holdco,
ALKERMES US HOLDINGS, INC.,
as Holdco,
The Several Lenders
from Time to Time Parties Hereto,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent,
MORGAN STANLEY SENIOR FUNDING, INC. and CITIGROUP GLOBAL MARKETS, INC. and JPMORGAN CHASE BANK, N.A.,
as co-Syndication Agents,
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Collateral Agent
Dated as of September 16, 2011, as amended and restated on September 25, 2012, as amended by the Second Amendment on February 14, 2013, as amended by the Third Amendment on May 22, 2013, as amended by the Fourth Amendment on October 12, 2016, as amended by the Fifth Amendment on March 26, 2018 and, as further amended by the Sixth Amendment on March 12, 2021 and as further amended by the Seventh Amendment on June 28, 2023
MORGAN STANLEY SENIOR FUNDING, INC.,
as Lead Arranger and Bookrunner
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 4950
1.3 Delaware LLC Division 51
1.4 Administraion of Interst Rates 51
SECTION 2. AMOUNT AND TERMS OF TERM COMMITMENTS 51
2.1 Term Commitments 51
2.2 Procedure for Term Loan Borrowing 5152
2.3 Repayment of Term Loans 52
2.4 Incremental Term Loans 5253
2.5 Fees 5455
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS 55
3.1 Optional Prepayments 55
3.2 Mandatory Prepayments; Premayment Premium 5556
3.3 Convesion and Continuation Options 5657
3.4 Limitations on LIBORTerm SOFR Traches 57
3.5 Interst Rates and Payments Dates 57
3.6 Computation of Interst and Fees 58
3.7 Inability to Determine Interest Rate 5859
3.8 Pro Rata Treatment; Application of Payments; Payments 59
3.9 Requirements of Law 60
3.10 Taxes 6162
3.11 Indemnity 65
3.12 Change of Lending Office 6566
-i-
3.13 Replacement of Lenders 6566
3.14 Evidence of Debt 66
3.15 Illegality 67
3.16 Extension Offers 67
3.17 Benchmark Replacement Setting 6869
SECTION 4. REPRESENTATIONS AND WARRANTIES 71
4.1 Financial Condtion 71
4.2 No Change 71
4.3 Corporate Existence; Compliance with Law 71
4.4 Power; Autorization; Enforecable Obligations 7172
4.5 No Legal Bar 72
4.6 Litigation and Adverse Proceedings 72
4.7 [Intentionally Omitted] 7273
4.8 Ownership of Property; Liens 7273
4.9 Intellectual Property 73
4.10 Taxes 7374
4.11 Federal Reserve Regulations 74
4.12 Labor Matters 74
4.13 ERISA 74
4.14 Investment Company Act; Other Regulations 75
4.15 Capital Stock and Ownership Interests of Subsidiaries 75
4.16 Use of Proceeds 75
4.17 Environmental Matters 75
4.18 Accuracy of Information, etc. 76
4.19 Security Documents 7677
4.20 Solvency 77
4.21 Senior Indebtedness 7778
-ii-
4.22 [Intentionally Omitted] 7778
4.23 Anticorruption Laws, Anti-Money Laundering Laws, and Sanctions 7778
4.24 Insurance 78
4.25 Choice of Law 7879
4.26 Centre of Main Interests 7879
4.27 Holding Companies 7879
4.28 Beneficial Ownership 79
SECTION 5. CONDITIONS PRECEDENT 79
5.1 Conditions to Extension of Credit 79
5.2 Conditions to Each Incremental Term Loan 79
SECTION 6. AFFIRMATIVE COVENANTS 7980
6.1 Financial Statements 7980
6.2 Certificates; Other Information 81
6.3 Payment of Taxes 82
6.4 Maintenance of Existence; Compliance 8283
6.5 Maintenance of Property; Insurance 83
6.6 Inspection of Property; Books and Records; Discussions 83
6.7 Notices 84
6.8 Environmental Laws 8485
6.9 Anticorruption Laws, Anti-Money Laundering Laws and Sanctions. 85
6.10 Post-Closing; Additional Collateral, etc. 85
6.11 Further Assurances 89
6.12 Rated Credit Facility; Corporate Ratings 89
6.13 Use of Proceeds 89
6.14 [Intentionally Omitted] 89
6.15 Intellectual Property 8990
6.16 Designation of Subsidiaries 8990
-iii-
SECTION 7. NEGATIVE COVENANTS 90
7.1 Indebtedness 90
7.2 Liens 93
7.3 Fundamental Changes 96
7.4 Disposition of Property 97
7.5 Restricted Payments 99
7.6 Investments 100
7.7 Optional Payments and Modifications of Certain Debt Instruments 102103
7.8 Transactions with Affiliates 103
7.9 [Intentionally Omitted] 103104
7.10 [Intentionally Omitted] 103104
7.11 Changes in Fiscal Periods; Accounting Changes 103104
7.12 Negative Pledge Clauses 103104
7.13 Clauses Restricting Subsidiary Distributions 104105
7.14 Lines of Business 105106
7.15 [Intentionally Omitted] 105106
7.16 Holding Company 106
7.17 Alkermes Ireland Holdings Limited 106
SECTION 8. EVENTS OF DEFAULT 106107
8.1 Events of Default 106107
SECTION 9. THE AGENTS 109110
9.1 Appointment 109110
9.2 Delegation of Duties 110
9.3 Exculpatory Provisions 110
9.4 Reliance by Agents 110111
9.5 Notice of Default 111
9.6 Non Reliance on Agents and Other Lenders 111
-iv-
9.7 Indemnification 112
9.8 Agent in Its Individual Capacity 112
9.9 Successor Administrative Agent 112
9.10 Agents Generally 113
9.11 Lender Action 113
9.12 Withholding Tax 113114
9.13 Administrative Agent May File Proof of Claims 114
9.14 Lender Representations 114115
9.15 Return of Certain Payments 115116
SECTION 10. MISCELLANEOUS 116117
10.1 Amendments and Waivers 116117
10.2 Notices 119
10.3 No Waiver; Cumulative Remedies 121122
10.4 Survival of Representations and Warranties 121122
10.5 Payment of Expenses and Taxes; Indemnity 121122
10.6 Successors and Assigns; Participations and Assignments 123124
10.7 Sharing of Payments; Set-off 129
10.8 Counterparts 130
10.9 Severability 130
10.10 Integration 130
10.11 GOVERNING LAW 130131
10.12 Submission To Jurisdiction; Waivers 130131
10.13 Acknowledgments 131
10.14 Releases of Guarantees and Liens 131132
10.15 Confidentiality 132
10.16 WAIVERS OF JURY TRIAL 133
10.17 Judgment Currency 133
-v-
10.18 Patriot Act Notice 133134
10.19 Acknowledgment and Consent to Bail-In of Affected Financial Institutions 133134
10.20 Acknowledgement Regarding Any Supported QFCs 134
-vi-
ANNEX:
A Guarantee and Security Principles
SCHEDULES:
1.1 Commitments
4.15 Subsidiaries
4.19 UCC Filing Jurisdictions
4.24 Insurance
7.1 Existing Indebtedness
7.2 Existing Liens
7.6 Existing Investments
7.12 Clauses Restricting Negative Pledges
7.13 Clauses Restricting Subsidiary Distributions
EXHIBITS:
A Form of Assignment and Assumption
B Form of Borrowing Notice
C [Intentionally Omitted]
D-1 Form of Tax Status Certificate (For Non U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
D-2 Form of Tax Status Certificate (For Non U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
D-3 Form of Tax Status Certificate (For Non U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
D-4 Form of Tax Status Certificate (For Non U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
E Form of Term Note
F-1 Form of Closing Certificate
F-2 Form of Compliance Certificate
G Form of Intellectual Property Security Agreement
H Form of Intercompany Note
I-1 Form of Perfection Certificate
I-2 Form of Perfection Certificate Supplement
-vii-
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 16, 2011, as amended and restated on September 25, 2012, as amended by the Second Amendment on February 14, 2013, as further amended by the Third Amendment on May 22, 2013, as further amended by the Fourth Amendment on October 12, 2016, as further amended by the Fifth Amendment on March 26, 2018, and as further amended by the Sixth Amendment on March 12, 2021, and as further amended by the Seventh Amendment on June 28, 2023, among ALKERMES, INC., a corporation organized under the laws of the Commonwealth of Pennsylvania (the “Borrower”), ALKERMES PLC, a company incorporated under the laws of the Republic of Ireland (registered number 498284) (“Holdings”), ALKERMES PHARMA IRELAND LIMITED, a private limited company organized under the laws of the Republic of Ireland (registered number 448848) and a wholly owned indirect subsidiary of Holdings (the “Intermediate Holdco”) and ALKERMES US HOLDINGS, INC., a Delaware corporation and a wholly owned subsidiary of Intermediate Holdco (“Holdco”), the several banks and other financial institutions or entities from time to time parties to this Agreement as “Lenders”, MORGAN STANLEY SENIOR FUNDING, INC. (“MSSF”), as administrative agent (in such capacity, and together with its successors and assigns in such capacity, the “Administrative Agent”), MORGAN STANLEY SENIOR FUNDING, INC., CITIGROUP GLOBAL MARKETS, INC. and J.P. MORGAN SECURITIES LLC, as co-syndication agents (in such capacity, the “Syndication Agents”), and MORGAN STANLEY SENIOR FUNDING, INC., as collateral agent (in such capacity, and together with its successors and assigns in such capacity, the “Collateral Agent”).
WHEREAS, the Borrower, Holdings, Intermediate Holdco, and Holdco are parties to the First Lien Term Loan Credit Agreement dated as of September 16, 2011 (as heretofore modified and supplemented and in effect immediately prior to the effectiveness of this Agreement, the “Original Credit Agreement”) with the financial institutions party thereto as lenders and the Administrative Agent;
WHEREAS, in connection with the transactions contemplated by the First Amendment, the Borrower requested that the Lenders make available the Term Commitments and the Term Loans on the Restatement Effective Date, the proceeds of which were used, together with cash-on hand of the Borrower, among other things, to refinance the existing indebtedness under the Original Credit Agreement, the Second Lien Credit Agreement, and to pay related fees and expenses;
WHEREAS, as of February 14, 2013, the Borrower, Holdings, Intermediate Holdco, Holdco, the other Guarantors party thereto, the Lenders party thereto, the Administrative Agent and the Collateral Agent entered into the Second Amendment, which amended the terms of this Agreement as of the Second Amendment Effective Date;
WHEREAS, as of May 22, 2013, the Borrower, Holdings, Intermediate Holdco, Holdco, the other Guarantors party thereto, the Lenders party thereto, the Administrative Agent and the Collateral Agent entered into the Third Amendment, which amended the terms of this Agreement as of the Third Amendment Effective Date;
1
WHEREAS, as of October 12, 2016, the Borrower, Holdings, Intermediate Holdco, Holdco, the other Guarantors party thereto, the Lenders party thereto, the Administrative Agent and the Collateral Agent entered into the Fourth Amendment, which amended the terms of this Agreement as of the Fourth Amendment Effective Date;
WHEREAS, as of March 26, 2018, the Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Lenders party thereto, the Administrative Agent and the Collateral Agent entered into the Fifth Amendment, which amended the terms of this Agreement as of the Fifth Amendment Effective Date;
WHEREAS, as of March 12, 2021, the Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Lenders party thereto, the Administrative Agent and the Collateral Agent entered into the Sixth Amendment, which amended the terms of this Agreement as of the Sixth Amendment Effective Date and pursuant to which the Borrower has requested that the Lenders make available the 2026 Term Commitments and the 2026 Term Loans on the Sixth Amendment Effective Date, the proceeds of which will be used (i), to the extent such 2026 Term Loans constitute Replacement Term Loans hereunder, to refinance the 2023 Term Loans in full (the “Sixth Amendment Refinancing”) and (ii), to the extent such 2026 Term Loans constitute Incremental Term Loans hereunder (the “2026 Term Loan Upsize”), for general corporate purposes to the extent not prohibited by the terms of this Agreement; and
WHEREAS, the Lenders are willing to make available the Term Commitments for such purposes on the terms and subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the agreements, provisions and covenants contained herein, the parties hereto agree that on the Restatement Effective Date the Original Credit Agreement shall be amended and restated as follows:
“2016 Term Commitment”: as to any 2016 Term Lender, the obligation of such 2016 Term Lender, if any, to make a 2016 Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth on Schedule 1.1(a) or in the Assignment and Assumption pursuant to which such 2016 Term Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the 2016 Term Commitments on the Restatement Effective Date was $75,000,000.
“2016 Term Lender”: each Lender that had a 2016 Term Commitment or that held a 2016 Term Loan.
“2016 Term Loan”: as defined in Section 2.1(a).
“2019 Term Commitment”: as to any 2019 Term Lender, the obligation of such 2019 Term Lender, if any, to make a 2019 Term Loan to the Borrower hereunder in a principal
-2-
amount not to exceed the amount set forth on Schedule 1.1(b) or in the Assignment and Assumption pursuant to which such 2019 Term Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the 2019 Term Commitments on the Restatement Effective Date was $300,000,000.
“2019 Term Lender”: each Lender that had a 2019 Term Commitment or that held a 2019 Term Loan.
“2019 Term Loan”: as defined in Section 2.1(b).
