10-Q 1 alks-20240331.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 March 31, 2024

 

OR

 

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

 

Commission File Number 001-35299

img77517403_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 April 26, 2024 was 169,221,311 shares.

 

 

 

 


 

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

 

 

 

 

 

Page No.

PART I - FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (unaudited):

 

 

Condensed Consolidated Balance Sheets — March 31, 2024 and December 31, 2023

5

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) — For the Three Months Ended March 31, 2024 and 2023

6

 

Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2024 and 2023

7

 

Condensed Consolidated Statements of Shareholders’ Equity — For the Three Months Ended March 31, 2024 and 2023

8

 

Notes to Condensed Consolidated Financial Statements

9

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

 

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, income taxes and profitability;
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 acquisitions, collaborations, licensing arrangements and other significant agreements with third parties, including those related to our products and our development programs;
our expectations regarding the impacts of new legislation, rules and regulations, the adoption of new accounting pronouncements, potential government shutdowns, or other global, political or economic instability or 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, know-how, and related rights or obligations;
our expectations regarding the tax treatment and other anticipated benefits of the separation of our oncology business; 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, 2023, filed with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 21, 2024 (our “Annual Report”).

3


 

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. 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 global biopharmaceutical company that seeks to develop innovative medicines in the field of neuroscience. We have a portfolio of proprietary commercial products for the treatment of alcohol dependence, opioid dependence, schizophrenia and bipolar I disorder and a pipeline of clinical and preclinical candidates in development for neurological disorders, including narcolepsy. 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: BYANNLI®, INVEGA®, INVEGA HAFYERA®, INVEGA SUSTENNA®, INVEGA TRINZA®, TREVICTA®, and XEPLION®—Johnson & Johnson or its affiliated companies; 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)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(In thousands, except share and per share amounts)

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

420,753

 

 

$

457,469

 

Receivables, net

 

 

315,848

 

 

 

332,477

 

Investments—short-term

 

 

324,295

 

 

 

316,022

 

Inventory

 

 

198,369

 

 

 

186,406

 

Contract assets

 

 

1,229

 

 

 

706

 

Prepaid expenses and other current assets

 

 

111,539

 

 

 

98,166

 

Assets held for sale

 

 

96,792

 

 

 

94,260

 

Total current assets

 

 

1,468,825

 

 

 

1,485,506

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

 

224,590

 

 

 

226,943

 

RIGHT-OF-USE ASSETS

 

 

89,683

 

 

 

91,460

 

INVESTMENTS—LONG-TERM

 

 

62,782

 

 

 

39,887

 

GOODWILL

 

 

83,027

 

 

 

83,027

 

INTANGIBLE ASSETS, NET

 

 

932

 

 

 

1,991

 

DEFERRED TAX ASSETS

 

 

182,536

 

 

 

195,888

 

OTHER ASSETS

 

 

11,521

 

 

 

11,521

 

TOTAL ASSETS

 

$

2,123,896

 

 

$

2,136,223

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

205,854

 

 

$

240,561

 

Accrued sales discounts, allowances and reserves

 

 

240,877

 

 

 

263,641

 

Operating lease liabilities—short-term

 

 

5,910

 

 

 

5,746

 

Contract liabilities—short-term

 

 

3,336

 

 

 

2,730

 

Current portion of long-term debt

 

 

3,000

 

 

 

3,000

 

Liabilities related to discontinued operations

 

 

 

 

 

4,542

 

Total current liabilities

 

 

458,977

 

 

 

520,220

 

LONG-TERM DEBT

 

 

287,095

 

 

 

287,730

 

OPERATING LEASE LIABILITIES—LONG-TERM

 

 

74,102

 

 

 

75,709

 

OTHER LONG-TERM LIABILITIES

 

 

48,959

 

 

 

49,878

 

Total liabilities

 

 

869,133

 

 

 

933,537

 

