10-Q 1 alks-20220930.htm 10-Q 10-Q
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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, 2022

 

OR

 

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

 

Commission File Number 001-35299

img75676126_0.jpg 

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 28, 2022 was 164,312,356 shares.

 

 

 

 


 

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

 

 

 

 

 

Page No.

PART I - FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (unaudited):

 

 

Condensed Consolidated Balance Sheets — September 30, 2022 and December 31, 2021

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three and Nine Months Ended September 30, 2022 and 2021

6

 

Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2022 and 2021

7

 

Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Nine Months Ended September 30, 2022 and 2021

8

 

Notes to Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

37

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signatures

44

 

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:

our expectations regarding our financial performance, including revenues, expenses, liquidity, capital expenditures and income taxes;
our expectations regarding our products, including expectations related to product development; regulatory filings, approvals and timelines; therapeutic and commercial value, scope and potential; and the costs and expenses related to such activities and expectations;
our expectations regarding the initiation, timing and results of clinical trials of our products;
our expectations regarding the competitive, payer, legislative, regulatory and policy landscape, and changes therein, related to our products, including competition from generic forms of our products or competitive products and development programs; barriers to access or coverage of our products and potential changes in reimbursement of our products; and legislation, regulations, executive orders, guidance or other measures that may impact pricing and reimbursement of, and access to, our products;
our expectations regarding the financial impact of currency exchange rate fluctuations and valuations;
our expectations regarding future amortization of intangible assets;
our expectations regarding collaborations, licensing arrangements and other significant agreements with third parties relating to our products and our development programs;
our expectations regarding the impact of new legislation, rules and regulations and the adoption of new accounting pronouncements;
our expectations regarding near‑term changes in the nature of our market risk exposures or in our management’s objectives and strategies with respect to managing such exposures;
our expectations regarding our ability to comply with restrictive covenants of our indebtedness and our ability to fund our debt service obligations;
our expectations regarding future capital requirements and expenditures for our operations and our ability to finance such capital requirements and expenditures;
our expectations regarding the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our products and intellectual property (“IP”), including our patents;
our expectations regarding the impact of the ongoing novel coronavirus (“COVID-19”) pandemic on our business and operations;
our expectations regarding the potential separation of our commercial-stage neuroscience business and development-stage 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,

3


 

see “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 16, 2022, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 29, 2022 (our “Annual Report”) 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 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 neurodegenerative disorders and cancer. Use of terms such as “us,” “we,” “our,” “Alkermes” or the “Company” in this Form 10-Q is meant to refer to Alkermes plc and its consolidated subsidiaries. Except as otherwise suggested by the context, (a) references to “products” or “our products” in this Form 10-Q include our marketed products, marketed products using our proprietary technologies, our licensed products, our product candidates and product candidates using our proprietary technologies, (b) references to the “biopharmaceutical industry” in this Form 10-Q are intended to include reference to the “biotechnology industry” and/or the “pharmaceutical industry” and (c) references to “licensees” in this Form 10-Q are used interchangeably with references to “partners.”

Note Regarding Trademarks

We are the owner of various U.S. federal trademark registrations (“®”) and other trademarks (“TM”), including ALKERMES®, ARISTADA®, ARISTADA INITIO®, LinkeRx®, LYBALVI®, NanoCrystal® and VIVITROL®.

The following are trademarks of the respective companies listed: AMPYRA®—Acorda Therapeutics, Inc. (“Acorda”); BYANNLI®, INVEGA®, INVEGA HAFYERA®, INVEGA SUSTENNA®, INVEGA TRINZA®, TREVICTA®, XEPLION®, and RISPERDAL CONSTA®—Johnson & Johnson Corporation (or its affiliates); KEYTRUDA®—Merck Sharp & Dohme Corp.; and VUMERITY®—Biogen MA Inc. (together with its affiliates, “Biogen”). Other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q may be referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

4


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(In thousands, except share and per share amounts)

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

263,957

 

 

$

337,544

 

Receivables, net

 

 

257,173

 

 

 

313,193

 

Investments—short-term

 

 

316,225

 

 

 

198,767

 

Inventory

 

 

166,296

 

 

 

150,335

 

Contract assets

 

 

10,105

 

 

 

13,363

 

Prepaid expenses and other current assets

 

 

40,041

 

 

 

48,967

 

Total current assets

 

 

1,053,797

 

 

 

1,062,169

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

 

326,350

 