“2021 Term Lender”: each Lender that held a 2021 Term Loan.
“2021 Term Loan”: as defined in Section 2.1(b).
“2023 Term Commitment”: as to any 2023 Term Lender, the obligation of such 2023 Term Lender (a) to continue its Existing Term Loans (as defined in the Fifth Amendment) as a 2023 Term Loan or (b) to make a 2023 Term Loan in the amount provided for in the Fifth Amendment. The original aggregate amount of the 2023 Term Commitments on the Fifth Amendment Effective Date was $284,250,000.
“2023 Term Facility”: the 2023 Term Loans made hereunder.
“2023 Term Lender”: each Lender that has a 2023 Term Commitment or that holds a 2023 Term Loan.
“2023 Term Loan”: as defined in Section 2.1(c).
“2026 Term Commitment”: as to any 2026 Term Lender, the obligation of such 2026 Term Lender to make a 2026 Term Loan (which may be through an exchange of 2023 Term Loans for 2026 Term Loans) in the amount provided for in the Sixth Amendment. The original aggregate amount of the 2026 Term Commitments on the Sixth Amendment Effective Date is $300,000,000.
“2026 Term Facility”: the 2026 Term Loans made hereunder.
“2026 Term Lender”: each Lender that has a 2026 Term Commitment or that holds a 2026 Term Loan.
“2026 Term Loan”: as defined in Section 2.1(d).
“2026 Term Loan Maturity Date”: the date that is five (5) years after the Sixth Amendment Effective Date.
“2026 Term Percentage”: as to any 2026 Term Lender at any time, the percentage which such 2026 Term Lender’s 2026 Term Commitment then constitutes of the aggregate 2026 Term Commitments (or, at any time after the Sixth Amendment Effective Date, the percentage which the aggregate principal amount of such 2026 Term Lender’s 2026 Term
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Loans then outstanding constitutes the aggregate principal amount of the 2026 Term Loans then outstanding).
“2026 Term Loan Upsize”: as defined in the recitals to this Agreement.
“ABR”: a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of (a) the rate of interest published by the Wall Street Journal, from time to time, as the “U.S. Prime Rate,” (b) ½ of 1% per annum above the Federal Funds Effective Rate; (c) the LIBOR RateTerm SOFR for an Interest Period of one month plus 1.00%, as adjusted to conform to changes as of the opening of business on the date of any such change of the LIBOR RateTerm SOFR; and (d) the ABR Floor.
“ABR Floor”: with respect to the 2026 Term Loans, 1.50%.
“ABR Loans”: Term Loans the rate of interest applicable to which is based upon the ABR.
“ABR Term SOFR Determination Day”: as defined in the definition of “Term SOFR.”
“Acquisition Agreement”: the Business Combination Agreement and Plan of Merger, dated as of May 9, 2011, by and among Elan Corporation, plc, a public limited company incorporated under the laws of the Republic of Ireland (registered number 30356), Holdings, Elan Science Four Limited (n/k/a Alkermes Ireland Holdings Limited), a private limited company incorporated under the laws of the Republic of Ireland (registered number 476691), Intermediate Holdco, Holdco, Merger Sub and the Borrower.
“Acquired Person”: as defined in Section 7.1(i).
“Adjusted Daily Simple SOFR”: an interest rate per annum equal to (a) the Daily Simple SOFR, plus (b) a percentage per annum as set forth below for the applicable Interest Period therefor; provided that if the Adjusted Daily Simple SOFR as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
Interest Period |
Percentage |
One month |
0.11448% |
Three months |
0.26161% |
Six months |
0.42826% |
“Adjusted Term SOFR”: for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if
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Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent”: as defined in the preamble to this Agreement.
“Administrative Agent Parties”: as defined in Section 10.2(c).
“Affected Financial Institution”: (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Lender”: as defined in Section 3.13.
“Affiliate”: as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the possession, direct or indirect, of the power to direct or cause the direction of management or policies of a Person, whether through ownership of securities, by contract or otherwise; provided, however, that, for purposes of Section 7.8, the term “Affiliate” shall also include (i) any person that directly or indirectly owns more than 10% of any class of Capital Stock of the person specified or (ii) any person that is an officer or director of the person specified.
“Agent Related Parties”: the Administrative Agent, the Collateral Agent, and any of their respective Affiliates, officers, directors, employees, agents, advisors or representatives.
“Agents”: the collective reference to the Administrative Agent, the Collateral Agent, the Syndication Agents and the Lead Arrangers.
“Agreed Security Principles”: the principles set forth in Annex A.
“Agreement”: this Amended and Restated Credit Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Anticorruption Laws”: the FCPA and any other anticorruption or anti-bribery laws, rules and regulations of any applicable jurisdiction, including but not limited to the UK 2010 Bribery Act.
“Anti-Money Laundering Laws”: any applicable laws, statutes, and regulations and orders relating to money laundering, including the USA PATRIOT Act.
“Applicable Margin”: in the case of 2026 Term Loans, 2.50% for LIBOR RateSOFR Loans and 1.50% for ABR Loans.
“Approved Fund”: with respect to any Lender, any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans, or similar extensions of credit in the ordinary course and is administered or managed by (a) such Lender, (b) an Affiliate of such Lender, or (c) an entity or an Affiliate of an entity that administers or manages such Lender.
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“Asset Sale”: any Disposition of Property or series of related Dispositions of Property (in each case, other than Intellectual Property), including, without limitation, any issuance of Capital Stock of any Subsidiary of Holdings to a Person other than to any Group Member (excluding in any case any such Disposition permitted by Section 7.4 other than Section 7.4(r)) that yields gross proceeds to any Group Member (valued at the initial principal amount thereof in the case of non‑cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non‑cash proceeds) in excess of $7,500,000.
“Assignee”: as defined in Section 10.6(b).
“Assignment and Assumption”: an assignment and assumption entered into by a Lender and an Eligible Assignee and accepted by the Administrative Agent, and, if applicable, the Borrower, substantially in the form of Exhibit A.
“Assignment Effective Date”: as defined in Section 10.6(d).
“Available Amount” at any time, an amount, to the extent Not Otherwise Applied, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication:
(a) the aggregate amount of Net Cash Proceeds of any capital contributions (that is converted or exchanged for Qualified Capital Stock) or issuances of Qualified Capital Stock (or for Qualified Capital Stock issued upon conversion of debt securities) received or made by Holdings (other than Section 7.5(d)) since the Original Closing Date; plus
(b) the cumulative amount of Excess Cash Flow for each fiscal year ending after the Restatement Effective Date for which financial statements have been delivered pursuant to Section 6.1(a) minus the portion of such Excess Cash Flow that has been applied toward the prepayment of Term Loans in accordance with Section 3.2(c) after the Restatement Effective Date; less
(c) any usage of such Available Amount pursuant to Sections 7.5(g), 7.5(j), 7.6(u) and 7.7(a)(i).
“Available Amount Condition”: after giving effect to any usage of the Available Amount, either (i) the Consolidated Leverage Ratio, on a pro forma basis, as of the last day of the period of four (4) fiscal quarters most recently completed for which financial statements were required to have been delivered pursuant to Section 6.1 is less than or equal to 4.50:1.00 or (ii) the Fixed Charge Coverage Ratio, on a pro forma basis, as of the last day of the period of four (4) fiscal quarters most recently completed for which financial statements were required to have been delivered pursuant to Section 6.1, is (A) greater than or equal to 2.00:1.00 or (B) no less than the Fixed Charge Coverage Ratio as of immediately prior to the transaction with respect to which such ratio is being measured.
“Available Tenor”: as of any date of determination and with respect to the then-current Benchmark, any tenor for such Benchmark or payment period for interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and, for the avoidance of doubt,
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shall exclude any tenor for such Benchmark that is removed from the definition of “Interest Period” pursuant to clause (d) of Section 3.17.
“Bail-In Action”: the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation”: (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Benchmark”: initially, LIBORthe Term SOFR Reference Rate; provided that, if a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and the Benchmark Replacement Date with respect thereto have occurred with respect to LIBORthe Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to clause (a) of Section 3.17.
“Benchmark Replacement”: for any Available Tenorwith respect to any Benchmark Transition Event, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(1) the sum of: (a) Term SOFR and (b) the Benchmark Replacement Adjustment with respect thereto[reserved];
(2) the sum of: (a)Adjusted Daily Simple SOFR and (b) the Benchmark Replacement Adjustment with respect thereto; or
(3) the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time and (b) the Benchmark Replacement Adjustment with respect thereto;
provided that (and subject to the obligation in the last sentence of Section 3.7(a)), in the case of clause (1) of this definition, such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion.
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If at any time the Benchmark Replacement as determined pursuant to clause (1), (2) or (3) of this definition would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment”: with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the first alternative set forth in the order below that can be determined by the Administrative Agent:
(a) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” Adjustment”: with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (ia) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (iib) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities; at such time.
provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrative Agent in its reasonable discretion.
“Benchmark Replacement Conforming Changes”: with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any
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Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent (in consultation with the Borrower) decides may be appropriate to reflect the adoption and implementation of any such Benchmark Replacement andrate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides (in consultation with the Borrower) that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines (in consultation with the Borrower) that no market practice for the administration of such Benchmark Replacementany such rate exists, in such other manner of administration as the Administrative Agent decides (in consultation with the Borrower) is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date”: the earliest to occur of the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the first date of the publicon which such Benchmark (or the published component used in the calculation thereof) has been or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) have been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication of information referenced thereinin such clause (3) and even if such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date; or
(3) in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination,
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the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event”: the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark, (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longernot, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period”: the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.17 and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.17.
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“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership to the extent required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
“Benefited Lender”: as defined in Section 10.7(a).
“Benefit Plan”: any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party shall mean an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Blocked Person”: as defined in Section 4.23(c).
“Blocking Regulation”: any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996, as amended, (or any law or regulation implementing such Regulation in any member state of the European Union or the United Kingdom) or any similar blocking or anti-boycott law, regulation or statute in force from time to time.
“Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).
“Borrower”: as defined in the preamble to this Agreement.
“Borrowing Date”: any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, that with respect to notices and determinations in connection with, and payments of principal and interest on, LIBOR Rate Loans, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market..
“Capital Expenditures”: for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets (including Capitalized Software Expenditures) or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries, excluding expenditures financed with any Reinvestment Deferred Amount to the extent otherwise not taken into account in determining Consolidated Net Income.
“Capitalized Software Expenditures” shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by Holdings, the Borrower and the Restricted Subsidiaries during such period in respect of licensed or purchased software or
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internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of Holdings, the Borrower and the Restricted Subsidiaries.
“Capital Lease Obligations”: as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
“Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing; provided that Capital Stock shall not include any debt securities that are convertible into or exchangeable for any of the foregoing Capital Stock.
“Cash Collateralize”: in respect of an obligation, provide and pledge cash collateral in Dollars, or provide a letter of credit issued by a person reasonably satisfactory to the Administrative Agent, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent (and “Cash Collateralization” has a corresponding meaning).
“Cash Equivalents”:
(a) Dollars, Euros, Pounds Sterling and Swiss Francs (and such other currency that is approved by the Administrative Agent) held in the ordinary course of business of the relevant Person;
(b) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year from the date of acquisition;
(c) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of one (1) year or less from the date of acquisition issued by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000;
(d) commercial paper of an issuer rated at least A-1 by S&P or P‑1 by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within one (1) year from the date of acquisition;
(e) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than thirty (30) days, with respect to securities issued or fully guaranteed or insured by the United States government;
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(f) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s;
(g) securities with maturities of one (1) year or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition; or
(h) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, as amended and (ii) are rated AAA by S&P and Aaa by Moody’s.
“CFC”: (i) any entity that is treated as a “controlled foreign corporation” within the meaning of Section 957 of the Code and or (ii) any Subsidiary of a CFC.
“CFC Holdco” means a Domestic Subsidiary with no material assets other than capital stock (and debt securities, if any) of one or more Subsidiaries that are CFCs, or of other CFC Holdcos.
“Change of Control”: an event or series of events by which:
(a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such Person or its Subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, directly or indirectly, of thirty-five percent (35%) or more of the equity securities of Holdings entitled to vote for members of the board of directors or equivalent governing body of Holdings on a fully‑diluted basis;
(b) at any time after the Restatement Effective Date, during any period of twenty-four (24) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election, nomination or appointment to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or
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(c) (i) Holdings shall cease to beneficially own and control 100% on a fully diluted basis of the economic and voting interest in the Capital Stock of Alkermes Ireland Holdings Limited or (ii) Holdco shall cease to beneficially own and control 100% on a fully diluted basis of the economic and voting interest in the Capital Stock of the Borrower.
“Code”: the Internal Revenue Code of 1986, as amended from time to time.
“Collateral”: all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.
“Collateral Agent”: as defined in the preamble to this Agreement.
“Commitment”: the Term Commitment of any Lender.
“Commodity Exchange Act”: the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from to time, and any successor statute.
“Commonly Controlled Entity”: an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.
“Communications”: as defined in Section 10.2(b).
“Compliance Certificate”: a certificate duly executed by a Responsible Officer substantially in the form of Exhibit F-2.
“Confidential Information Memorandum”: the Confidential Information Memorandum dated September 10, 2012 and furnished to the Lenders in connection with the syndication of the Term Facilities.