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 March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 175,734,220 and 172,569,051 shares issued; 169,184,516 and 166,979,833 shares outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

1,757

 

 

 

1,726

 

Treasury shares, at cost (6,549,704 and 5,589,218 shares at March 31, 2024 and December 31, 2023, respectively)

 

 

(217,685

)

 

 

(189,336

)

Additional paid-in capital

 

 

2,780,992

 

 

 

2,736,934

 

Accumulated other comprehensive loss

 

 

(3,601

)

 

 

(3,110

)

Accumulated deficit

 

 

(1,306,700

)

 

 

(1,343,528

)

Total shareholders’ equity

 

 

1,254,763

 

 

 

1,202,686

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

2,123,896

 

 

$

2,136,223

 

 

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)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands, except per share amounts)

 

REVENUES:

 

 

 

 

 

 

Product sales, net

 

$

233,536

 

 

$

214,727

 

Manufacturing and royalty revenues

 

 

116,833

 

 

 

72,862

 

Research and development revenue

 

 

3

 

 

 

6

 

Total revenues

 

 

350,372

 

 

 

287,595

 

EXPENSES:

 

 

 

 

 

 

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

 

 

58,644

 

 

 

58,164

 

Research and development

 

 

67,611

 

 

 

63,770

 

Selling, general and administrative

 

 

179,749

 

 

 

167,833

 

Amortization of acquired intangible assets

 

 

1,059

 

 

 

8,800

 

Total expenses

 

 

307,063

 

 

 

298,567

 

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

43,309

 

 

 

(10,972

)

OTHER INCOME (EXPENSE), NET:

 

 

 

 

 

 

Interest income

 

 

9,399

 

 

 

4,966

 

Interest expense

 

 

(5,978

)

 

 

(5,288

)

Other income (expense), net

 

 

182

 

 

 

(39

)

Total other income (expense), net

 

 

3,603

 

 

 

(361

)

INCOME (LOSS) BEFORE INCOME TAXES

 

 

46,912

 

 

 

(11,333

)

INCOME TAX PROVISION

 

 

7,964

 

 

 

717

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

38,948

 

 

 

(12,050

)

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

 

(2,120

)

 

 

(29,795

)

NET INCOME (LOSS)

 

$

36,828

 

 

$

(41,845

)

 

 

 

 

 

 

EARNINGS (LOSS) PER ORDINARY SHARE:

 

 

 

 

 

 

Earnings (loss) per share from continuing operations - basic

 

$

0.23

 

 

$

(0.07

)

Loss per share from discontinued operations - basic

 

$

(0.01

)

 

$

(0.18

)

Earnings (loss) per share - basic

 

$

0.22

 

 

$

(0.25

)

 

 

 

 

 

 

Earnings (loss) per share from continuing operations - diluted

 

$

0.23

 

 

$

(0.07

)

Loss per share from discontinued operations - diluted

 

$

(0.01

)

 

$

(0.18

)

Earnings (loss) per share - diluted

 

$

0.21

 

 

$

(0.25

)

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:

 

 

 

 

 

 

Basic

 

 

167,984

 

 

 

165,085

 

Diluted

 

 

172,981

 

 

 

165,085

 

COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

Net income (loss)

 

$

36,828

 

 

$

(41,845

)

Holding (loss) gain, net of a tax (benefit) provision of $(75) and $488, respectively

 

 

(491

)

 

 

2,760

 

COMPREHENSIVE INCOME (LOSS)

 

$

36,337

 

 

$

(39,085

)

 

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)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

36,828

 

 

$

(41,845

)

Adjustments to reconcile net income (loss) to cash flows from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

8,056

 

 

 

18,714

 

Share-based compensation expense

 

 

32,755

 

 

 

22,643

 

Deferred income taxes

 

 

7,515

 

 

 

(36,117

)

Other non-cash charges

 

 

2,215

 

 

 

369

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

16,628

 

 

 

18,789

 

