On February 16, 2022 Alkermes plc (Nasdaq: ALKS) reported financial results for the quarter and year ended Dec. 31, 2021 and provided financial expectations for 2022 (Press release, Alkermes, FEB 16, 2022, View Source [SID1234608172]).
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"In 2021, we made significant progress against our strategic priorities of growing our commercial business, expanding and advancing our development pipeline and driving profitability," said Richard Pops, Chief Executive Officer of Alkermes. "The year was highlighted by the FDA approval and our commercial launch of our oral atypical antipsychotic, LYBALVI, which joined ARISTADA, our long-acting injectable antipsychotic, in our psychiatry franchise. We drove new growth with VIVITROL in the alcohol dependence indication. We met important pipeline milestones, initiating potential registration-enabling studies for nemvaleukin and advancing our HDAC inhibitor and orexin development candidates. In 2022, we are focused on execution as we advance the commercial launch of LYBALVI, enroll our nemvaleukin clinical studies, demonstrate disciplined allocation of capital and manage the business to drive long-term profitability and value creation for our shareholders."
Quarter Ended Dec. 31, 2021 Financial Highlights
– Total revenues for the quarter were $324.5 million. This compared to $280.0 million for the same period in the prior year.
– Total operating expenses for the quarter were $322.1 million. This compared to $310.7 million for the same period in the prior year.
– Net income according to generally accepted accounting principles in the United States (GAAP) was $0.9 million for the quarter, or a basic and diluted GAAP earnings per share of $0.01. This compared to GAAP net loss of $42.6 million, or a basic and diluted GAAP loss per share of $0.27, for the same period in the prior year.
– Non-GAAP net income was $38.5 million for the quarter, or a non-GAAP basic earnings per share of $0.24 and diluted earnings per share of $0.23. This compared to non-GAAP net income of $16.5 million, or a non-GAAP basic and diluted earnings per share of $0.10 for the same period in the prior year.
Year Ended Dec. 31, 2021 Financial Results
Revenues
– Total revenues for the year were $1.17 billion. This compared to $1.04 billion in the prior year.
– Net sales of proprietary products for the year were $627.4 million, compared to $551.8 million in the prior year.
Net sales of VIVITROL were $343.9 million, compared to $310.7 million in the prior year, representing an increase of approximately 11%.
Net sales of ARISTADAi were $275.4 million, compared to $241.0 million in the prior year, representing an increase of approximately 14%.
Net sales of LYBALVI were $8.2 million, following commercial launch in October 2021.
– Manufacturing and royalty revenues for the year were $541.8 million, compared to $484.0 million in the prior year.
Royalty revenues from INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA (the "long-acting INVEGA products") were $303.1 million, compared to $274.2 million in the prior year.
Manufacturing and royalty revenues from RISPERDAL CONSTA were $50.9 million, compared to $71.4 million in the prior year.
Manufacturing and royalty revenues from VUMERITY were $87.4 million, compared to $22.5 million in the prior year.
Costs and Expenses
– Total operating expenses for the year were $1.20 billion, compared to $1.15 billion in the prior year.
Cost of Goods Manufactured and Sold were $197.4 million, compared to $178.3 million in the prior year.
R&D expenses were $406.5 million, compared to $394.6 million in the prior year. R&D expenses in 2021 included a $25.0 million development milestone paid to the former shareholders of Rodin Therapeutics, Inc. related to the company’s HDAC inhibitor platform. Excluding this milestone, R&D expenses for the year were $381.5 million.
Selling, General and Administrative (SG&A) expenses were $561.0 million, compared to $538.8 million in the prior year, primarily reflecting increased investment to support the launch of LYBALVI.
Profitability
– GAAP net loss for the year was $48.2 million, or a basic and diluted GAAP loss per share of $0.30 and included the $25.0 million development milestone. This compared to GAAP net loss of $110.9 million, or a basic and diluted GAAP loss per share of $0.70, in the prior year.
– Non-GAAP net income for the year was $129.1 million, or a non-GAAP basic earnings per share of $0.80 and diluted earnings per share of $0.78 and included the $25.0 million development milestone. This compared to non-GAAP net income of $68.6 million, or a non-GAAP basic and diluted earnings per share of $0.43, in the prior year.
Balance Sheet
– At Dec. 31, 2021, Alkermes recorded cash, cash equivalents and total investments of $765.7 million, compared to $659.8 million at Dec. 31, 2020, driven primarily by the company’s operating results and changes in working capital. The company’s total debt outstanding as of Dec. 31, 2021 was $295.8 million.
"In 2021, we managed the business to achieve the high end of our overall financial expectations, as we drove topline growth, continued to optimize our cost structure and focused on operational efficiencies. At the same time, we invested in key strategic priorities including the launch of LYBALVI and the nemvaleukin development program," commented Iain Brown, Chief Financial Officer of Alkermes. "We enter 2022 in a solid financial position. Our financial expectations for the year reflect our continued focus on driving the growth of our proprietary products and disciplined capital allocation focused on opportunities with high potential return on investment in support of the company’s strategy and to drive shareholder value creation."
Financial Expectations for 2022
The following financial expectations for 2022 assume improvement in COVID-19 pandemic-related disruptions, beginning in the second quarter. If current disruptions do not decrease as anticipated, or if new COVID-19-related disruptions emerge, the company’s ability to meet these expectations could be negatively impacted. These financial expectations also reflect removal of all royalties from worldwide sales of the long-acting INVEGA products beginning in 2022. Alkermes has, to date, only received notice of partial termination relating to royalties from the long-acting INVEGA products in the U.S., after January 2022. Alkermes has not received a notice of termination from Janssen in respect of any markets outside the U.S. However, for financial planning purposes only, the company has decided to remove all royalties related to sales in markets outside the U.S. after May 2022. Alkermes continues to disagree with the position taken by Janssen and is prepared to pursue all options at its disposal to enforce its contractual rights and address any unauthorized use of its intellectual property.