“Consolidated Current Assets”: at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Loan Parties at such date.
“Consolidated Current Liabilities”: at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Loan Parties at such date, but excluding the current portion of any Funded Debt, the current portion of interest expense (other than interest expense that is due and unpaid) and the current portion of current and deferred Taxes based upon income or profits of the Loan Parties.
“Consolidated EBITDA”: for any period, for Holdings, the Borrower and the Restricted Subsidiaries on a consolidated basis, without duplication, an amount equal to Consolidated Net Income for such period plus (a) the following, in each case, to the extent deducted (and not added back) in calculating such Consolidated Net Income:
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(i) provisions for Taxes based on income or profits or capital, plus franchise or similar taxes and foreign withholding taxes;
(ii) interest expense, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Term Loans) for such period;
(iii) depreciation and amortization expense;
(iv) non‑cash stock-based compensation expense for such period;
(v) all extraordinary, unusual or nonrecurring cash expenses and charges for such period;
(vi) non‑cash purchase accounting adjustments;
(vii) costs and expenses incurred in connection with the transactions consummated under the Acquisition Agreement and the Transaction;
(viii) any net loss from disposed or discontinued operations;
(ix) all customary costs and expenses incurred or paid in connection with Investments (including Permitted Acquisitions) whether or not such Investment is consummated;
(x) the amount of any minority interest expense (or income (loss) allocable to noncontrolling interests) consisting of Subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned Restricted Subsidiary of Holdings;
(xi) all customary costs and expenses incurred in connection with the issuance, prepayment or amendment or refinancing of Indebtedness permitted hereunder or issuance of Capital Stock;
(xii) other expenses reducing such Consolidated Net Income which do not represent a cash item in such period (but excluding any such charge which requires an accrual of, or a cash reserve for, anticipated cash charges in any future period);
(xiii) the aggregate net loss on the Disposition of property (other than accounts (as defined in the Uniform Commercial Code) and inventory) outside the ordinary course of business;
(xiv) the amount of net cost savings and synergies projected by the Borrower in good faith as a result of actions taken or committed to be taken (including pursuant to internal procedures) no later than twelve (12) months following the end of such period (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (A) such cost savings and synergies are reasonably identifiable and factually supportable, (B) no cost savings shall be added
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pursuant to this clause (xiv) to the extent duplicative of any such expenses or changes that are included in clauses (v), (viii), (xii) and (xiii) above and clause (xvi) below with respect to such period, and (C) the benefits resulting therefrom are anticipated by the Borrower to be realized commencing not later than twelve (12) months of such actions having been taken, or having been committed to be taken; and provided, further, that the aggregate amount of net cost savings and synergies resulting from the transactions consummated under the Acquisition Agreement and the Transaction that are added back pursuant to this clause (xiv) shall not exceed $20,000,000 in the aggregate in any period;
(xv) any expenses or charge for such period to the extent covered by, and actually reimbursed by, the insurer within 180 days with respect to any business interruption insurance or similar insurance of Holdings, the Borrower or any Restricted Subsidiary in respect thereof; and
(xvi) the actual amount of any restructuring charges, integration and facilities opening costs or other business optimization expenses (including cost and expenses relating to business optimization programs and new systems design and implementation costs) and project start-up costs; provided that no such restructuring charges, integration or optimization expenses shall be added pursuant to this clause (xvi), to the extent they are duplicative of any such expenses or changes that are included in clauses (v), (viii), (xii), (xiii) and (xiv) above;
less (b) the following to the extent added in calculating such Consolidated Net Income of the Loan Parties:
(A) all interest income for such period,
(B) all Tax benefits for such period to the extent not netted in determining the amount for clause (a)(i) above,
(C) non‑cash purchase accounting adjustments,
(D) (i) the aggregate net gain from the Disposition of property (other than accounts (as defined in the Uniform Commercial Code) and inventory) outside the ordinary course of business, (ii) any net gain from disposed or discontinued operations, (iii) all extraordinary, unusual or nonrecurring gains for such period, and (iv) all non‑cash items increasing Consolidated Net Income which do not represent a cash item in such period or any future period (but excluding any such items (x) in respect of which cash was received in a prior period or will be received in a future period or (y) which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period), and
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(E) the amount of minority interest income (or income (loss) allocable to noncontrolling interests) consisting of Subsidiary loss attributable to minority equity interests of third parties in any non‑wholly owned Restricted Subsidiary of Holdings.
For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”) pursuant to any determination hereunder, (x) if at any time during such Reference Period any Group Member shall have made any Asset Sale, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Asset Sale for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, in each case assuming the repayment of Indebtedness in connection therewith occurred as of the first day of such Reference Period and (y) if during such Reference Period any Group Member shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period.
As used in this definition only, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person.
“Consolidated Funded Debt”: at any date, the aggregate principal amount of all Indebtedness of the type described in clauses (a), (b) (to the extent of Earn-Out Obligations and other similar obligations), (c), (e), (f) (to the extent of any unreimbursed drawings), (g) and (h) of the definition of such term of the Loan Parties at such date, determined on a consolidated basis in accordance with GAAP.
“Consolidated Leverage Ratio”: at any date, the ratio of (a) Consolidated Funded Debt as of such date minus the aggregate amount of cash and Cash Equivalents (in each case, free and clear of all Liens other than non‑consensual liens permitted by Section 7.2 or other Liens permitted by Sections 7.2(h) or 7.2(w)) included in the consolidated balance sheet of Holdings, the Borrower and the Restricted Subsidiaries as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ended on such date.
“Consolidated Net Income”: for any period, the consolidated net income (or loss) of Holdings, the Borrower and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP; (a) the undistributed earnings of any Subsidiary of Holdings that is not a Loan Party or a direct or indirect parent entity of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document), its Organizational Documents or Requirement of Law applicable to such Subsidiary shall be excluded; (b) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period shall be excluded; (c) effects of adjustments in the inventory, property and equipment, software, goodwill, other intangible assets, in-process research and development, deferred revenue and debt line items in consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the transactions consummated under the Acquisition Agreement, net of
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taxes, shall be excluded provided that this clause (c) shall not include the recognition of deferred revenue for any period subsequent to the Original Closing Date; (d) any after-tax effect of income (loss) from the early extinguishment of (i) Indebtedness, (ii) obligations under any Hedge Agreements or (iii) other derivative instruments, in each case, solely to the extent permitted under this Agreement shall be excluded; (e) any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with any Permitted Acquisition, Investment, Disposition, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to the Term Loans), issuance of Qualified Capital Stock, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of the Term Loans and any credit facilities) and including, in each case, any such transaction undertaken but not completed, and any charges or non‑recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful, in each case, solely to the extent permitted under this Agreement, shall be excluded; (f) losses or gains on asset sales (other than asset sales made in the ordinary course of business) shall be excluded (but solely to the extent such sales are permitted under this Agreement), and (g) the following items shall be excluded, in each case, solely to the extent permitted under this Agreement: (i) any net unrealized gain or loss (after any offset) resulting in such period from obligations under any Hedge Agreements and the application of Statement of Financial Accounting Standards No. 133; and (ii) any net unrealized gain or loss (after any offset) resulting in such period from currency translation gains or losses including those (x) related to currency remeasurements of Indebtedness and (y) resulting from Hedge Agreements for currency exchange risk. In addition, to the extent not already included, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance.
“Consolidated Total Assets”: as of the date of any determination thereof, total assets of Holdings, the Borrower and the Restricted Subsidiaries calculated in accordance with GAAP on a consolidated basis as of such date.
“Consolidated Working Capital”: at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date.
“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Control Agreement”: shall have the meaning assigned to such term in the Guaranty and Collateral Agreement.
“Corporate Family Rating”: an opinion issued by Moody’s of a corporate family’s ability to honor all of its financial obligations that is assigned to a corporate family as if it had a single class of debt and a single consolidated legal entity structure.
“Corporate Rating”: an opinion issued by S&P of an obligor’s overall financial capacity (its creditworthiness) to pay its financial obligations.
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“Corresponding Tenor”: with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Covered Entity” shall mean any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” shall have the meaning assigned to such term in Section 10.20.
“Daily Simple SOFR”: for any day, SOFR, with the conventions for this rate (which may include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided that, if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion.
“Debentures”: the First Lien Irish law security documents entered into or to be entered into by Holdings, Intermediate Holdco and any other Subsidiary Guarantor that is not a CFC or CFC Holdco incorporated in Ireland or which has an interest in material property, assets or rights which are governed by Irish law or which are situated or deemed to be situated in Ireland, in favor of, or for the benefit of, the Collateral Agent for the benefit of the Secured Parties, which shall be in a form reasonably satisfactory to the Administrative Agent and the Collateral Agent.
“Default”: any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“Defaulting Lender”: at any time, any Lender (a) that has failed for to comply with its obligations under Section 2.1 of this Agreement (a “funding obligation”), (b) that has notified the Administrative Agent or the Borrower, or has stated publicly, that it will not comply with any such funding obligation hereunder, (c) that has failed to confirm in writing to the Administrative Agent, in response to a written request of the Administrative Agent, that it will comply with its funding obligations hereunder, or (d) with respect to which a Lender Insolvency Event has occurred and is continuing; provided that (i) the Administrative Agent and the Borrower may declare (A) by joint notice to the Lenders that a Defaulting Lender is no longer a “Defaulting Lender” or (B) that a Lender is not a Defaulting Lender if in the case of both clauses (a) and (b) the Administrative Agent and the Borrower each determines, in its reasonable discretion, that (x) the circumstances that resulted in such Lender becoming a “Defaulting Lender” no longer apply or (y) it is satisfied that such Lender will continue to perform its funding obligations hereunder and (ii) a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of voting stock or any other equity interest in such Lender or a parent company thereof by a Governmental Authority or an instrumentality thereof unless such ownership or acquisition results in or provides such Lender with immunity from the jurisdiction
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of the courts within the United States from the enforcement of judgments, writs of attachment on its assets or permits such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Lender. The Administrative Agent will promptly send to all parties hereto a notice when it becomes aware that a Lender is a Defaulting Lender.
“Default Right” shall have the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Designated Non-Cash Consideration”: the fair market value of non-cash consideration received by a Group Member in connection with a Disposition pursuant to Section 7.4(r) that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of the Borrower, setting forth the basis of such valuation (which amount will be reduced by the fair market value of the portion of the non-cash consideration converted to cash within 180 days following the consummation of the applicable Disposition).
“Disposition”: with respect to any Property, any sale, lease, Exclusive License, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.
“Disqualified Capital Stock”: any Capital Stock that is not Qualified Capital Stock.
“Disqualified Institution”: a company that is primarily engaged in the development, manufacture, marketing and commercialization of biotechnology and/or pharmaceuticals or any of its Affiliates (other than any Affiliate of such Disqualified Institution that is a bona fide debt fund of a private equity firm that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course).
“Dollars” and “$”: dollars in lawful currency of the United States.
“Domestic Subsidiary”: any Subsidiary that is a “United States Person,” as defined in the Code, other than a CFC.
“Early Opt-in Election”: if the then-current Benchmark is LIBORTerm SOFR, the occurrence of:
(1) a notification by the Administrative Agent to (or the request by the Borrower to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding U. S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) aan other SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
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(2) the joint election by the Administrative Agent and the Borrower to trigger a fallback from LIBORTerm SOFR and the provision by the Administrative Agent of written notice of such election to the Lenders.
“Earn-Out Obligations”: those certain unsecured obligations of Holdings or any Subsidiary arising in connection with any acquisition of assets or businesses permitted under Section 7.6 to the seller of such assets or businesses and the payment of which is dependent on the future earnings or performance of such assets or businesses and contained in the agreement relating to such acquisition or in an employment agreement delivered in connection therewith.
“ECF Percentage”: 50%; provided that, with respect to each fiscal year of Holdings commencing with the fiscal year ending December 31, 2013, the ECF Percentage shall be reduced to (a) 25% if the Consolidated Leverage Ratio as of the last day of such fiscal year is less than 3.00 to 1.00 but greater than or equal to 2.00 to 1.00 and (b) 0% if the Consolidated Leverage Ratio as of the last day of such fiscal year is less than 2.00 to 1.00.
“EEA Financial Institution”: (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country”: any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority”: any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Electronic Signature”: an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Eligible Assignee”: any Assignee permitted by and consented to in accordance with Section 10.6(b); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Disqualified Institution.
“Environment”: ambient air, indoor air, surface water, groundwater, drinking water, land surface and subsurface strata, and natural resources such as wetlands, flora and fauna.
“Environmental Laws”: any and all applicable foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) relating to pollution or protection of the Environment, including those relating to use, generation, storage, treatment, transport, Release or threat of Release of Materials of Environmental Concern, or to protection of human or animal health or safety (to the extent relating to exposure to Materials of Environmental Concern), as now or may at any time hereafter be in effect.
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“ERISA”: the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued thereunder.
“EU Bail-In Legislation Schedule”: the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Euro” and the designation “€” shall mean the single currency of the participating member states of the European Union.