Contract assets

 

 

(523

)

 

 

500

 

Inventory

 

 

(12,641

)

 

 

(2,029

)

Prepaid expenses and other assets

 

 

(7,461

)

 

 

(3,697

)

Right-of-use assets

 

 

1,777

 

 

 

4,269

 

Accounts payable and accrued expenses

 

 

(38,448

)

 

 

(30,154

)

Accrued sales discounts, allowances and reserves

 

 

(22,764

)

 

 

30,148

 

Contract liabilities

 

 

(208

)

 

 

(4,287

)

Operating lease liabilities

 

 

(2,516

)

 

 

(4,379

)

Other long-term liabilities

 

 

(105

)

 

 

5,774

 

Cash flows provided by (used in) operating activities

 

 

21,108

 

 

 

(21,302

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Additions of property, plant and equipment

 

 

(8,342

)

 

 

(6,860

)

Proceeds from the sale of equipment

 

 

411

 

 

 

 

Purchases of investments

 

 

(114,508

)

 

 

(23,898

)

Sales and maturities of investments

 

 

82,488

 

 

 

103,608

 

Cash flows (used in) provided by investing activities

 

 

(39,951

)

 

 

72,850

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

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

 

 

11,226

 

 

 

2,874

 

Employee taxes paid related to net share settlement of equity awards

 

 

(28,349

)

 

 

(24,744

)

Principal payments of long-term debt

 

 

(750

)

 

 

(750

)

Cash flows used in financing activities

 

 

(17,873

)

 

 

(22,620

)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(36,716

)

 

 

28,928

 

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

457,469

 

 

 

292,473

 

CASH AND CASH EQUIVALENTS—End of period

 

$

420,753

 

 

$

321,401

 

SUPPLEMENTAL CASH FLOW DISCLOSURE:

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Purchased capital expenditures included in accounts payable and accrued expenses

 

$

2,629

 

 

$

1,762

 

 

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, 2023

 

 

172,569,051

 

 

$

1,726

 

 

$

2,736,934

 

 

$

(3,110

)

 

$

(1,343,528

)

 

 

(5,589,218

)

 

$

(189,336

)

 

$

1,202,686

 

Issuance of ordinary shares under employee stock plans

 

 

3,165,169

 

 

 

31

 

 

 

11,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,226

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(960,486

)

 

 

(28,349

)

 

 

(28,349

)

Share-based compensation

 

 

 

 

 

 

 

 

32,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,863

 

Unrealized gain on marketable securities, net of tax benefit of $75

 

 

 

 

 

 

 

 

 

 

 

(491

)

 

 

 

 

 

 

 

 

 

 

 

(491

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,828

 

 

 

 

 

 

 

 

 

36,828

 

BALANCE — March 31, 2024

 

 

175,734,220

 

 

$

1,757

 

 

$

2,780,992

 

 

$

(3,601

)

 

$

(1,306,700

)

 

 

(6,549,704

)

 

$

(217,685

)

 

$

1,254,763

 

 

 

 

 

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' ordinary 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

 

 

 

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

8


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited)

 

1. THE COMPANY

Alkermes plc is a global biopharmaceutical company that seeks to develop innovative medicines in the field of neuroscience. Alkermes has a portfolio of proprietary commercial products for the treatment of alcohol dependence, opioid dependence, schizophrenia and bipolar I disorder and a pipeline of clinical and preclinical candidates in development for neurological disorders, including narcolepsy. Headquartered in Ireland, Alkermes also has a corporate office and research and development (“R&D”) center in Massachusetts and a manufacturing facility in Ohio.