 

 

341,054

 

INVESTMENTS—LONG-TERM

 

 

166,928

 

 

 

229,430

 

RIGHT-OF-USE ASSETS

 

 

106,980

 

 

 

115,627

 

INTANGIBLE ASSETS, NET

 

 

46,845

 

 

 

74,043

 

GOODWILL

 

 

92,873

 

 

 

92,873

 

DEFERRED TAX ASSETS

 

 

137,149

 

 

 

81,833

 

OTHER ASSETS

 

 

10,977

 

 

 

27,455

 

TOTAL ASSETS

 

$

1,941,899

 

 

$

2,024,484

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

211,177

 

 

$

208,491

 

Accrued sales discounts, allowances and reserves

 

 

235,640

 

 

 

237,216

 

Operating lease liabilities—short-term

 

 

15,756

 

 

 

16,240

 

Contract liabilities—short-term

 

 

3,982

 

 

 

6,339

 

Current portion of long-term debt

 

 

3,000

 

 

 

3,000

 

Total current liabilities

 

 

469,555

 

 

 

471,286

 

LONG-TERM DEBT

 

 

290,904

 

 

 

292,804

 

OPERATING LEASE LIABILITIES—LONG-TERM

 

 

95,731

 

 

 

104,162

 

OTHER LONG-TERM LIABILITIES

 

 

42,855

 

 

 

43,648

 

Total liabilities

 

 

899,045

 

 

 

911,900

 

COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 168,864,804 and 165,790,549 shares issued; 164,303,229 and 161,937,327 shares outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

1,689

 

 

 

1,658

 

Treasury shares, at cost (4,561,575 and 3,853,222 shares at September 30, 2022 and December 31, 2021, respectively)

 

 

(160,561

)

 

 

(142,658

)

Additional paid-in capital

 

 

2,885,594

 

 

 

2,798,325

 

Accumulated other comprehensive loss

 

 

(12,837

)

 

 

(3,723

)

Accumulated deficit

 

 

(1,671,031

)

 

 

(1,541,018

)

Total shareholders’ equity

 

 

1,042,854

 

 

 

1,112,584

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,941,899

 

 

$

2,024,484

 

 

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 LOSS

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands, except per share amounts)

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

199,380

 

 

$

157,737

 

 

$

561,435

 

 

$

448,508

 

Manufacturing and royalty revenues

 

 

52,941

 

 

 

136,294

 

 

 

243,437

 

 

 

398,435

 

License revenue

 

 

 

 

 

 

 

 

2,000

 

 

 

1,500

 

Research and development revenue

 

 

36

 

 

 

110

 

 

 

249

 

 

 

845

 

Total revenues

 

 

252,357

 

 

 

294,141

 

 

 

807,121

 

 

 

849,288

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)

 

 

50,625

 

 

 

49,561

 

 

 

164,144

 

 

 

143,705

 

Research and development

 

 

100,430

 

 

 

118,411

 

 

 

289,256

 

 

 

308,152

 

Selling, general and administrative

 

 

152,777

 

 

 

136,213

 

 

 

448,206

 

 

 

400,569

 

Amortization of acquired intangible assets

 

 

9,166

 

 

 

9,615

 

 

 

27,198

 

 

 

28,532

 

Total expenses

 

 

312,998

 

 

 

313,800

 

 

 

928,804

 

 

 

880,958

 

OPERATING LOSS

 

 

(60,641

)

 

 

(19,659

)

 

 

(121,683

)

 

 

(31,670

)

OTHER EXPENSE, NET:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,239

 

 

 

468

 

 

 

3,708

 

 

 

1,955

 

Interest expense

 

 

(3,552

)

 

 

(2,437

)

 

 

(8,271

)

 

 

(8,814

)

Change in the fair value of contingent consideration

 

 

(3,553

)

 

 

(5,195

)

 

 

(21,750

)

 

 

(677

)

Other (expense) income, net

 

 

(1,861

)

 

 

288

 

 

 

2,380

 

 

 

(327

)

Total other expense, net

 

 

(6,727

)

 

 

(6,876

)

 

 

(23,933

)

 

 

(7,863

)

LOSS BEFORE INCOME TAXES

 

 

(67,368

)

 

 

(26,535

)

 

 

(145,616

)

 

 

(39,533

)

INCOME TAX (BENEFIT) PROVISION

 

 

(3,394

)

 

 

2,453

 

 