“Eurocurrency Reserve Requirements”: for any day as applied to a LIBOR Rate Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
“Event of Default”: any of the events specified in Section 8; provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“Excess Cash Flow”: for any fiscal year of Holdings, the excess, if any, of:
(a) the sum, without duplication, of:
(i) Consolidated Net Income for such fiscal year;
(ii) the amount of all non‑cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income;
(iii) decreases in Consolidated Working Capital for such fiscal year; and
(iv) the aggregate net amount of non‑cash loss on the Disposition of Property by Holdings, the Borrower and the Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income minus
(b) the sum, without duplication, of:
(i) the amount of all non‑cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (a) though (f) of the definition of Consolidated Net Income;
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(ii) the aggregate amount actually paid by Holdings, the Borrower and the Restricted Subsidiaries in cash during such fiscal year on account of Capital Expenditures and permitted Investments (including Permitted Acquisitions);
(iii) (x) the aggregate amount of all principal payments of Consolidated Funded Debt (including the Term Loans) and (y) all mandatory prepayments of Loans pursuant to Section 3.2, in each case, of Holdings, the Borrower and the Restricted Subsidiaries made during such fiscal year;
(iv) increases in Consolidated Working Capital for such fiscal year;
(v) the aggregate net amount of non‑cash gain on the Disposition of Property by Holdings, the Borrower and the Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business);
(vi) cash payments by Holdings, the Borrower and the Restricted Subsidiaries during such period in respect of long‑term liabilities of Holdings, the Borrower and the Restricted Subsidiaries other than Indebtedness;
(vii) Restricted Payments made by Holdings in cash to holders of its common equity from Internally Generated Cash;
(viii) the amount of cash income Taxes actually paid in such period to the extent they exceed the amount of Tax expense deducted in determining Consolidated Net Income for such period;
(ix) fees, expenses or charges paid in cash related to any permitted Investments (including Permitted Acquisitions), the issuance, payment, amendment or refinancing of Indebtedness permitted under Section 7.1 hereof and the issuance of Capital Stock and Dispositions permitted under Section 7.4 hereof; and
(x) any premium paid in cash during such period in connection with the prepayment, redemption, purchase, defeasance or other satisfaction prior to scheduled maturity of Indebtedness permitted to be prepaid, redeemed, purchased, defeased or satisfied hereunder;
(xi) without duplication of amounts deducted in prior periods (A) the aggregate consideration required to be paid in cash by a Group Member pursuant to binding contracts (the “Contract Consideration”) entered into prior to or during such period relating to Permitted Acquisitions or (B) any planned cash expenditures by Holdings, the Borrower or any of the Restricted Subsidiaries relating to Capital Expenditures or acquisitions of intellectual property (the “Planned Expenditures”), in each case to be consummated or made during the period of four consecutive fiscal quarters of Holdings following the end of such period; provided that, to the extent the aggregate amount of such Permitted Acquisitions, Capital Expenditures or acquisitions of intellectual property actually made during such period of four consecutive fiscal quarters is less than the
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Contract Consideration and the Planned Expenditures, as applicable, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters;
provided that the amounts referenced in clauses (ii), (iii)(y) and (vi) of this paragraph (b) shall not be included in this paragraph (b) and have the effect of reducing Excess Cash Flow to the extent such amounts were funded out of proceeds of Funded Debt.
“Excess Cash Flow Application Date”: as defined in Section 3.2(c).
“Excess Cash Flow Payment Period”: (a) with respect to the prepayment required on the first Excess Cash Flow Application Date, the period from the Restatement Effective Date to December 31, 2013 (taken as one accounting period) and (b) with respect to the prepayment required on each successive Excess Cash Flow Application Date, the immediately preceding fiscal year of Holdings.
“Exchange Act”: the Securities Exchange Act of 1934, as amended.
“Excluded Indebtedness”: all Indebtedness permitted by Section 7.1.
“Excluded Swap Obligation”: with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor, or the grant by such Guarantor of a security interest to secure, as applicable, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor, or the grant of such security interest, as applicable, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.
“Excluded Taxes”: with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Loan Party under any Loan Document, (a) Taxes imposed on or measured by its net income or net profits (however denominated, franchise Taxes imposed on it in lieu of net income Taxes and branch profits (or similar) Taxes imposed on it, in each case, by any jurisdiction (or any political subdivision thereof) (i) as a result of the recipient being organized or having its principal office or, in the case of any Lender, its applicable lending office in such jurisdiction, or (ii) as a result of any other present or former connection between such recipient and such jurisdiction (other than a connection arising primarily as a result of the execution, delivery, or performance by the recipient of its obligations under the Loan Documents, receipt of payments under the Loan Documents or enforcement of rights under the Loan Documents), (b) any U.S. federal withholding Tax that (i) is imposed on amounts payable to a Lender under any laws in effect at the time such Lender becomes a party hereto (or designates a new lending office), except to the extent that, in the case where a Lender designated a new lending office, such Lender, or in the
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case of an assignment, the assignor, was entitled, immediately prior to the time of designation of a new lending office or assignment as the case may be, to receive additional amounts from the Borrower with respect to such Tax pursuant to Section 3.10(a); or (ii) is attributable to such Lender’s failure to comply with Section 3.10(e) and (c) any Taxes that are imposed pursuant to FATCA.
“Exclusive License”: any license by a Person of its owned Intellectual Property to a third party for a term greater than two (2) years and which provides such licensee exclusive rights to exploit such Intellectual Property.
“Extension”: as defined in Section 3.16.
“Extension Loan”: as defined in Section 3.16.
“Extension Offer”: as defined in Section 3.16.
“FATCA”: Sections 1471 through 1474 of the Code as of the Sixth Amendment Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future Treasury regulations thereunder or other official administrative interpretations thereof, any agreements entered into pursuant to current Section 1471(b)(1) of the Code as of the date of this Agreement (or any amended or successor version described above) and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“FCPA” the United States Foreign Corrupt Practices Act of 1977, as amended.
“Federal Funds Effective Rate”: for any day, the rate per annum equal to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent in a commercially reasonable manner.
“Federal Reserve Bank of New York’s Website”: the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“FEMA”: the Federal Emergency Management Agency, a component of the U.S. Department of Homeland Security that administers the National Flood Insurance Program.
“Fifth Amendment”: that certain Amendment No. 5 to Amended and Restated Credit Agreement, dated as of March 26, 2018, among Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Administrative Agent and certain Term Lenders party thereto.
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“Fifth Amendment Effective Date”: the date on which all of the conditions contained in Section 4 of the Fifth Amendment have been satisfied or waived by the Administrative Agent.
“First Amendment”: the amendment to the Original Credit Agreement by and among the Borrower, Holdings, Intermediate Holdco, each other Loan Party (as defined therein) party thereto, MSSF, and the lenders from time to time party thereto.
“First Lien Secured Leverage Ratio”: at any date, the ratio of (a) Consolidated Funded Debt secured by a first priority Lien on all or any portion of the Collateral or any other assets of any of the Loan Parties as of such date minus the aggregate amount of cash and Cash Equivalents (in each case, free and clear of all Liens other than non‑consensual liens permitted by Section 7.2 or other Liens permitted by Sections 7.2(h) or 7.2(w)) included in the consolidated balance sheet of Holdings, the Borrower and the Restricted Subsidiaries as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ended on such date.
“Fixed Charge Coverage Ratio”: at any date, the ratio of (a) Consolidated EBITDA for the period of four consecutive fiscal quarters ended on such date to (b) Fixed Charges for such four consecutive fiscal quarter period.
“Fixed Charges”: for any period, total interest expense of Holdings, the Borrower and the Restricted Subsidiaries payable in cash for such period with respect to all outstanding Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, including the interest component under Capital Lease Obligations, but excluding, to the extent included in interest expense, (i) annual agency fees paid to administrative agents and collateral agents under any credit facilities or other debt instruments or documents, (ii) costs associated with obtaining Hedge Agreements and any interest expense attributable to the movement of the mark-to-market valuation of obligations under Hedge Agreements or other derivative instruments, and any one-time cash costs associated with breakage in respect of Hedge Agreements for interest rates, (iii) any interest component relating to accretion or accrual of discounted liabilities, (iv) amortization of deferred financing costs, debt issuance costs (including bridge, commitment and other financing fees), commissions, fees and expenses or expensing of any financing fees or prepayment or redemption premiums or penalty and any other amounts of non-cash interest (including as a result of the effects of acquisition method accounting or pushdown accounting), (v) penalties and interest related to taxes and (vi) any “additional interest” with respect to debt securities.
“Flood Insurance Laws”: collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.
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“Floor”: for the Loans or any tranche thereof, as applicable, the benchmark rate floor (which may be zero), if any, provided for in this Agreement with respect to LIBOR as determined for the 2026 Term Loans or such tranche thereof, as applicable, 0.50%.
“Foreign Lender”: any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“Foreign Pledge Agreement”: a pledge or charge agreement with respect to any Collateral that constitutes Capital Stock of a Foreign Subsidiary, in form and substance reasonably satisfactory to the Administrative Agent; provided that no pledge or charge agreement shall be provided with respect to the Capital Stock of a Subsidiary of the Borrower that is a CFC or CFC Holdco except for a pledge of no more than 65% of the voting Capital Stock of such CFC or CFC Holdco (whether directly, indirectly through a pledge of the voting Capital Stock of an entity that is treated as a disregarded entity for federal income tax purposes and substantially all of the assets of which consist of the voting Capital Stock of one or more of such CFCs or CFC Holdcos, or a combination thereof).
“Foreign Security Document”: as defined in Section 4.19.
“Foreign Subsidiary”: any Subsidiary of Holdings that is not a Domestic Subsidiary.
“Fourth Amendment”: that certain Amendment No. 4 to Amended and Restated Credit Agreement, dated as of October 12, 2016, among Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Administrative Agent and certain Term Lenders party thereto.
“Fourth Amendment Effective Date”: the date on which all of the conditions contained in Section 3 of the Fourth Amendment have been satisfied or waived by the Administrative Agent.
“Funded Debt”: as to any Person, without duplication, (a) all Indebtedness of the type described in clauses (a), (b) (to the extent of Earn-Out Obligations and other similar obligations), (c), (e), (f) (to the extent of any unreimbursed drawings thereunder) and (h) and (b) Indebtedness of the type described in clause (g) of the definition of such term of such Person that matures more than one (1) year from the date of its creation or matures within one (1) year from such date but is renewable or extendible, at the option of such Person, to a date more than one (1) year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one (1) year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Term Loans.
“Funding Office”: the office of the Administrative Agent specified in Section 10.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.
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“GAAP”: generally accepted accounting principles in the United States as in effect from time to time subject to Section 1.2(e).
“Governmental Authority”: any nation or government, any state or other political subdivision thereof, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government (including any supranational bodies such as the European Union or the European Central Bank) and any securities exchange.
“Governmental Authorization”: all laws, rules, regulations, authorizations, consents, decrees, permits, licenses, waivers, privileges, approvals from and filings with all Governmental Authorities necessary in connection with any Group Member’s business.
“Group Members”: the collective reference to Holdings, the Borrower and the Restricted Subsidiaries.
“Guarantee and Collateral Agreement”: the First Lien Guarantee and Collateral Agreement dated as of September 16, 2011 executed and delivered by the Borrower and each other Loan Party that is a party thereto.
“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
“Guarantors”: collectively, the Subsidiary Guarantors.
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“Health Care Laws”: any and all applicable current and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by the Food and Drug Administration, the Center for Medicare and Medicaid Services, the Department of Health and Human Services (“HHS”), the Office of Inspector General of HHS, the Drug Enforcement Administration or any other Governmental Authority (including any professional licensing laws, certificate of need laws and state reimbursement laws), relating in any way to the manufacture, distribution, marketing, sale, supply or other disposition of any product or service of Holdings or any of its Restricted Subsidiaries, the conduct of the business of Holdings or any of its Restricted Subsidiaries, the provision of health care services generally, or to any relationship among Holdings and its Restricted Subsidiaries, on the one hand, and their suppliers and customers and patients and other end-users of their products and services, on the other hand.
“Hedge Agreements”: any agreement with respect to any cap, swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedge Agreement.
“Holdco”: as defined in the preamble to this Agreement.
“Holdings”: as defined in the preamble to this Agreement.
“IFRS”: the International Financial Reporting Standards as issued by the International Accounting Standards Board.
“Immaterial Subsidiary”: any Subsidiary now existing or hereafter acquired or formed and each successor thereto, (a) which accounts for not more than the lesser of 5% of (i) the consolidated gross revenues (after intercompany eliminations) of Holdings, the Borrower and the Restricted Subsidiaries and (ii) the consolidated assets (after intercompany eliminations) of Holdings, the Borrower and the Restricted Subsidiaries, in each case, as of the last day of the most recently completed fiscal quarter as reflected on the financial statements for such quarter, and (b) if the Subsidiaries that constitute Immaterial Subsidiaries pursuant to clause (a) above account for, in the aggregate, more than the lesser of (i) 10% of such consolidated gross revenues (after intercompany eliminations) and (ii) 10% of the consolidated assets (after intercompany eliminations), each as described in clause (b) above, then the term “Immaterial Subsidiary” shall not include each such Subsidiary (starting with the Subsidiary that accounts for the most consolidated gross revenues or consolidated assets and then in descending order) necessary to account for at least 90% of the consolidated gross revenues and 90% of the consolidated assets, each as described in clause (b) above.
“Increase Term Joinder”: as defined in Section 2.4(c).