On May 1, 2024, the Company completed the previously announced sale of its development and manufacturing facility in Athlone, Ireland (the “Athlone Facility”) to Novo Nordisk (“Novo”). The Company and Novo also entered into subcontracting arrangements to continue certain development and manufacturing activities currently performed at the Athlone Facility for a period of time after the closing of the transaction; these activities may continue through the end of 2025. At March 31, 2024 and December 31, 2023, the Company classified the assets described under the related asset purchase agreement as “Assets held for sale” within the accompanying condensed consolidated balance sheets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company for the three months ended March 31, 2024 and 2023 are unaudited and have been prepared on a basis substantially consistent with the audited financial statements for the year ended December 31, 2023. 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 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 Annual Report. Intercompany accounts and transactions have been eliminated. Columns and rows within tables may not sum due to rounding.

Reclassification

The Company has presented its former oncology business as discontinued operations in its accompanying condensed consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2023. See Note 3, Discontinued Operations in these “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for additional information.

Discontinued Operations

The Company determined that the separation of its oncology business in November 2023 met the criteria for classification of the oncology business as discontinued operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205, Discontinued Operations (“Topic 205”). Accordingly, the financial statements have been updated to present the results of the oncology business as discontinued operations for the three months ended March 31, 2023 in the accompanying condensed consolidated statement of operations and comprehensive income (loss).

9


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

Assets Held for Sale

In connection with the sale of the Athlone Facility, the Company reviewed FASB ASC 805, Business Combinations and, based on the definitions therein, determined that the Athlone Facility constitutes a business. Accordingly, the assets associated with the sale of the Athlone Facility were classified as “Assets held for sale” within the accompanying condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

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 from contracts with its customers and related allowances, impairment and amortization of 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 one business segment, which is the business of developing, manufacturing and commercializing medicines designed to address unmet medical needs of patients in major therapeutic areas. The Company’s chief decision maker, its Chief Executive Officer and chairman of its board of directors, reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB 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 standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss and the title and position of the Company’s chief operating decision maker. The amendments in this guidance also expand the interim segment disclosure requirements. All disclosure requirements under this guidance are required for public entities with a single reportable segment. This ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this guidance are required to be applied on a retrospective basis. The Company elected to early adopt this guidance and determined this ASU did not have an impact on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures in order to provide information to assist key stakeholders in better assessing how the Company’s operations and related tax risks and tax planning and operational opportunities affect the Company’s tax rate and prospects for future cash flows. This ASU becomes effective for public companies for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This guidance will be applied on a prospective basis. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

10


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

3. DISCONTINUED OPERATIONS

Mural Oncology Separation

On November 15, 2023 (the “Separation Date”), the Company completed the separation of its oncology business into Mural Oncology plc (“Mural”), a new, independent, publicly-traded company (the “Separation”). The Separation was effected by means of a distribution of all of the outstanding ordinary shares of Mural to the Company’s shareholders (the “Distribution”), in which each of the Company’s shareholders received one ordinary share, nominal value $0.01 per share, of Mural for every ten ordinary shares, par value $0.01 per share, of the Company (the “Distribution Ratio”) held by such shareholder as of the close of business on November 6, 2023, the record date for the Distribution. The historical results of the oncology business have been reflected as discontinued operations in the Company’s accompanying condensed consolidated financial statements for the three months ended March 31, 2023.

In connection with the Separation, the Company entered into a separation agreement with Mural, dated as of November 13, 2023 (the “Separation Agreement”), that, among other things, sets forth the Company’s agreements with Mural regarding the principal actions taken or to be taken in connection with the Separation, including the Distribution. The Separation Agreement identified those assets to be transferred to, liabilities to be assumed by, and contracts to be assigned to Mural, including the operating lease for the office and laboratory space at 852 Winter Street in Waltham, Massachusetts, and it provided for when and how such transfers, assumptions and assignments were to occur. The purpose of the Separation Agreement was to provide Mural and the Company with those assets necessary to operate their respective businesses and to retain or assume the respective liabilities related to those assets.