All line items are according to GAAP, except as otherwise noted.
In millions (except per share amounts)
2022 Expectations
*Reflects royalties related to sales of INVEGA SUSTENNA/INVEGA TRINZA/INVEGA HAFYERA in the U.S. through January 2022 and royalties related to sales of XEPLION/TREVICTA through May 2022.
+2022 per share expectations are calculated based on a weighted average basic share count of approximately 163.0 million shares outstanding and a weighted average diluted share count of approximately 166.5 million shares outstanding.
Mr. Brown continued, "Over the last several years, we have worked to position the business such that our topline performance will be fueled primarily by the growth of our proprietary products. We estimate that the early termination of the Janssen license agreement in the United States and the impact of its potential termination outside the United States would together reduce our total revenues by approximately $260 million in 2022. From an operational perspective, we have adapted our budget, recognizing that even if we are able to favorably resolve our situation with Janssen, that resolution could take time. Today we are updating our long-term profitability targets to reflect exclusion of worldwide royalties from the long-acting INVEGA products. In the event that the situation with Janssen resolves in a manner favorable to Alkermes, or Janssen does not terminate our license agreement in markets outside the U.S., we would be positioned to accelerate the achievement of these targets. The revised profitability targets that we are announcing today reflect feedback from many of our institutional shareholders, our commitment to continued expense management and our focus on driving long-term profitability."
Profitability Targets
The company today updated its long-term profitability targets to reflect the removal of all royalty revenues related to sales of the long-acting INVEGA products in the U.S. after January 2022 and outside the U.S. after May 2022. The company is not providing reconciliations of, or comparable GAAP measures for, the following updated non-GAAP profitability targets, as they are not determinable without unreasonable efforts.*
The company is committed to achieving:
FY 2025 non-GAAP net income equal to 25% of the company’s total revenues and EBITDAii margin of 20% of total revenues
FY 2026 non-GAAP net income equal to 30% of the company’s total revenues and EBITDA margin of 25% of total revenues
As a bridge to these long-term profitability targets, the company expects to achieve non-GAAP net income in the range of 15% to 20% of the company’s total revenues in FY 2024.
Recent Events:
Psychiatry and Addiction
In October 2021, the company presented clinical data and epidemiology and health economics and outcomes research from its psychiatry and addiction portfolios at scientific conferences, including Psych Congress, the International Society for Affective Disorders (ISAD) Conference, and the Neuroscience Education Institute (NEI) Congress.
In February 2022, the company announced positive topline results from ENLIGHTEN-Early, a phase 3b study that evaluated the effect of LYBALVI compared to olanzapine on body weight in patients with schizophrenia, schizophreniform disorder or bipolar I disorder who were early in their illness. The company plans to submit results from the ENLIGHTEN-Early study to a peer-reviewed journal for publication and present full study results at upcoming scientific meetings.
Oncology
In November 2021, the company presented data from the ION-01 study, a phase 2 trial evaluating intravenous nemvaleukin alfa ("nemvaleukin") in combination with pembrolizumab (KEYTRUDA) in patients with recurrent or metastatic head and neck squamous cell carcinoma that had previously progressed on an anti-PD-(L)1 therapy, at the Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper)’s (SITC) (Free SITC Whitepaper) 36th Annual Meeting.
In January 2022, the company presented a poster at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Gastrointestinal (GI) Cancers Symposium, highlighting clinical data related to advanced GI cancers from ARTISTRY-1, a phase 1/2 study evaluating the tolerability and efficacy of nemvaleukin administered intravenously as a monotherapy and in combination with pembrolizumab, and preclinical data from the study of nemvaleukin in combination with novel agents in GI cancers.
Neuroscience
In November 2021, the company announced dosing of the first subject in a phase 1 study evaluating the safety and tolerability of ALKS 1140 in healthy adults. ALKS 1140 is designed to increase functional synaptic connections and synaptic integrity in the brain.
Corporate
In November 2021, the company announced the appointment of a new independent director, Cato T. Laurencin, M.D., Ph.D., to the company’s Board of Directors. Dr. Laurencin was designated by Sarissa Capital Management LP and certain affiliates (collectively "Sarissa") in connection with Sarissa’s April 2021 agreement with the company. Dr. Laurencin brings significant experience across a wide range of medical and scientific disciplines, strong administrative skills, and a focus on public health that is consistent with the company’s values and business strategy.
Other
In November 2021, the company announced receipt of notices of partial termination in respect of two license agreements with Janssen Pharmaceutica N.V., a subsidiary of Johnson & Johnson Company and, under these agreements, a licensee and recipient of Alkermes’ nanoparticulate formulation technology, known as NanoCrystal technology. The terminations impact know-how royalties related to sales of long-acting INVEGA products and other products in the United States.
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 Wednesday, Feb. 16, 2022, 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 will be available from 11:00 a.m. ET (4:00 p.m. GMT) on Wednesday, Feb. 16, 2022, through Wednesday, Feb. 23, 2022, and may be accessed by visiting Alkermes’ website or by dialing +1 877 660 6853 for U.S. callers and +1 201 612 7415 for international callers. The replay conference ID is 13726455.