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“Incremental Lender”: any Person that makes a Term Loan pursuant to Section 2.4 or has a commitment to make an Incremental Term Loan pursuant to Section 2.4.
“Incremental Term Facility”: as defined in Section 2.4(a).
“Incremental Term Loan Commitment”: as defined in Section 2.4(a).
“Incremental Term Loans”: as defined in Section 2.4(c).
“Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (including Earn-Out Obligations but excluding current trade payables and payroll liabilities incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) the liquidation value of all Disqualified Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Sections 7.1 and 8(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. For purposes of clause (j) above (including as such clause applies to Section 8(e)), the principal amount of Indebtedness in respect of Hedge Agreements shall equal the amount that would be payable (giving effect to netting) at such time if such Hedge Agreement were terminated. For the avoidance of doubt Indebtedness does not include compensation and benefits paid, to be paid, provided or to be provided, in the ordinary course of business and not yet overdue.
“Indemnified Liabilities”: as defined in Section 10.5(b).
“Indemnified Taxes”: (a) Taxes other than Excluded Taxes imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and, (b) to the extent not otherwise described in subsection (a), Other Taxes.
“Indemnitee”: as defined in Section 10.5(b).
“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
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“Insolvent”: pertaining to a condition of Insolvency.
“Intellectual Property”: collectively, all United States and foreign (a) patents, patent applications, certificates of inventions, industrial designs, together with any and all inventions described and claimed therein, and reissues, divisions, continuations, extensions and continuations-in-part thereof and amendments thereto; (b) trademarks, service marks, certification marks, trade names, slogans, logos, trade dress, Internet Domain Names, and other source identifiers, whether statutory or common law, whether registered or unregistered, and whether established or registered in the United States or any other country or any political subdivision thereof, together with any and all registrations and applications for any of the foregoing, goodwill connected with the use thereof and symbolized thereby, and extensions and renewals thereof and amendments thereto; (c) copyrights (whether statutory or common law, and whether published or unpublished), copyrightable subject matter, and all mask works (as such term is defined in 17 U.S.C. Section 901, et seq.), together with any and all registrations and applications therefor, and renewals and extensions thereof and amendments thereto; (d) rights in computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, technology supporting the foregoing, and all documentation, including user manuals and training materials, related to any of the foregoing (“Software”); (e) trade secrets and proprietary or confidential information, data and databases, know-how and proprietary processes, designs, inventions, and any other similar intangible rights, to the extent not covered by the foregoing, whether statutory or common law, whether registered or unregistered; (f) income, fees, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages, claims and payments for past, present or future infringements, misappropriations or other violations thereof; (g) rights and remedies to sue for past, present and future infringements, misappropriations and other violations of any of the foregoing; and (h) rights, priorities, and privileges corresponding to any of the foregoing or other similar intangible assets throughout the world.
“Intellectual Property Security Agreements”: an intellectual property security agreement or such other agreement, as applicable, pursuant to which each Loan Party which owns any Intellectual Property which is the subject of a registration or application with the United States Patent and Trademark Office or the United States Copyright Office (or, with respect to each Loan Party which owns any Intellectual Property which is the subject of a registration or application with the equivalent authority in the Republic of Ireland) grants to the Collateral Agent, for the benefit of the Secured Parties a security interest in such Intellectual Property attached hereto as Exhibit G.
“Intercompany Note”: the Intercompany Note to be executed and delivered by each Subsidiary of Holdings that is not a Loan Party, substantially in the form attached hereto as Exhibit H.
“Interest Payment Date”: (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any LIBOR RateSOFR Loan having an Interest Period of three (3) months or less, the last day of such Interest Period, and (c) as to any LIBOR RateSOFR Loan having an Interest Period longer than three (3) months, each day that is three (3) months, or a
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whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period.
“Interest Period”: as to any LIBOR RateSOFR Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR RateSOFR Loan and ending one, two, three or six months (or if consented to by all Lenders, twelve months) thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR RateSOFR Loan and ending one, two, three or six months (or if consented to by all Lenders, nine or twelve months) thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent no later than 12:00 Noon, New York City time, on the date that is three (3) Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, the initial Interest Period will commence on the Restatement Effective Date and end on December 3, 2012; provided, further, all of the foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period that would extend beyond the Term Loan Maturity Date; and
(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
“Intermediate Holdco”: as defined in the preamble to this Agreement.
“Internally Generated Cash”: with respect to any period, any cash of Holdings, the Borrower or any Subsidiary Guarantor generated during such period, excluding Net Cash Proceeds and any cash constituting proceeds from an incurrence of Indebtedness, an issuance of Capital Stock or a capital contribution, in each case, except to the extent such proceeds are included as income in calculating Consolidated Net Income for such period.
“Internet Domain Names”: all Internet domain names and associated URL addresses.
“Investments”: as defined in Section 7.6.
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“IP Sale”: any Disposition of any Intellectual Property (excluding in any case any such Disposition permitted by clauses (c), (e), (k) and (n) of Section 7.4) that yields gross proceeds to any Group Member (valued at the initial principal amount thereof in the case of non‑cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $7,500,000.
“IRS”: the United States Internal Revenue Service.
“ISDA Definitions”: the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Junior Financing”: any Junior Indebtedness or any other Indebtedness of Holdings or any Subsidiary that is, or that is required to be, contractually subordinated in payment or lien priority to the Obligations.
“Junior Financing Documentation”: any documentation governing any Junior Financing.
“Junior Indebtedness”: Indebtedness of any Person so long as (a) such Indebtedness shall not require any amortization prior to the date that is six (6) months following the Term Loan Maturity Date; (b) the weighted average maturity of such Indebtedness shall occur after the date that is six (6) months following the Term Loan Maturity Date; (c) the mandatory prepayment provisions, affirmative and negative covenants and financial covenants shall be no more restrictive, taken as a whole, than the provisions set forth in the Loan Documents, as determined in good faith and certified in writing to the Administrative Agent by a Responsible Officer of the Borrower; (d) such Indebtedness is unsecured; (e) if such Indebtedness is Subordinated Indebtedness, the other terms and conditions thereof shall be satisfied; (f) if such Indebtedness is incurred by a Subsidiary that is not a Loan Party, (i) such Subsidiary shall have also provided a guarantee of the Obligations substantially on the terms set forth in the Guarantee and Collateral Agreement and (ii) if the Indebtedness being guaranteed, is subordinated to the Obligations, such guarantee, shall be subordinated to the guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness; and (g) if such Indebtedness is incurred by a Subsidiary that is not a Loan Party, subject to Section 7.6(g), such Indebtedness may be guaranteed by another Group Member.
“Key IP”: the Intellectual Property covering the products marketed under the following brand names: “VIVITROL”, “BYDUREON”, “RISPERDAL CONSTA” and “INVEGA SUSTENNA”, and any derivative or modified products or property thereof.
“Lead Arrangers”: Morgan Stanley Senior Funding, Inc., Citigroup Global Markets, Inc. and J.P. Morgan Securities LLC, each, in its capacity as joint lead arranger under this Agreement.
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“Lender Insolvency Event”: (a) a Lender or its Parent Company is adjudicated by a Governmental Authority to be insolvent, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, or (b) such Lender or its Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or such Lender becomes the subject of a Bail-In Action, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its Parent Company, or such Lender or its Parent Company has indicating its consent to or acquiescence in any such proceeding or appointment.
“Lenders”: each Term Lender and Incremental Lender.
“LIBOR”: with respect to each day during each Interest Period pertaining to a LIBOR Rate Loan, the rate per annum offered for deposits of Dollars for the applicable Interest Period that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M., London, England time, two (2) Business Days prior to the first day of such Interest Period or (b) if no such offered rate exists, such rate will be the rate of interest per annum as determined by the Administrative Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits of Dollars in immediately available funds are offered at 11:00 A.M., London, England time, two (2) Business Days prior to the first day in the applicable Interest Period by major financial institutions reasonably satisfactory to the Administrative Agent in the London interbank market for such interest period and for an amount equal or comparable to the principal amount of the Term Loans to be borrowed, converted or continued as LIBOR Rate Loans on such date of determination.
“LIBOR Floor”: with respect to the 2026 Term Loans, 0.50%.
“LIBOR Rate”: with respect to each day during each Interest Period pertaining to a LIBOR Rate Loan, the rate per annum equal to the greater of (a) the LIBOR Floor and (b) for each Interest Period following the initial Interest Period, the rate per annum determined by the Administrative Agent (rounded upward to the nearest 1/100th of 1%) by dividing (i) LIBOR for such Interest Period by (ii) 1.00 - Eurocurrency Reserve Requirements. The LIBOR Rate shall be adjusted on and as of the effective date of any change in the Eurocurrency Reserve Requirements.
“LIBOR Rate Loans”: loans the rate of interest applicable to which is based upon the LIBOR Rate.
“LIBOR Tranche”: the collective reference to LIBOR Rate Loans under a particular loan facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).
“Lien”: with respect to any property or asset, (a) any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, encumbrance, charge or security interest in, on, of or with respect to such property or asset, (b) any right, title or interest of any Person (including any vendor or lessor) under any conditional sale agreement, capital lease or title retention agreement (or any capital or financing lease having substantially the same economic effect as any of the foregoing) relating to such property or asset and (c) in the case of securities (debt or
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equity), any purchase option, call, put or similar right of any Person with respect to such securities.
“Loan Documents”: this Agreement, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth Amendment, the Security Documents and the Notes.
“Loan Party”: each of Holdings, the Borrower and the Subsidiary Guarantors.
“Margin Stock”: as defined in Regulation U of the Board as from time to time in effect and any successor to all or a portion thereof.
“Material Adverse Effect”: (a) a material adverse effect upon, the business, assets, liabilities, operations or condition (financial or otherwise) of Holdings and its Subsidiaries, taken as a whole or (b) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.
“Material Indebtedness”: of any Person at any date, Indebtedness the outstanding principal amount of which exceeds in the aggregate $50,000,000.
“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, or any substances, materials, wastes, pollutants or contaminants in any form regulated under any Environmental Law, including asbestos and asbestos-containing materials, polychlorinated biphenyls, radon gas, radiation, and electromagnetic or radio frequency emissions.
“Maximum Rate”: as defined in Section 3.5(e).
“Merger Sub”: ANTLER ACQUISITION CORP., a corporation organized under the laws of the Commonwealth of Pennsylvania and a wholly-owned subsidiary of Holdco and to be merged with and into the Borrower.
“Moody’s”: Moody’s Investors Service, Inc.
“Mortgaged Properties”: the real properties as to which the Collateral Agent for the benefit of the Secured Parties is granted a Lien pursuant to the Mortgages pursuant to Section 6.10.
“Mortgages”: any mortgages and deeds of trust or any other documents creating and evidencing Liens on Mortgaged Properties made by any Loan Party in favor of, or for the benefit of, the Collateral Agent for the benefit of the Secured Parties, which shall be in a form reasonably satisfactory to the Administrative Agent and the Collateral Agent.
“Multiemployer Plan”: a Plan that is a “multiemployer” plan as defined in Section 4001(a)(3) of ERISA.
“Multiple Employer Plan”: a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Group Member or any
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Commonly Controlled Entity and at least one person other than a Group Member or a Commonly Controlled Entity or (b) was so maintained and in respect of which any Group Member or a Commonly Controlled Entity could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
“Net Cash Proceeds”:
(a) in connection with any Asset Sale, IP Sale (other than in connection with any Exclusive License) or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or held in escrow or purchase price adjustment receivable or by the Disposition of any non‑cash consideration received in connection therewith or otherwise, but only as and when received and net of costs, amounts and taxes set forth below), net of:
(i) attorneys’ fees, accountants’ fees, investment banking fees and other professional and transactional fees actually incurred in connection therewith;
(ii) amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document);
(iii) other fees and expenses actually incurred in connection therewith;
(iv) taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements);
(v) amounts provided as a reserve in accordance with GAAP against any liabilities associated with the assets disposed of in an Asset Sale (including, without limitation, pension and other post‑employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such Asset Sale); provided that such amounts shall be considered Net Cash Proceeds upon release of such reserve; and
(b) in connection with any Exclusive License, the proceeds thereof in the form of cash and Cash Equivalents constituting Upfront Payments, net of:
(i) attorneys’ fees, accountants’ fees, investment banking fees and other professional and transactional fees actually incurred in connection therewith;
(ii) other fees and expenses actually incurred in connection therewith;
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(iii) taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements);
(iv) amounts provided as a reserve in accordance with GAAP against any liabilities associated with such Exclusive License (including, without limitation, against any indemnification obligations associated with such Exclusive License); provided that such amounts shall be considered Net Cash Proceeds upon release of such reserve; and
(c) in connection with any issuance or sale of Capital Stock, any capital contribution or any incurrence of Indebtedness, the cash proceeds received from such issuance, contribution or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.
“Non‑Consenting Lenders”: as defined in Section 10.1.
“Non‑Defaulting Lender”: at any time, a Lender that is not a Defaulting Lender.
“Non‑U.S. Pension Plan”: any plan, fund or other similar program established or maintained outside the United States by a Group Member primarily for the benefit of employees of Group Members residing outside the United States, which plan, fund or other similar program provides for retirement income of such employees or a deferral of income from such employees in contemplation of retirement and is not subject to ERISA or the Code.