Under the terms of the Separation Agreement, the Company granted Mural a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license (or, as the case may be, sublicense) to certain IP controlled by the Company as of the date of the Distribution to allow Mural to use such IP for the oncology business, and Mural granted the Company a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license (or, as the case may be, sublicense) to the IP transferred to Mural as part of the Separation for the Company’s use outside of the oncology business.

Each of Mural and the Company agreed to releases with respect to pre-Distribution claims, and cross-indemnities with respect to post-Distribution claims, that are principally designed to place financial responsibility for the obligations and liabilities allocated to Mural under the Separation Agreement, and financial responsibility for the obligations and liabilities allocated to the Company under the Separation Agreement. The Company and Mural are also each subject to mutual six-month employee non-solicitation and non-hire restrictions, subject to certain customary exceptions, and certain confidentiality restrictions and information sharing obligations.

The transfer of assets and liabilities to Mural was effected through a contribution in accordance with the Separation Agreement, as summarized below:

 

(In thousands)

 

November 15, 2023

 

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

 

$

275,000

 

Total current assets

 

 

275,000

 

Property, plant and equipment, net

 

 

10,096

 

Right-of-use assets

 

 

14,513

 

Goodwill

 

 

7,800

 

Deferred tax asset

 

 

1,799

 

Total assets

 

$

309,208

 

LIABILITIES

 

 

 

Current Liabilities

 

 

 

Operating lease liabilities—short-term

 

$

6,036

 

Total current liabilities

 

 

6,036

 

Operating lease liabilities—long-term

 

 

9,412

 

Total liabilities

 

 

15,448

 

Net assets transferred to Mural

 

$

293,760

 

 

11


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

The Company determined that the Separation and related Distribution qualified as tax-free for U.S. federal income tax purposes, which required significant judgment by management. In making such determination, the Company applied U.S. federal tax law to relevant facts and circumstances and obtained: (i) a favorable private letter ruling from the Internal Revenue Service; (ii) a tax opinion; and (iii) other external tax advice related to the concluded tax treatment. If the Separation and Distribution were to ultimately fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company and/or its shareholders could be subject to significant liabilities, which could have material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods. Furthermore, other than taxes recorded on the transfer of IP, the Company determined that the Separation and related Distribution qualified as tax-free for Irish tax purposes, which required significant judgment by management. In making such determination, the Company applied Irish tax law to relevant facts and circumstances and obtained: (i) a tax opinion; and (ii) other external tax advice related to the concluded tax treatment. If the Separation and Distribution were to ultimately fail to qualify for tax-free treatment for Irish tax purposes, the Company and/or its shareholders could be subject to significant liabilities, which could have material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.

In connection with the Separation, the Company also entered into a tax matters agreement with Mural, dated as of November 13, 2023. The tax matters agreement governs the Company’s and Mural’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Distribution, together with certain related transactions, to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and assistance and cooperation in respect of tax matters.

In connection with the Separation, the Company also entered into an employee matters agreement with Mural, dated as of November 13, 2023 (as amended, the “Employee Matters Agreement”). The Employee Matters Agreement governs the Company’s, Mural’s and their respective subsidiaries’ and affiliates’ rights, responsibilities and obligations after the Separation with respect to, employment, benefits and compensation matters relating to employees and former employees (and their respective dependents and beneficiaries) who are or were associated with the Company, including those who became employees of Mural in connection with the Separation; the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans; other human resources, employment and employee benefits matters; and the treatment of equity-based awards granted by the Company prior to the Separation.

The Company entered into two transition services agreements with Mural. On November 13, 2023, Alkermes, Inc., a wholly-owned subsidiary of the Company (“Alkermes US”), and Mural Oncology, Inc., a wholly-owned subsidiary of Mural (“Mural US”), entered into one transition services agreement, pursuant to which the Company and its subsidiaries will provide, on an interim, transitional basis, various services to Mural and its subsidiaries, and a second transition services agreement, pursuant to which Mural and its subsidiaries will provide certain services to the Company and its subsidiaries, in each case for a term of two years, unless earlier terminated in accordance with the terms of the applicable agreement.

