On February 16, 2023 Alkermes plc (Nasdaq: ALKS) reported financial results for the quarter and year ended Dec. 31, 2022 and provided financial expectations for 2023 (Press release, Alkermes, FEB 16, 2023, View Source [SID1234627289]).
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"2022 was a productive year for Alkermes as we delivered strong results for the first full year of the commercial launch of LYBALVI, achieved double-digit revenue growth for VIVITROL and ARISTADA, and continued to advance our R&D portfolio, including ongoing enrollment of the potential registration-enabling studies for nemvaleukin in oncology and initiation of the first-in-human studies for our orexin 2 receptor agonist program," said Richard Pops, Chief Executive Officer of Alkermes. "Looking ahead, this year we are focused on three key areas: driving the ongoing launch of LYBALVI, advancing our orexin program in narcolepsy and other sleep disorders, and executing on the planned separation of our oncology businesses. Through these initiatives, we believe we can unlock significant value for our shareholders and establish a compelling investment thesis for both the neuroscience and oncology businesses."
"We exceeded our financial expectations for 2022, driven by the strong performance of our proprietary products and our focus on disciplined management of our cost structure. The launch of LYBALVI represents a significant growth opportunity for the company in the oral antipsychotic market and leverages our established commercial capabilities," commented Iain Brown, Chief Financial Officer of Alkermes. "We believe that the anticipated growth of LYBALVI and our proprietary commercial product portfolio, together with our expected decrease in R&D expenditures following the planned separation of the oncology business, will position the company to achieve the updated long-term profitability targets we are providing today and drive shareholder value."
Quarter Ended Dec. 31, 2022 Financial Results
– Total revenues for the quarter were $304.7 million, compared to $324.5 million for the same period in the prior year.
– Net sales of proprietary products for the quarter were $216.1 million, compared to $178.9 million for the same period in the prior year.
Net sales of VIVITROL were $102.0 million, compared to $92.0 million for the same period in the prior year, representing an increase of approximately 11%.
Net sales of ARISTADAi were $79.2 million, compared to $78.7 million for the same period in the prior year, representing an increase of approximately 1%.
Net sales of LYBALVI were $34.9 million, compared to $8.2 million for the same period in the prior year, following commercial launch in October 2021.
– Total operating expenses for the quarter were $325.3 million, compared to $322.1 million for the same period in the prior year.
– Net loss according to generally accepted accounting principles in the U.S. (GAAP) was $28.3 million for the quarter, or a basic and diluted GAAP loss per share of $0.17. This compared to GAAP net income of $0.9 million, or a basic and diluted GAAP earnings per share of $0.01, for the same period in the prior year.
– Non-GAAP net income was $24.2 million for the quarter, or a non-GAAP basic earnings per share of $0.15 and non-GAAP diluted earnings per share of $0.14. This compared to non-GAAP net income of $38.5 million, or a non-GAAP basic earnings per share of $0.24 and non-GAAP diluted earnings per share of $0.23, for the same period in the prior year.
Year Ended Dec. 31, 2022 Financial Results
Revenues
– Total revenues for the year were $1.11 billion. This compared to $1.17 billion in the prior year.
– Net sales of proprietary products for the year were $777.6 million, compared to $627.4 million in the prior year.
Net sales of VIVITROL were $379.5 million, compared to $343.9 million in the prior year, representing an increase of approximately 10%.
Net sales of ARISTADA were $302.1 million, compared to $275.4 million in the prior year, representing an increase of approximately 10%.
Net sales of LYBALVI were $96.0 million, compared to $8.2 million in the prior year, following commercial launch in October 2021.
– Manufacturing and royalty revenues for the year were $332.0 million, compared to $541.8 million in the prior year.
Royalty revenues from INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI (the "long-acting INVEGA products") were $115.7 million, compared to $303.1 million in the prior year. This decrease was driven primarily by Janssen Pharmaceutica N.V.’s (Janssen) partial termination of the license agreement related to sales of the long-acting INVEGA products in the United States (U.S.), effective Feb. 2, 2022.
Manufacturing and royalty revenues from VUMERITY were $115.5 million, compared to $87.4 million in the prior year.
Costs and Expenses
– Total operating expenses for the year were $1.25 billion, compared to $1.20 billion in the prior year.
Cost of Goods Manufactured and Sold were $218.1 million, compared to $197.4 million in the prior year.
R&D expenses were $393.8 million, compared to $406.5 million in the prior year. R&D expenses in 2021 included the accrual of a $25.0 million development milestone payment.
Selling, General and Administrative (SG&A) expenses were $605.7 million, compared to $561.0 million in the prior year, primarily reflecting increased investment to support the launch of LYBALVI.
Profitability
– GAAP net loss for the year was $158.3 million, or a basic and diluted GAAP loss per share of $0.97. This compared to GAAP net loss of $48.2 million, or a basic and diluted GAAP loss per share of $0.30, in the prior year, which included the $25.0 million development milestone payment.
– Non-GAAP net income for the year was $57.9 million, or a non-GAAP basic earnings per share of $0.35 and non-GAAP diluted earnings per share of $0.34. This compared to non-GAAP net income of $129.1 million, or a non-GAAP basic earnings per share of $0.80 and non-GAAP diluted earnings per share of $0.78, in the prior year.