“Not Otherwise Applied”: with reference to any amount of proceeds of any transaction, that (a) was not required to be applied to prepay the Term Loans pursuant to Section 3.2(c) and (b) was not previously applied in determining the permissibility of a transaction under the Loan Documents where such permissibility was (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose.
“Notes”: the collective reference to any promissory note evidencing Loans.
“Obligations”: the unpaid principal of and interest on (including interest accruing after the maturity of the Term Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any Insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post‑filing or post‑petition interest is allowed in such proceeding) the Term Loans and all other obligations and liabilities of the Loan Parties to any Agent or to any Lender (or, in the case of Specified Hedge Agreements, any Qualified Counterparty), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to any Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided that, notwithstanding anything to the
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contrary contained herein or in the other Loan Documents, the Obligations shall exclude any Excluded Swap Obligations of any Guarantor.
“Offer”: as defined in Section 10.6(b).
“Offer Loans”: as defined in Section 10.6(b).
“Original Closing Date”: September 16, 2011.
“Original Credit Agreement”: as defined in the recitals to this Agreement.
“Organizational Documents”: as to any Person, the Certificate of Incorporation, Certificate of Formation, By-Laws, Limited Liability Company Agreement, Memorandum and Articles of Association, Partnership Agreement or other similar organizational or governing documents of such Person.
“Other Taxes”: any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Document.
“Parent Company”: with respect to a Lender, the bank holding company (as defined in Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.
“Parent Entity” shall mean any of Holdings, Intermediate Holdco and Holdco and any other person of which Holdings is a Subsidiary.
“Participant”: as defined in Section 10.6(e).
“Patriot Act”: the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001).
“Payment”: as defined in Section 9.15(a).
“Payment Notice”: as defined in Section 9.15(b).
“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor entity performing similar functions).
“Perfection Certificate”: shall mean a perfection certificate in the form of Exhibit I-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise.
“Perfection Certificate Supplement” shall mean a perfection certificate supplement in the form of Exhibit I-2 or any other form approved by the Collateral Agent.
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“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR.”
“Permitted Acquisition”: any acquisition, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all or a majority of the Capital Stock of, or a business line or unit or a division of, any Person; provided:
(a) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom;
(b) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations;
(c) in the case of the acquisition of Capital Stock, such Capital Stock shall become subject to a security interest in favor of the Collateral Agent for the benefit of the Secured Parties and the issuer of such Capital Stock shall become a Loan Party, in each case, in accordance with Section 6.10 and 6.11;
(d) either (x) the Consolidated Leverage Ratio, in each case, calculated on a pro forma basis after giving effect to such acquisition as if such acquisition had occurred on the first day of the most recent period of four (4) consecutive fiscal quarters of the Borrower for which financial statements are available shall be either (A) less than 4.50:1.00 or (B) no greater than the Consolidated Leverage Ratio as of immediately prior to such acquisition or (y) the Fixed Charge Coverage Ratio, in each case, calculated on a pro forma basis after giving effect to such acquisition as if such acquisition had occurred on the first day of the most recent period of four (4) consecutive fiscal quarters of the Borrower for which financial statements are available shall be either (A) greater than or equal to 2.00:1.00 or (B) no less than the Fixed Charge Coverage Ratio as of immediately prior to such acquisition;
(e) Holdings shall have delivered to the Administrative Agent at least five (5) Business Days prior to such proposed acquisition, a Compliance Certificate evidencing compliance with clause (d) above and compliance with clause (f) below, together with all relevant financial information with respect to such acquired assets, including, in the event the Consolidated EBITDA (calculated on a pro forma basis) of the assets and property subject to such acquisition is greater than 25% of the Consolidated EBITDA (calculated on a pro forma basis) of Holdings, appropriate revisions to the Projections included in the Confidential Information Memorandum, or, if Projections have been provided pursuant to Section 6.2(b), appropriate revisions to such Projections, in each case after giving effect to such proposed acquisition (such revised projections or Projections to be accompanied by a certificate of a Responsible Officer of the Borrower stating that such revised projections or Projections are based on estimates, information and assumptions set forth therein and otherwise believed by such Responsible Officer of the Borrower to be reasonable at such time (it being recognized that such revised projections or Projections relate to future events and are not to be viewed as fact and that actual results during the
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period covered thereby may differ from such revised projections or Projections by a material amount)); and
(f) any Person or assets or division as acquired in accordance herewith shall be in substantially the same business or lines of business in which Holdings and/or its Subsidiaries are engaged, or are permitted to be engaged, as provided in Section 7.14, as of the time of such acquisition.
“Permitted Refinancing”: as to any Indebtedness, the incurrence of other Indebtedness to refinance, extend, renew, defease, restructure, replace or refund (collectively, “refinance”) such existing Indebtedness; provided that, in the case of such other Indebtedness, the following conditions are satisfied: (a) the weighted average life to maturity of such refinancing Indebtedness shall be greater than or equal to the weighted average life to maturity of the Indebtedness being refinanced; (b) the principal amount of such refinancing Indebtedness shall be less than or equal to the principal amount (including any accreted or capitalized amount) then outstanding of the Indebtedness being refinanced, plus any required premiums and other amounts paid, and fees and expenses incurred, in connection with such modification, refinancing, refunding, renewal or extension and by any amount equal to any existing commitments unutilized thereunder; (c) the respective obligor or obligors shall be the same on the refinancing Indebtedness as on the Indebtedness being refinanced; (d) the security, if any, for the refinancing Indebtedness shall be substantially the same as that for the Indebtedness being refinanced (except to the extent that less security is granted to holders of refinancing Indebtedness); and (e) the refinancing Indebtedness is subordinated to the Obligations on terms that are at least as favorable, taken as a whole, as the Indebtedness being refinanced (as determined in good faith and certified in writing to the Administrative Agent by a Responsible Officer of the Borrower) and the holders of such refinancing Indebtedness have entered into any subordination or intercreditor agreements reasonably requested by the Administrative Agent evidencing such subordination.
“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
“Plan”: at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Platform”: as defined in Section 6.1.
“Pledged Company”: any Subsidiary of Holdings the Capital Stock of which is pledged to the Collateral Agent pursuant to any Security Document.
“Pledged Equity Interests”: as defined in the Guarantee and Collateral Agreement.
“Portfolio Interest Exemption”: as defined in Section 3.10.
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“Pound Sterling”: the lawful currency of the United Kingdom.
“Pro Forma Financial Statements”: as defined in Section 4.1(a).
“Projections”: as defined in Section 6.2(b).
“Properties”: as defined in Section 4.17(a).
“Property”: any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.
“PTE”: prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“QFC” shall mean the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” shall have the meaning assigned to such term in Section 10.20.
“Qualified Capital Stock”: any Capital Stock (other than warrants, rights or options referenced in the definition thereof) that either (a) does not have a maturity and is not mandatorily redeemable, or (b) by its terms (or by the terms of any employee stock option, incentive stock or other equity-based plan or arrangement under which it is issued or by the terms of any security into which it is convertible or for which it is exchangeable (or from which it was converted or exchanged)), or upon the happening of any event, (x) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable (excluding any mandatory redemption resulting from an asset sale or change in control so long as no payments in respect thereof are due or owing, or otherwise required to be made, until all Obligations have been paid in full in cash), pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case, at any time on or after the one hundred eighty-first day following the Term Loan Maturity Date, or (y) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (or has been converted or exchanged from) (i) debt securities or (ii) any Capital Stock referred to in clauses (a) or (b)(x) above, in each case, at any time on or after the one hundred eighty-first day following the Term Loan Maturity Date.
“Qualified Counterparty”: with respect to any Hedge Agreement, any counterparty thereto that is, or that at the time such Hedge Agreement was entered into, was, a Lender, an Affiliate of a Lender, an Agent or an Affiliate of an Agent (or, in the case of any such Hedge Agreement entered into prior to the Restatement Effective Date, any counterparty that was a Lender, an Affiliate of a Lender, an Agent or an Affiliate of an Agent on the Original Closing Date); provided that, in the event a counterparty to a Hedge Agreement at the time such Hedge Agreement was entered into (or, in the case of any Hedge Agreement entered into prior to the Restatement Effective Date, on the Original Closing Date) was a Qualified Counterparty,
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such counterparty shall constitute a Qualified Counterparty hereunder and under the other Loan Documents.
“Quarterly Payment Date”: March 31, June 30, September 30 and December 31 of each year.
“Recipient”: as defined in Section 9.15(a).
“Recovery Event”: any settlement of or payment in excess of $7,500,000 in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Group Member.
“Reference Time”: with respect to any setting of the then-current Benchmark means (1) if such Benchmark is LIBOR, 11:00 a.m. (LondonTerm SOFR, 5:00 a.m. (Chicago time) on the day that is two London banking daysU.S. Government Securities Business Days preceding the date of such setting, and (2) if such Benchmark is not LIBORTerm SOFR, the time determined by the Administrative Agent in its reasonable discretion.
“Refinanced Term Loans”: as defined in Section 10.1.
“Register”: as defined in Section 10.6(d).
“Regulation”: as defined in Section 4.26.
“Regulation S‑X”: Regulation S‑X promulgated under the Securities Act.
“Regulation T”: Regulation T of the Board as in effect from time to time.
“Regulation U”: Regulation U of the Board as in effect from time to time.
“Regulation X”: Regulation X of the Board as in effect from time to time.
“Reinvestment Deferred Amount”: with respect to (i) any Reinvestment Event (other than any IP Sale), the aggregate Net Cash Proceeds and (ii) any Reinvestment Event that is an IP Sale, 75% of the aggregate Net Cash Proceeds, in each case, received by any Group Member in connection therewith that are not applied to prepay the Term Loans pursuant to Section 3.2(b) as a result of a Reinvestment Event.
“Reinvestment Event”: any Asset Sale, IP Sale or Recovery Event in respect of which the Borrower intends and expects to reinvest all or a specified portion of the Net Cash Proceeds of an Asset Sale, IP Sale or Recovery Event in the Borrower’s or the Restricted Subsidiaries’ businesses (including by making Permitted Acquisitions and funding research and development costs); provided that in the case of an IP Sale of Key IP the proceeds from such IP Sale may not be invested or reinvested in any Unrestricted Subsidiary or be used to fund research and development of any Person other than the Borrower and its Restricted Subsidiaries; provided further that concurrently with the delivery of any financial statements pursuant to Section 6.1(a), to the extent not previously disclosed and delivered to the Administrative Agent and the Collateral Agent, the Borrower shall deliver a written notice executed by a Responsible Officer
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certifying as to the relevant portion of the Net Cash Proceeds from any Asset Sale, IP Sale or Recovery Event subject to a Reinvestment Event occurring during such fiscal year.
“Reinvestment Prepayment Amount”: with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount reinvested prior to the relevant Reinvestment Prepayment Date in the Borrower’s or the Restricted Subsidiaries’ businesses (including by making Permitted Acquisitions and funding research and development costs).
“Reinvestment Prepayment Date”: with respect to any Reinvestment Event, the earlier of (a) the date occurring twelve (12) months (or if Intermediate Holdco, the Borrower or a Restricted Subsidiary, as the case may be has entered into a legally binding commitment to reinvest such Reinvestment Deferred Amount during such twelve (12) month period, eighteen (18) months) after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, reinvest the relevant Reinvestment Deferred Amount in accordance with this Agreement.
“Related Indemnified Person”: of an indemnified person means (a) any controlling person or controlled affiliate of such indemnified person, (b) the respective directors, officers, or employees of such indemnified person or any of its controlling persons or controlled affiliates and (c) the respective agents of such indemnified person or any of its controlling persons or controlled affiliates, in the case of this clause (c), acting at the instructions of such indemnified person, controlling person or such controlled affiliate; provided that each reference to a controlled affiliate or controlling person in this sentence pertains to a controlled affiliate or controlling person involved in the negotiation or syndication of this Agreement and the Term Loans.
“Related Party Register”: as defined in Section 10.6(d).
“Release”: any release, spill, emission, discharge, deposit, disposal, leaking, pumping, pouring, dumping, emptying, injection, or leaching into the Environment, or into or from any building or facility.
“Relevant Governmental Body”: the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Reorganization”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
“Replacement Term Loans”: as defined in Section 10.1.
“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty (30) day notice period is waived pursuant to PBGC Reg. § 4043.
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“Repricing Transaction”: in connection with a transaction the primary purpose of which is to reduce the effective interest cost or weighted average yield (excluding any arrangement or commitment fees in connection therewith) applicable to the 2026 Term Loans (a) the prepayment, refinancing, substitution or replacement of all or a portion of the 2026 Term Loans with the incurrence of any new long-term first lien bank indebtedness by the Borrower or any of its Restricted Subsidiaries having an effective interest cost or weighted average yield at the time of incurrence thereof that is less than the effective interest cost or weighted average yield of such 2026 Term Loans at the time of such incurrence or (b) any amendment to this Agreement that, directly or indirectly, reduces the effective interest cost or weighted average yield of such 2026 Term Loans (or any Lender must assign its Terms Loans as a result of its failure to consent to any such amendment). No “Repricing Transaction” shall be deemed to occur in connection with any Change of Control or Transformative Acquisition.
“Required Lenders”: at any time, the holders of more than 50% of the sum of (a) the aggregate unpaid principal amount of the Term Loans then outstanding and (b) the Total Term Commitments then in effect.
