SEC Filing | Alkermes plc

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10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

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

Commission File Number 001-35299

ALKERMES PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)



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

Connaught House

1 Burlington Road

Dublin 4, Ireland, D04 C5Y6

(Address of principal executive offices)

+ 353-1-772-8000

(Registrant’s telephone number, including area code)

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


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

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

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

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



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

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

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

The number of the registrant’s ordinary shares, $0.01 par value, outstanding as of October 20, 2023 was 166,881,286 shares.

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023



		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets — September 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) — For the Three and Nine Months Ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Nine Months Ended September 30, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37

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

Cautionary Note Concerning Forward-Looking Statements

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

•

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

•

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

•

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

•

our expectations regarding the competitive, payer, legislative, regulatory and policy landscape, and changes therein, related to our products, including competition from generic forms of our products or competitive products and development programs; barriers to access or coverage of our products and potential changes in reimbursement of our products; and legislation, regulations, executive orders, guidance or other measures that may impact pricing and reimbursement of, and access to, our products;

•

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

•

our expectations regarding future amortization of intangible assets;

•

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

•

our expectations regarding the impacts of new legislation, rules and regulations, the adoption of new accounting pronouncements and potential U.S. government shutdowns or other disruptions;

•

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

•

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

•

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

•

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

•

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

•

our expectations regarding the planned separation of our oncology business, including anticipated timing, effects, costs, benefits and tax treatment; and

•

other expectations discussed elsewhere in this Form 10-Q.

Actual results might differ materially from those expressed or implied by these forward-looking statements because these forward-looking statements are subject to risks, assumptions and uncertainties. In light of these risks, assumptions and uncertainties, the forward-looking expectations discussed in this Form 10-Q might not occur. You are cautioned not to place undue reliance on the forward-looking statements in this Form 10-Q, which speak only as of the date of this Form 10-Q. All subsequent written and oral forward-looking statements concerning the matters addressed in this Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by applicable law or regulation, we do not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For information about the risks, assumptions and uncertainties of our business, see “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed

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”), “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”) and “Part II, Item 1A—Risk Factors” in this Form 10-Q.

This Form 10-Q may include data that we obtained from industry publications and third-party research, surveys and studies. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. 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, “Part II, Item 1A—Risk Factors” in our Q1 Quarterly Report and “Part II, Item 1A—Risk Factors” in this Form 10-Q. These and other factors could cause our results to differ materially from those expressed 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: AMPYRA®—Acorda Therapeutics, Inc.; 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.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	September 30, 2023			December 31, 2022
	(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	647,711		$	292,473
Receivables, net		337,697			287,967
Investments—short-term		241,439			315,992
Inventory		192,186			181,418
Contract assets		2,766			8,929
Prepaid expenses and other current assets		42,982			43,527
Total current assets		1,464,781			1,130,306
PROPERTY, PLANT AND EQUIPMENT, NET		327,517			325,361
INVESTMENTS—LONG-TERM		106,431			131,610
RIGHT-OF-USE ASSETS		103,170			115,855
INTANGIBLE ASSETS, NET		10,987			37,680
GOODWILL		92,873			92,873
DEFERRED TAX ASSETS		162,184			115,602
OTHER ASSETS		11,288			14,691
TOTAL ASSETS	$	2,279,231		$	1,963,978
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	243,263		$	220,089
Accrued sales discounts, allowances and reserves		238,467			252,115
Operating lease liabilities—short-term		15,058			15,722
Contract liabilities—short-term		3,319			6,816
Current portion of long-term debt		3,000			3,000
Total current liabilities		503,107			497,742
LONG-TERM DEBT		288,366			290,270
OPERATING LEASE LIABILITIES—LONG-TERM		78,552			89,829
OTHER LONG-TERM LIABILITIES		53,623			42,384
Total liabilities		923,648			920,225
COMMITMENTS AND CONTINGENT LIABILITIES (Note 16)
SHAREHOLDERS’ EQUITY:
Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at September 30, 2023 and December 31, 2022, respectively		—			—
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 172,218,651 and 168,951,193 shares issued; 166,714,095 and 164,377,009 shares outstanding at September 30, 2023 and December 31, 2022, respectively		1,722			1,690
Treasury shares, at cost (5,504,556 and 4,574,184 shares at September 30, 2023 and December 31, 2022, respectively)		(186,942	)		(160,862	)
Additional paid-in capital		3,003,184			2,913,099
Accumulated other comprehensive loss		(6,074	)		(10,889	)
Accumulated deficit		(1,456,307	)		(1,699,285	)
Total shareholders’ equity		1,355,583			1,043,753
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,279,231		$	1,963,978