 

Discontinued Operations

The Company determined that the Separation met the criteria for classification of the oncology business as discontinued operations in accordance with Topic 205. The following summarizes the loss from discontinued operations for the three months ended March 31, 2024 and 2023:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2024

 

 

2023

 

Operating expenses from discontinued operations

 

 

 

 

 

 

Cost of goods manufactured

 

$

 

 

$

11

 

Research and development

 

 

2,516

 

 

 

29,867

 

Selling, general and administrative

 

 

 

 

 

6,644

 

Total operating expenses from discontinued operations

 

 

2,516

 

 

 

36,522

 

Operating loss from discontinued operations

 

 

(2,516

)

 

 

(36,522

)

Income tax benefit from discontinued operations

 

 

(396

)

 

 

(6,727

)

Net loss and comprehensive loss from discontinued operations

 

$

(2,120

)

 

$

(29,795

)

 

12


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

There were no assets and $4.5 million of liabilities related to the Separation at December 31, 2023. All assets related to the Separation were transferred to Mural as of the Separation Date. The $4.5 million of liabilities classified as “Liabilities related to discontinued operations” in the accompanying condensed consolidated balance sheet related to bonus amounts accrued for employees that transferred to Mural during 2023 and through the Separation Date that were paid by the Company in the first quarter of 2024, in accordance with the terms of the Employee Matters Agreement.

The following table summarizes the significant non-cash items and capital expenditures of the discontinued operations that are included in the accompanying condensed consolidated statements of cash flows for the three months ended March 31, 2023:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

OPERATING ACTIVITIES:

 

 

 

Depreciation

 

$

116

 

Share-based compensation expense

 

 

1,620

 

Right-of-use assets

 

 

3,066

 

Operating lease liabilities

 

 

(1,460

)

 

 

 

INVESTING ACTIVITIES:

 

 

 

Additions of property, plant and equipment

 

$

(100

)

 

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Product Sales, Net

During the three months ended March 31, 2024 and 2023, the Company recorded product sales, net, as follows:

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2024

 

 

2023

 

VIVITROL

 

$

97,659

 

 

$

96,659

 

ARISTADA and ARISTADA INITIO

 

 

78,870

 

 

 

80,077

 

LYBALVI

 

 

57,007

 

 

 

37,991

 

Total product sales, net

 

$

233,536

 

 

$

214,727

 

 

Manufacturing and Royalty Revenues

During the three months ended March 31, 2024 and 2023, the Company recorded manufacturing and royalty revenues from its collaboration arrangements as follows:

 

 

 

Three Months Ended March 31, 2024

 

(In thousands)

 

Manufacturing Revenue

 

 

Royalty Revenue

 

 

Total

 

Long-acting INVEGA products(1)

 

$

 

 

$

62,673

 

 

$

62,673

 

VUMERITY

 

 

12,124

 

 

 

19,130

 

 

 

31,254

 

Other

 

 

17,906

 

 

 

5,000

 

 

 

22,906

 

 

$

30,030

 

 

$

86,803

 

 

$

116,833

 

 

 

 

Three Months Ended March 31, 2023

 

(In thousands)

 

Manufacturing Revenue

 

 

Royalty Revenue

 

 

Total

 

Long-acting INVEGA products(1)

 

$

 

 

$

13,562

 

 

$

13,562

 

VUMERITY

 

 

12,649

 

 

 

16,225

 

 

 

28,874

 

Other

 

 

25,791

 

 

 

4,635

 

 

 

30,426

 

 

$

38,440

 

 

$

34,422

 

 

$

72,862

 

 

(1)
“long-acting INVEGA products”: INVEGA SUSTENNA/XEPLION (paliperidone palmitate), INVEGA TRINZA/TREVICTA (paliperidone palmitate) and INVEGA HAFYERA/BYANNLI (paliperidone palmitate).