 

(15,603

)

 

 

9,509

 

NET LOSS

 

$

(63,974

)

 

$

(28,988

)

 

$

(130,013

)

 

$

(49,042

)

LOSS PER ORDINARY SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.39

)

 

$

(0.18

)

 

$

(0.79

)

 

$

(0.31

)

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

164,282

 

 

 

161,456

 

 

 

163,541

 

 

 

160,642

 

COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(63,974

)

 

$

(28,988

)

 

$

(130,013

)

 

$

(49,042

)

Holding loss, net of a tax benefit of $188, $72, $1,242 and $325, respectively

 

 

(2,349

)

 

 

(249

)

 

 

(9,114

)

 

 

(1,122

)

COMPREHENSIVE LOSS

 

$

(66,323

)

 

$

(29,237

)

 

$

(139,127

)

 

$

(50,164

)

 

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)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(130,013

)

 

$

(49,042

)

Adjustments to reconcile net loss to cash flows from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

58,185

 

 

 

57,510

 

Share-based compensation expense

 

 

67,771

 

 

 

68,603

 

Deferred income taxes

 

 

(54,073

)

 

 

2,015

 

Change in the fair value of contingent consideration

 

 

21,750

 

 

 

677

 

Loss on debt extinguishment

 

 

 

 

 

171

 

Other non-cash charges

 

 

3,746

 

 

 

1,803

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

56,045

 

 

 

(13,991

)

Contract assets

 

 

3,258

 

 

 

10,892

 

Inventory

 

 

(15,646

)

 

 

(13,375

)

Prepaid expenses and other assets

 

 

1,872

 

 

 

(1,507

)

Right-of-use assets

 

 

12,470

 

 

 

12,891

 

Accounts payable and accrued expenses

 

 

4,810

 

 

 

15,546

 

Contract liabilities

 

 

(9,191

)

 

 

(4,642

)

Operating lease liabilities

 

 

(13,411

)

 

 

(12,504

)

Other long-term liabilities

 

 

12,424

 

 

 

(4,353

)

Cash flows provided by operating activities

 

 

19,997

 

 

 

70,694

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Additions of property, plant and equipment

 

 

(28,227

)

 

 

(19,359

)

Proceeds from the sale of equipment

 

 

 

 

 

277

 

Proceeds from contingent consideration

 

 

1,273

 

 

 

7,908

 

Return of Fountain Healthcare Partners II, L.P. investment

 

 

485

 

 

 

 

Payment made for licensed Intellectual Property ("IP")

 

 

 

 

 

(1,000

)

Purchases of investments

 

 

(256,806

)

 

 

(294,370

)

Sales and maturities of investments

 

 

190,994

 

 

 

241,082

 

Cash flows used in investing activities

 

 

(92,281

)

 

 

(65,462

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from the issuance of ordinary shares under share-based compensation arrangements

 

 

18,850

 

 

 

24,810

 

Employee taxes paid related to net share settlement of equity awards

 

 

(17,903

)

 

 

(13,633

)

Proceeds from the issuance of long-term debt

 

 

 

 

 

23,567

 

Payment made for debt extinguishment

 

 

 

 

 

(993

)

Principal payments of long-term debt

 

 

(2,250

)

 

 

(1,500

)

Cash flows (used in) provided by financing activities

 

 

(1,303

)

 

 

32,251

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(73,587

)

 

 

37,483

 

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

337,544

 

 

 

272,961

 

CASH AND CASH EQUIVALENTS—End of period

 

$

263,957

 

 

$

310,444

 

SUPPLEMENTAL CASH FLOW DISCLOSURE:

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Purchased capital expenditures included in accounts payable and accrued expenses

 

$

2,690

 

 

$

2,698

 

 

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

7


 

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, 2021

 

 

165,790,549

 

 

$

1,658

 

 

$

2,798,325

 

 

$

(3,723

)

 

$

(1,541,018

)

 

 

(3,853,222

)

 

$

(142,658

)

 

$

1,112,584

 

Issuance of ordinary shares under employee stock plans

 

 

1,953,293

 

 

 

19

 

 

 

1,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,795

 

Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(678,209

)

 

 

(17,069

)

 

 

(17,069

)

Share-based compensation

 

 

 

 

 

 

 

 

18,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,494

 

Unrealized loss on marketable securities, net of tax benefit of $1,382

 

 

 

 

 

 

 

 

 

 

 

(4,511