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

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
	(In thousands, except per share amounts)
REVENUES:
Product sales, net	$	231,822		$	199,380		$	678,026		$	561,435
Manufacturing and royalty revenues		149,113			52,941			607,888			243,437
License revenue		—			—			—			2,000
Research and development revenue		3			36			16			249
Total revenues		380,938			252,357			1,285,930			807,121
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)		61,509			50,625			182,944			164,144
Research and development		97,140			100,430			291,565			289,256
Selling, general and administrative		169,446			152,777			549,181			448,206
Amortization of acquired intangible assets		8,995			9,166			26,693			27,198
Total expenses		337,090			312,998			1,050,383			928,804
OPERATING INCOME (LOSS)		43,848			(60,641	)		235,547			(121,683	)
OTHER INCOME (EXPENSE), NET:
Interest income		9,370			2,239			21,105			3,708
Interest expense		(6,006	)		(3,552	)		(16,978	)		(8,271	)
Change in the fair value of contingent consideration		—			(3,553	)		—			(21,750	)
Other income (expense), net		149			(1,861	)		(415	)		2,380
Total other income (expense), net		3,513			(6,727	)		3,712			(23,933	)
INCOME (LOSS) BEFORE INCOME TAXES		47,361			(67,368	)		239,259			(145,616	)
INCOME TAX BENEFIT		(397	)		(3,394	)		(3,719	)		(15,603	)
NET INCOME (LOSS)	$	47,758		$	(63,974	)	$	242,978		$	(130,013	)
EARNINGS (LOSS) PER ORDINARY SHARE:
Basic	$	0.29		$	(0.39	)	$	1.46		$	(0.79	)
Diluted	$	0.28		$	(0.39	)	$	1.42		$	(0.79	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic		166,607			164,282			165,996			163,541
Diluted		171,903			164,282			170,981			163,541
COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	47,758		$	(63,974	)	$	242,978		$	(130,013	)
Holding gain (loss), net of a tax provision (benefit) of $216, $(188), $803 and $(1,242), respectively		1,363			(2,349	)		4,815			(9,114	)
COMPREHENSIVE INCOME (LOSS)	$	49,121		$	(66,323	)	$	247,793		$	(139,127	)

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

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended
	September 30,
	2023			2022
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	242,978		$	(130,013	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization		56,386			58,185
Share-based compensation expense		75,062			67,771
Deferred income taxes		(47,385	)		(54,073	)
Change in the fair value of contingent consideration		—			21,750
Other non-cash charges		1,394			3,746
Changes in assets and liabilities:
Receivables		(49,730	)		56,045
Contract assets		6,163			3,258
Inventory		(9,866	)		(15,646	)
Prepaid expenses and other assets		3,947			1,872
Right-of-use assets		12,685			12,470
Accounts payable and accrued expenses		20,958			6,386
Accrued sales discounts, allowances and reserves		(13,649	)		(1,576	)
Contract liabilities		(5,724	)		(9,191	)
Operating lease liabilities		(12,569	)		(13,411	)
Other long-term liabilities		13,466			12,424
Cash flows provided by operating activities		294,116			19,997
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment		(31,018	)		(28,227	)
Proceeds from the sale of equipment		6			—
Proceeds from contingent consideration		—			1,273
Return of Fountain Healthcare Partners II, L.P. investment		—			485
Purchases of investments		(186,593	)		(256,806	)
Sales and maturities of investments		291,944			190,994
Cash flows provided by (used in) investing activities		74,339			(92,281	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares under share-based compensation arrangements		15,113			18,850
Employee taxes paid related to net share settlement of equity awards		(26,080	)		(17,903	)
Principal payments of long-term debt		(2,250	)		(2,250	)
Cash flows used in financing activities		(13,217	)		(1,303	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		355,238			(73,587	)
CASH AND CASH EQUIVALENTS—Beginning of period		292,473			337,544
CASH AND CASH EQUIVALENTS—End of period	$	647,711		$	263,957
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses	$	4,209		$	2,690

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

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)


	Ordinary Shares				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Capital		Loss			Deficit			Shares			Amount			Total
	(In thousands, except share data)
BALANCE — December 31, 2022		168,951,193	$	1,690	$	2,913,099	$	(10,889	)	$	(1,699,285	)		(4,574,184	)	$	(160,862	)	$	1,043,753
Issuance of ordinary shares under employee stock plans		2,567,603		25		2,849		—			—			—			—			2,874
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(885,652	)		(24,744	)		(24,744	)
Share-based compensation		—		—		22,778		—			—			—			—			22,778
Unrealized gain on marketable securities, net of tax provision of $488		—		—		—		2,760			—			—			—			2,760
Net loss		—		—		—		—			(41,845	)		—			—			(41,845	)
BALANCE — March 31, 2023		171,518,796	$	1,715	$	2,938,726	$	(8,129	)	$	(1,741,130	)		(5,459,836	)	$	(185,606	)	$	1,005,576
Issuance of ordinary shares under employee stock plans		457,105		5		9,121		—			—			—			—			9,126
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(17,777	)		(540	)		(540	)
Share-based compensation		—		—		28,518		—			—			—			—			28,518
Unrealized gain on marketable securities, net of tax provision of $99		—		—		—		692			—			—			—			692
Net income		—		—		—		—			237,065			—			—			237,065
BALANCE — June 30, 2023		171,975,901	$	1,720	$	2,976,365	$	(7,437	)	$	(1,504,065	)		(5,477,613	)	$	(186,146	)	$	1,280,437
Issuance of ordinary shares under employee stock plans		242,750		2		3,111		—			—			—			—			3,113
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(26,943	)		(796	)		(796	)
Share-based compensation		—		—		23,708		—			—			—			—			23,708
Unrealized gain on marketable securities, net of tax provision of $216		—		—		—		1,363			—			—			—			1,363
Net income		—		—		—		—			47,758