13


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. Accordingly, the Company ceased recognizing royalty revenue related to 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 Janssen Pharmaceutica’s royalty and other obligations under the agreement. In May 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 and late-payment interest related to 2022 U.S. net sales of the long-acting INVEGA products, which payments were received from Janssen Pharmaceutica in the second quarter of 2023, and is entitled to 2023 and future royalty revenues from Janssen Pharmaceutica 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, the Company recognized royalty revenues related to the back royalties and resumed recognizing royalty revenue related to ongoing U.S. sales of the long-acting INVEGA products.

 

Contract Assets

Contract assets include unbilled amounts related to the manufacture of a product that, once complete, will be sold under certain of the Company’s manufacturing contracts. 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 ten days to eight weeks.

Total contract assets at March 31, 2024 were as follows:

 

(In thousands)

 

Contract Assets

 

Contract assets at December 31, 2023

 

$

706

 

Additions

 

 

1,229

 

Transferred to receivables, net

 

 

(706

)

Contract assets at March 31, 2024

 

$

1,229

 

 

Contract Liabilities

 

Contract liabilities consist of contractual obligations related to deferred revenue. At March 31, 2024 and December 31, 2023, $3.3 million and $2.7 million of the contract liabilities, respectively, were classified as “Contract liabilities–short-term” in the accompanying condensed consolidated balance sheets and $1.2 million and $2.1 million of the contract liabilities, respectively, were classified as “Other long-term liabilities” in the accompanying condensed consolidated balance sheets.

Total contract liabilities at March 31, 2024 were as follows:

 

(In thousands)

 

Contract Liabilities

 

Contract liabilities at December 31, 2023

 

$

4,775

 

Additions

 

 

 

Amounts recognized into revenue

 

 

(208

)

Contract liabilities at March 31, 2024

 

$

4,567

 

 

14


ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

 

5. INVESTMENTS

Investments consisted of the following (in thousands):

 

 

 

 

 

 

Gross Unrealized

 

 

 

 

 

 

 

 

 

 

 

 

Losses

 

 

 

 

 

 

Amortized

 

 

 

 

 

Less than

 

 

Greater than

 

 

Estimated

 

March 31, 2024

 

Cost

 

 

Gains

 

 

One Year

 

 

One Year

 

 

Fair Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

$

214,958

 

 

$

227

 

 

$

(77

)

 

$

(444

)

 

$

214,664

 

Corporate debt securities

 

 

109,691

 

 

 

290

 

 

 

(25

)

 

 

(325

)

 

 

109,631

 

 Total short-term investments

 

 

324,649

 

 

 

517

 

 

 

(102

)

 

 

(769

)

 

 

324,295

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

 

29,446

 

 

 

 

 

 

(81

)

 

 

(207

)

 

 

29,158

 

Corporate debt securities

 

 

32,104

 

 

 

 

 

 

(49

)

 

 

(251

)

 

 

31,804

 

 

 

61,550

 

 

 

 

 

 

(130

)

 

 

(458

)

 

 

60,962

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

1,820

 

 

 

 

 

 

 

 

 

 

 

 

1,820

 

Total long-term investments

 

 

63,370

 

 

 

 

 

 

(130

)

 

 

(458

)

 

 

62,782

 

Total investments

 

$

388,019

 

 

$

517

 

 

$

(232

)

 

$

(1,227

)

 

$

387,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

$

199,708

 

 

$

758

 

 

$

(36

)

 

$

(611

)

 

$

199,819

 

Corporate debt securities

 

 

112,055

 

 

 

703

 

 

 

(15

)

 

 

(536

)

 

 

112,207

 

Non-U.S. government debt securities

 

 

4,004

 

 

 

 

 

 

 

 

 

(8

)

 

 

3,996

 

 Total short-term investments

 

 

315,767

 

 

 

1,461

 

 

 

(51

)

 

 

(1,155

)