“Requirement of Law”: as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, in each case, any applicable Health Care Laws.
“Resolution Authority”: an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer”: the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of Holdings or the Borrower (unless otherwise specified), but in any event, with respect to financial matters, the chief financial officer, treasurer or assistant treasurer of the Borrower.
“Restatement Effective Date”: the date on which all the conditions set forth in Section 3 of the First Amendment are satisfied.
“Restricted Payments”: as defined in Section 7.5.
“Restricted Subsidiary”: shall mean any Subsidiary that is not an Unrestricted Subsidiary.
“S&P”: Standard & Poor’s Ratings Services.
“Sanctioned Country”: any country or territory with which dealings are broadly and comprehensively prohibited by any country-wide or territory-wide Sanctions (as of the date hereof, Crimea, Cuba, Iran, North Korea, and Syria).
“Sanctioned Person”: any Person with whom dealings are restricted, prohibited, or sanctionable under any Sanctions, including as a result of: (a) being named on any list of Persons subject to Sanctions, (b) being located, organized, or resident in, or directly or indirectly owned or controlled by the government of, any Sanctioned Country, or (c) any direct or indirect
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relationship of ownership, control, or agency with, or any direct or indirect commercial dealings with, a Person described in (a) or (b).
“Sanctions”: all national and supranational laws, regulations, decrees, orders, or other acts with force of law of the United States, the United Kingdom, or the European Union, or United Nations Security Council resolutions, concerning trade and economic sanctions including embargoes; the freezing or blocking of assets of targeted Persons; or other restrictions on exports, imports, investment, payments, or other transactions targeted at particular Persons or countries, including any laws threatening to impose such trade and economic sanctions on any person for engaging in proscribed or targeted behavior.
“SEC”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
“Second Amendment”: that certain Amendment No. 2 to Amended and Restated Credit Agreement, dated as of February 14, 2013, among Borrower, Holdings, Intermediate Holdco, the Guarantors party thereto, the Administrative Agent and certain Term Lenders party thereto.
“Second Amendment Effective Date”: the date on which all of the conditions contained in Section 3 of the Second Amendment have been satisfied or waived by the Administrative Agent.
“Second Lien Credit Agreement”: the Second Lien Credit Agreement dated as of September 16, 2011 among Holdings, the Borrower, Morgan Stanley Senior Funding, Inc. as administrative agent, and the other parties thereto.
“Secured Parties”: the collective reference to the Lenders, the Agents, and the Qualified Counterparties, and each of their successors and assigns.
“Securities Act”: the Securities Act of 1933, as amended.
“Security Documents”: the collective reference to the Guarantee and Collateral Agreement, the Debentures, the Mortgages (if any), the Control Agreements, the Intellectual Property Security Agreements and all other security documents hereafter delivered to the Administrative Agent or the Collateral Agent granting a Lien on any property of any Person to secure the Obligations of any Loan Party under any Loan Document or any Specified Hedge Agreement.
“Seventh Amendment”: that certain Amendment No. 7 to Amended and Restated Credit Agreement, dated as of June 28, 2023, among Borrower and the Administrative Agent.
“Seventh Amendment Effective Date”: the date on which all of the conditions contained in Section 3 of the Seventh Amendment have been satisfied or waived by the Administrative Agent.
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“Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.
“Sixth Amendment”: that certain Amendment No. 6 to Amended and Restated Credit Agreement, dated as of March 12, 2021, among Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Administrative Agent and certain Term Lenders party thereto.
“Sixth Amendment Effective Date”: the date on which all of the conditions contained in Section 4 of the Sixth Amendment have been satisfied or waived by the Administrative Agent.
“Sixth Amendment Lead Arrangers”: MSSF and Cowen Finance Company LLC, each in its capacity as joint lead arranger in respect of the Sixth Amendment.
“Sixth Amendment Refinancing”: as defined in the recitals to this Agreement.
“SOFR”: with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day publishedas administered by the SOFR Administrator on the SOFR Administrator’s Website at approximately 2:30 p.m. (New York City time) on the immediately succeeding Business Day..
“SOFR Administrator”: the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website”: the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Loan” means a Loan that bears interest at a rate based on Adjusted Term SOFR, other than pursuant to clause (c) of the definition of “ABR”.
“Software”: as defined in the definition of Intellectual Property.
“Solvent”: as to any Person at any time, that (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on the sum of its debts and other liabilities, including contingent liabilities; (c) such Person has not, does not intend to, and does not believe (nor should it reasonably believe) that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they become due (whether at maturity or otherwise); (d) such Person does not have unreasonably small capital with which to conduct the businesses in which it is engaged as such businesses are now conducted and are proposed to be conducted following the Restatement Effective Date; (e) it is not unable to pay its debts as they fall due; and (f) in the case of any such Person organized under the laws of the Republic of Ireland, it is not deemed unable to pay its debts as they fall due for purposes of the laws of the Republic of Ireland.
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“Special Flood Hazard Area”: an area that FEMA’s current flood maps indicate has at least a one percent (1%) chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.
“specified currency”: as defined in Section 10.17.
“Specified Hedge Agreement”: any Hedge Agreement entered into by (a) any Loan Party and (b) any Qualified Counterparty, as counterparty; provided, that any release of Collateral or Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements; provided, however, that notwithstanding such release, nothing herein shall limit the contractual rights of any such Qualified Counterparty set forth in such Specified Hedge Agreement.
“Stock Certificates”: Collateral consisting of certificates representing Capital Stock of any Subsidiary of Holdings for which a security interest can be perfected by delivering such certificates.
“Subordinated Indebtedness”: any unsecured Junior Indebtedness of the Borrower or a Subsidiary Guarantor the payment of principal and interest of which and other obligations of the Borrower or such Subsidiary Guarantor in respect thereof are subordinated to the prior payment in full of the Obligations on terms and conditions reasonably satisfactory to the Administrative Agent.
“Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person and, in the case of Person which is a company incorporated in Ireland, shall include a subsidiary of such Person within the meaning of Section 7 of the Companies Act 2014 of Ireland. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Holdings.
“Subsidiary Guarantor”: each Subsidiary of Holdings (other than the Borrower) that guarantees the Obligations pursuant to a Loan Document or pursuant to Section 6.10.
“Supported QFC” shall have the meaning assigned to such term in Section 10.20.
“Survey”: a survey of any Mortgaged Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be
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dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Property, provided that the Borrower shall have a reasonable amount of time to deliver such redated survey, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Property and issue customary endorsements or (b) otherwise acceptable to the Collateral Agent.
“Swap Obligations”: with respect to any Loan Party any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Swiss Franc”: the lawful currency of Switzerland.
“Syndication Agent(s)”: as defined in the preamble to this Agreement.
“Syndication Date”: the date on which the Lead Arrangers complete syndication of the Term Loans and the entities selected in such syndication process become parties to this Agreement.
“Taxes”: taxes, levies, imposts, duties, charges, fees, deductions or withholdings imposed by any Governmental Authority, and any interest, penalties or additions to tax imposed with respect thereto.
“Tax Status Certificate”: as defined in Section 3.10.
“Term Commitments”: (x) prior to the Sixth Amendment Effective Date, the 2023 Term Commitments and (y) on and after the Sixth Amendment Effective Date, the 2026 Term Commitments.
“Term Facilities”: (x) prior to the Sixth Amendment Effective Date, the 2023 Term Facility and (y) on and after the Sixth Amendment Effective Date, the 2026 Term Facility.
“Term Lender”: (x) prior to the Sixth Amendment Effective Date, each 2023 Term Lender and (y) on and after the Sixth Amendment Effective Date, each 2026 Term Lender.
“Term Loans”: (x) prior to the Sixth Amendment Effective Date, the 2023 Term Loans and (y) on and after the Sixth Amendment Effective Date, the 2026 Term Loans, together with any Incremental Term Loans, if applicable.
“Term Loan Increase Effective Date”: as defined in Section 2.4(a).
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“Term Loan Maturity Date”: in the case of the 2026 Term Facility, the 2026 Term Loan Maturity Date.
“Term Percentage”: after the Sixth Amendment Effective Date, the 2026 Term Percentage.
“Term SOFR”:
“Term SOFR Adjustment”: for any calculation with respect to a SOFR Loan, a percentage per annum as set forth below for the applicable Interest Period therefor:
Interest Period |
Percentage |
One month |
0.11448% |
Three months |
0.26161% |
Six months |
0.42826% |
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“Term SOFR Administrator”: the CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR”: for the applicable Corresponding Tenor as of the applicable Reference Time, Reference Rate”: the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Term SOFR Tranche”: the collective reference to SOFR Loans under a particular loan facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).
“Third Amendment”: that certain Amendment No. 3 and Waiver to Amended and Restated Credit Agreement, dated as of May 22, 2013, among Borrower, Holdings, Intermediate Holdco, Holdco, the Guarantors party thereto, the Administrative Agent and certain Term Lenders party thereto.
“Third Amendment Effective Date”: the date on which all of the conditions contained in Section 3 of the Third Amendment have been satisfied or waived by the Administrative Agent.
“Title Company”: any title insurance company as shall be retained by Borrower and reasonably acceptable to the Administrative Agent.
“Total Term Commitments”: at any time, the aggregate amount of the Term Commitments then in effect. The original aggregate amount of the Total Term Commitments on the Restatement Effective Date was $375,000,000.
“Tranche”: each of the 2026 Term Loans, any Term Loans borrowed in accordance with Section 2.4, any “extended tranche” as set forth in Section 3.16 and any Replacement Term Loans, as the context may require.
“Transaction”: collectively, (a) the Refinancing, (b) the borrowing of the Term Loans on the Restatement Effective Date and (c) the other transactions contemplated by the Loan Documents.
“Transferee”: any Assignee or Participant.
“Transformative Acquisition”: any acquisition by any Group Member that either (a) is not permitted by the terms of this Agreement and other Loan Documents immediately prior to the consummation of such acquisition or (b) if permitted by the terms of this Agreement and other Loan Documents immediately prior to the consummation of such acquisition, would not provide the Group Members with adequate flexibility under this Agreement and other Loan Documents for the continuation and/or expansion of their combined operations following such consummation, as determined by the Borrower acting in good faith.
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“Type”: as to any Term Loan, its nature as an ABR Loan or a LIBOR RateSOFR Loan.
“UCC Filing Collateral”: Collateral consisting solely of assets for which a security interest can be perfected by filing a Uniform Commercial Code financing statement.
“UK Financial Institution”: any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority”: the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement”: the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment with respect thereto.
“Unasserted Contingent Obligations”: as defined in the Guarantee and Collateral Agreement.
“United States” or “U.S.”: the United States of America.
“Unrestricted Subsidiary”: any Subsidiary designated by the board of directors of Holdings as an Unrestricted Subsidiary pursuant to Section 6.16, in each case, until such Person ceases to be Unrestricted Subsidiary in accordance with Section 6.16 or ceases to be a Subsidiary.
“Upfront Payment”: for any Exclusive License, the aggregate cash payment paid to any Group Member on or prior to the consummation of the Exclusive License (and which, for the avoidance of doubt, shall not include any royalty, earnout, milestone payment, contingent payment or any other deferred payment that may be payable thereafter.)
“USA PATRIOT Act”: The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107 56 (signed into law October 26, 2001)).
“U.S. GAAP”: generally accepted accounting principles in effect from time to time in the United States.
“U.S. Government Securities Business Day”: any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
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“U.S. Special Resolution Regimes” shall have the meaning assigned to such term in Section 10.20.
“Voluntary Prepayment”: a prepayment of the Term Loans.
“Weighted Average Life to Maturity”: when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one‑twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.
“Wholly Owned Subsidiary”: as to any Person, any other Person, all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
“Write-Down and Conversion Powers”: (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
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The Incremental Term Loan Commitments shall be effected by a joinder agreement (the “Increase Term Joinder”) executed by the Borrower, the Administrative Agent and each Incremental Lender making such Incremental Term Loan Commitment, in form and substance reasonably satisfactory to each of them. The Increase Term Joinder may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 2.4. In addition, unless otherwise specifically provided herein, all references in the Loan Documents to Term Loans shall be deemed, unless the context otherwise requires, to include references to Incremental Term Loans that are Term Loans made pursuant to this Agreement.
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(a) IfSubject to Section 3.17, if, on or prior to the first day of any Interest Period:
for any SOFR Loan, (i) the Administrative Agent shall have reasonably determined (which determination shall be conclusive and binding upon the Borrower and the Lenders) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Interest Period; provided that no Benchmark Transition Event shall occurred at such time; or
“Adjusted Term SOFR” cannot be determined pursuant to the definition thereof, then (ii) the Administrative Agent shall have received notice from the Required Lenders that LIBOR or the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as reasonably determined and conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,
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the Administrative Agent shall give written notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter but at least two (2) Business Days prior to the first day of such Interest Period. If such notice is given (x) any Term Loans that were to have been converted on the first day of such Interest Period to LIBOR RateSOFR Loans shall be continued as ABR Loans and (y) any outstanding LIBOR RateSOFR Loans shall be converted, on the last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent (which notice the Administrative Agent agrees to withdraw promptly upon a determination that the condition or situation which gave rise to such notice no longer exists), no further LIBOR RateSOFR Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to LIBOR RateSOFR Loans. Notwithstanding the foregoing, the Lenders shall use commercially reasonable efforts to satisfy any applicable IRS guidance so that the implementation of a Benchmark Replacement will not be treated as a deemed exchange under Section 1001 of the Code.