Balance Sheet
– At Dec. 31, 2022, the company recorded cash, cash equivalents and total investments of $740.1 million, compared to $765.7 million at Dec. 31, 2021. The company’s total debt outstanding as of Dec. 31, 2022 was $293.3 million.
Financial Expectations for 2023
The following financial expectations for 2023 reflect the combined neuroscience and oncology business for the full year, as the company works toward the planned separation of the oncology business, which it currently expects to complete in the second half of the year. These financial expectations also reflect anticipated continued growth of the company’s proprietary products, investment in a direct-to-consumer campaign to support the launch of LYBALVI, continued focus on operational efficiency, and expected costs related to the potential separation of the company’s oncology business. In addition, these expectations reflect the company’s assumption that it will continue to receive royalty payments related to sales of the long-acting INVEGA products outside the U.S. through the end of May 2023. These financial expectations do not include any royalty payments related to sales of the long-acting INVEGA products in the U.S., as arbitration proceedings with Janssen related to these royalty payments remain ongoing.
All line items are according to GAAP, except as otherwise noted.
In millions (except per share amounts)
2023 Expectations
Total Revenue
$1,130 – $1,250
VIVITROL Net Sales
$380 – $410
ARISTADA Net Sales
$315 – $345
LYBALVI Net Sales
$180 – $205
INVEGA Franchise Royalties*
$25 – $30
Other Revenues
$230 – $260
Cost of Goods Sold
$230 – $250
R&D Expenses
$370 – $400
SG&A Expenses
$695 – $725
Amortization of Intangible Assets
~$35
Interest Expense, Net
$5 – $10
Income Tax Benefit
$5 – $10
GAAP Net Loss
($160) – ($200)
GAAP Net Loss per Share+
($0.96) – ($1.20)
Non-GAAP Net Income
$0 – $40
Non-GAAP Net Earnings Per Share (Diluted)+
$0.00 – $0.23
Capital Expenditures
$35 – $40
*Reflects royalties related to sales of XEPLION/TREVICTA/BYANNLI outside of the U.S. through the end of May 2023.
+2023 per share expectations are calculated based on a weighted average basic share count of approximately 166.5 million shares outstanding and a weighted average diluted share count of approximately 171.5 million shares outstanding.
Profitability Targets
The company today accelerated its long-term profitability targets to reflect the planned separation of the company’s oncology business in the second half of 2023. The updated profitability targets continue to reflect the removal of all royalty revenues related to sales of the long-acting INVEGA products, as arbitration proceedings with Janssen related to these royalty payments remain ongoing. The company is not providing reconciliations of, or comparable GAAP measures for, the following non-GAAP profitability targets, as they are not determinable without unreasonable efforts.*
The company is committed to achieving:
– FY 2024 non-GAAP net income equal to 25% of the company’s total revenues and EBITDAii margin of 20% of total revenues
– FY 2025 non-GAAP net income equal to 30% of the company’s total revenues and EBITDA margin of 25% of total revenues
Recent Events:
Corporate
– In November 2022, the company announced its intent, as approved by its board of directors (the Board) to separate its neuroscience business and oncology business. The company plans to explore a separation of the oncology business into an independent, publicly-traded company as part of an ongoing review of strategic alternatives for the oncology business. The separation, if consummated, is expected to be completed in the second half of 2023.
– In December 2022, the company received an interim award (the Interim Award) in its arbitration proceedings with Janssen, a subsidiary of Johnson & Johnson, in respect of Janssen’s partial termination in the United States of two license agreements with the company. In the Interim Award, the arbitral tribunal (the Tribunal) agreed with the company’s position that, while Janssen may terminate the agreements, it may not continue to sell Products (as defined in the agreements) developed during the term of the agreements without paying royalties pursuant to the terms of the respective agreements. The company will engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal’s issuance of a final award.
Neuroscience
– In November 2022, the company initiated a phase 1 single ascending dose study in healthy volunteers to advance the clinical development of its orexin 2 receptor agonist program for the treatment of narcolepsy and other sleep disorders.
Oncology
– In December 2022, the Independent Data Monitoring Committee for the company’s ARTISTRY-6 phase 2 study evaluating nemvaleukin alfa (nemvaleukin), the company’s investigational, novel engineered interleukin-2 (IL-2) variant immunotherapy, as monotherapy in patients with advanced cutaneous melanoma or advanced mucosal melanoma, performed a risk-benefit assessment of the study and recommended that the trial continue without modifications.
– In January 2023, the company announced that nemvaleukin has been granted an Innovation Passport for the treatment of mucosal melanoma under the Innovative Licensing and Access Pathway (ILAP) by the Medicines and Healthcare products Regulatory Agency (MHRA), the regulatory body of the United Kingdom.
Conference Call
Alkermes will host a conference call and webcast presentation with accompanying slides at 8:00 a.m. ET (1:00 p.m. GMT) on Thursday, Feb. 16, 2023, to discuss these financial results and provide an update on the company. The webcast may be accessed on the Investors section of Alkermes’ website at www.alkermes.com. The conference call may be accessed by dialing +1 877 407 2988 for U.S. callers and +1 201 389 0923 for international callers. In addition, a replay of the conference call may be accessed by visiting Alkermes’ website.