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and the result of any of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining LIBOR RateSOFR Loans or, with respect to Taxes under clause (i) above, any Term Loan, or to reduce any amount receivable hereunder in respect thereof (whether of principal, interest or any other amount), then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled and setting forth in reasonable detail such increased costs.
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(A) any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent duly completed and executed originals of IRS Form W-9 or such other documentation or information prescribed by applicable laws or reasonably requested by the Borrower or the Administrative Agent (in such number of signed originals as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon request of the Borrower or the Administrative Agent) as will enable the Borrower or the Administrative Agent, as the case may be, to determine whether or not such Lender is subject to U.S. federal backup withholding or information reporting requirements; and
(B) each Foreign Lender that is entitled under the Code or any applicable treaty to an exemption from or reduction of U.S. federal withholding tax with respect to any payments hereunder or under any other Loan Document shall deliver to the Borrower and the Administrative Agent (in such number of signed originals as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent), duly completed and executed copies of whichever of the following is applicable:
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Notwithstanding anything to the contrary in this Section 3.10(f), no Lender shall be required to deliver any documentation pursuant to this Section 3.10(f) that it is not legally eligible to provide.
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(i) (A) a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and (B) aand its related Benchmark Replacement Date with respect thereto have occurred prior to the Reference Time in connection with any setting of the then-current Benchmark, then:
(x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace the then-currentsuch Benchmark for all purposes under this Agreementhereunder and under any other Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without requiring any amendment to, or requiring any further action by or consent of any other party to, this Agreement or any other Loan Document, and (y) if a Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace the then-currentsuch Benchmark for all purposes under this Agreementhereunder and under any other Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without requiring any amendment to, or requiring any further action by or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. If the Benchmark Replacement is based upon Daily Simple SOFR, all interest payments will be payable on a monthly basis; or
(ii) (A) a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and the Benchmark Replacement Date with respect thereto has already occurred prior to the Reference Time for any setting of the then-current Benchmark and as a result the then-current Benchmark is being determined in accordance with clauses (2) or (3) of the definition of “Benchmark Replacement”; and (B) the Administrative Agent subsequently determines, in its reasonable discretion, that (w) Term SOFR and a Benchmark Replacement Adjustment with respect thereto is or has becomes available and the Benchmark Replacement Date with respect thereto has occurred, (x) there is currently a market for U.S. dollar-denominated syndicated credit facilities utilizing Term SOFR as a Benchmark and for determining the Benchmark Replacement Adjustment with respect thereto, (y) Term SOFR is being recommended as the Benchmark for U.S. dollar-denominated syndicated credit facilities by the Relevant Government Authority and (z) in any event, Term SOFR, the Benchmark Replacement Adjustment with respect
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thereto and the application thereof is administratively feasible for the Administrative Agent (as determined by the Administrative Agent in its reasonable discretion), then clause (1) of the definition of “Benchmark Replacement” will, without requiring any amendment to, or requiring any further action by or consent of any other party to, this Agreement or any other Loan Document, replace such then-current Benchmark for all purposes hereunder and under any other Loan Document in respect of such Benchmark setting and subsequent Benchmark settings on and from the beginning of the next Interest Period or, as the case may be, Available Tenor so long as the Administrative Agent notifies the Borrower and the Lenders prior to the commencement of such next Interest Period or, as the case may be, Available Tenor.
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To induce the Agents and the Lenders to enter into this Agreement and to make the Term Loans, each of Holdings and the Borrower hereby represents and warrants on the Restatement Effective Date that:
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This Section 4.23 shall not apply in respect of a Loan Party if and to the extent it is illegal, invalid or unenforceable as a result of any applicable Blocking Regulation and, in such case, the legality, validity and enforceability of this Section 4.23 shall not otherwise be affected.
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Holdings and the Borrower hereby agree that, so long as the Commitments remain in effect, or any Term Loan or other amount is owing to any Lender or Agent hereunder (other than unasserted contingent indemnification obligations), Holdings shall and shall cause each of its Restricted Subsidiaries to:
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All such financial statements shall be in accordance with GAAP applied consistently throughout the periods reflected therein and other than as disclosed therein with prior periods.
Documents required to be delivered pursuant to Section 6.1(a) or (b) or Section 6.2(b) or Section 6.2(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent) (the “Platform”); provided that, (x) to the extent the Administrative Agent or any Lender so requests, the Borrower shall deliver paper copies of such documents to the Administrative Agent or such Lender until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (y) the Borrower shall notify the Administrative Agent (by facsimile or electronic mail) of the posting of any such documents. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to herein, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
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Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto.
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This Section 6.9 shall not apply in respect of a Loan Party if and to the extent it is illegal, invalid or unenforceable as a result of any applicable Blocking Regulation and, in such case, the legality, validity and enforceability of this Section 6.9 shall not otherwise be affected.
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Holdings and the Borrower hereby agree that, so long as the Commitments remain in effect or any Term Loan or other amount is owing to any Lender or Agent hereunder
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(other than unasserted contingent indemnification obligations), Holdings shall not, and shall not permit any of its Restricted Subsidiaries to:
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The accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 7.1.
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The amount of any Investment, other than a Guarantee Obligation, shall be (i) the amount actually invested, as determined at the time of each such Investment, without adjustment for subsequent increases or decreases in the value of such Investment, minus (ii) the amount of dividends or distributions actually received in connection with such Investment and any return of capital and any payment of principal received in respect of such Investment that in each case is received in cash or cash equivalents (not in excess of the amount of Investments originally made).
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then, and in any such event, (A) if such event is an Event of Default specified in paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Term Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Term Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 8, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. Notwithstanding anything to the contrary contained herein or in the other Loan Documents, no amounts received from any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor.
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Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Term Loans.
In the case of any waiver, the Loan Parties, the Lenders and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no
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such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.
In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Term Loans (“Refinanced Term Loans”) with a replacement term loan tranche hereunder (“Replacement Term Loans”); provided that (a) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans plus accrued interest, fees and expenses related thereto, (b) the Applicable Margin for such Replacement Term Loans shall not be higher than the Applicable Margin for such Refinanced Term Loans, (c) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the applicable Term Loans) and (d) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing.
If, in connection with any proposed amendment, modification, waiver or termination requiring the consent of all Lenders, the consent of the Required Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained being referred to as a “Non‑Consenting Lender”), then, so long as the Administrative Agent is not a Non‑Consenting Lender, the Administrative Agent or a Person reasonably acceptable to the Administrative Agent shall have the right but not the obligation to purchase at par from such Non‑Consenting Lenders, and such Non‑Consenting Lenders agree that they shall, upon the Administrative Agent’s request, sell and assign to the Administrative Agent or such Person, all of the Term Loans of such Non‑Consenting Lenders for an amount equal to the principal balance of all such Term Loans held by such Non‑Consenting Lenders and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment and Assumption. In addition to the foregoing, the Borrower may replace any Non‑Consenting Lender pursuant to Section 3.13.
Notwithstanding the foregoing, this Agreement and the other Loan Documents may be amended (or amended and restated), modified or supplemented with the written consent of the Administrative Agent and the Borrower (a) to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender, (b) to add one or more additional credit facilities with respect to Incremental Term Loans to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans, as applicable, and the accrued interest and fees in respect thereof and (c) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders; provided, that the conditions set forth in Section 2.4 are satisfied.
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Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, to the fullest extent permitted by applicable law, such Lender will not be entitled to vote in respect of amendments and waivers hereunder and the Commitment and the outstanding Loans or other extensions of credit of such Lender hereunder will not be taken into account in determining whether the Required Lenders or all of the Lenders, as required, have approved any such amendment or waiver (and the definition of “Required Lenders” will automatically be deemed modified accordingly for the duration of such period); provided that, subject to the limitations set forth in the first paragraph of this Section 10.1, any such amendment or waiver that would increase or extend the term of the Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or interest owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation owing to such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter the terms of this proviso, will require the consent of such Defaulting Lender.
provided, however, that materials and information described in Section 10.2(b) shall be delivered to the Administrative Agent in accordance with the provisions thereof or as otherwise specified to the Borrower by the Administrative Agent. Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given or made upon the earlier of (i) actual receipt by the relevant party hereto, (ii) if delivered by hand or courier, when signed for by or on behalf of the relevant party hereto, and (iii) four days after having been mailed; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that notices and communications to any Agent pursuant to Sections 2 and 9 shall not be effective until received by such Agent). Delivery by telecopier or other electronic means of an executed counterpart of a signature page to any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. The words “delivery”, “execute,” “execution,” “signed,” “signature,” and words of like import in any Loan Document or any other document executed in connection herewith shall be deemed to include Electronic Signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity
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or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary neither the Administrative Agent nor any Lender is under any obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent or such Lender pursuant to procedures approved by it and provided further without limiting the foregoing, upon the request of any party, any electronic signature shall be promptly followed by such manually executed counterpart.
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The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (i) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
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(A) the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default under Section 8(a) or (f) has occurred and is continuing at the time of such assignment, (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received a draft of the relevant Assignment and Assumption or (z) such assignment is made prior to the earlier of (1) the Syndication Date and (2) the date that is 90 days after the Restatement Effective Date; and
(B) the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of each of the Term Facilities if such assignment is to an Assignee that is not a Lender, an Affiliate of a Lender or an Approved Fund;
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(A) no Default or Event of Default has occurred or is continuing at the time of such assignment or would result from such assignment;
(B) Holdings, the Borrower or any of their respective Subsidiaries may make one or more offers (each, an “Offer”) to repurchase all or any portion of any Tranche of Term Loans (such Term Loans, the “Offer Loans”); provided that, (1) Holdings, the Borrower or such Subsidiary delivers a notice of such Offer to the Administrative Agent and all Lenders no later than noon (New York City time) at least five (5) Business Days in advance of a proposed consummation date of such Offer indicating (w) the last date on which such Offer may be accepted, (x) the maximum dollar amount of such Offer, (y) the repurchase price per dollar of principal amount of such Offer Loans at which Holdings, the Borrower or such Subsidiary is willing to repurchase such Offer Loans and (z) the instructions, consistent with this Section 10.6(b)(v) with respect to the Offer, that a Lender must follow in order to have its Offer Loans repurchased; (2) Holdings, the Borrower or such Subsidiary shall hold such Offer open for a minimum period of two (2) Business Days; (3) a Lender who elects to participate in the Offer may choose to sell all or part of such Lender’s Offer Loans; (4) such Offer shall be made to the Lenders holding the Offer Loans on a pro rata basis in accordance with the respective principal amount then due and owing to the Lenders; provided that, if any Lender elects not to participate in the Offer, either in whole or in part, the amount of such Lender’s Offer Loans not being tendered shall be excluded in calculating the pro rata amount applicable to the balance of such Offer Loans; and (5) such Offer shall be conducted pursuant to such procedures the Administrative Agent may establish in consultation with the Borrower (which shall be consistent with this clause (B)) and that a Lender must follow in order to have its Offer Loans repurchased;
(C) with respect to all repurchases made by Holdings, the Borrower or their respective Subsidiaries, such repurchases shall be deemed to be voluntary prepayments pursuant to Section 3.1 in an amount equal to the aggregate principal amount of such Term Loans;
(D) following repurchase by Holdings, the Borrower or any of their respective Subsidiaries, (1) all principal and accrued and unpaid interest on the Term Loans so repurchased shall be deemed to have been paid for all purposes and no longer outstanding (and may not be resold by Holdings, the Borrower or such Subsidiary), for all purposes of this Agreement and all other Loan Documents and (2) Holdings, the Borrower or any of their respective Subsidiaries, as the case may be, will promptly advise the Administrative Agent
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of the total amount of Offer Loans that were repurchased from each Lender who elected to participate in the Offer; and
(E) any Term Loans purchased by or assigned to Holdings, the Borrower or any of their respective Subsidiaries shall be automatically, immediately and permanently cancelled upon the effectiveness of such assignment and will thereafter no longer be outstanding for any purpose hereunder; and
Except as otherwise provided in clause (v) above and in paragraph (c) below, subject to acceptance and recording thereof pursuant to paragraph (d) below, from and after the effective date specified in each Assignment and Assumption the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.9, 3.10, 3.11 and 10.5; provided, with respect to such Section 3.10, that such Lender continues to comply with the requirements of Sections 3.10 and 3.10(e). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.
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Exhibit 31.1
CERTIFICATIONS
I, Richard F. Pops, certify that:
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Date: July 26, 2023 |
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/s/ Richard F. Pops |
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Richard F. Pops |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Iain M. Brown, certify that:
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Date: July 26, 2023 |
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/s/ Iain M. Brown |
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Iain M. Brown |
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Senior Vice President, Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Alkermes plc (the “Company”) for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Richard F. Pops, Chairman and Chief Executive Officer of the Company, and Iain M. Brown, Senior Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
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Date: July 26, 2023 |
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/s/ Richard F. Pops |
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Richard F. Pops |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: July 26, 2023 |
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/s/ Iain M. Brown |
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Iain M. Brown |
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Senior Vice President, Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
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