Alkermes Reports Second Quarter Fiscal 2010 Financial Results
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-- RISPERDAL(R) CONSTA(R) Shows Strong Operational Growth --
-- Company Updates Financial Expectations for Fiscal 2010 --
CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Alkermes, Inc. (NASDAQ: ALKS) today reported financial results for its second quarter of fiscal 2010, which ended on September 30, 2009.
Financial highlights:
-- Quarterly revenues of $48.2 million, driven by strong manufacturing and
royalty revenues from RISPERDAL(R) CONSTA(R). Worldwide sales of
RISPERDAL CONSTA by Janssen, Division of Ortho-McNeil-Janssen
Pharmaceuticals, Inc., and Janssen-Cilag (Janssen) were approximately
$353 million, growing 9.9% on an operational basis year-over-year. U.S.
sales growth for the quarter ended September 30, 2009, was 9.3% while
sales outside the U.S. were up 10.2% operationally driven by increased
share.
-- GAAP net loss of $8.7 million and pro forma net income of $1.1 million.
-- Strong financial position with cash and total investments of $369.5
million.
Other recent highlights:
-- Positive data reported for two phase 1 studies of ALKS 33, an oral
opioid modulator for the potential treatment of addiction and other
central nervous system disorders.
-- Phase 1 clinical study initiated for ALKS 37, an oral,
peripherally-restricted opioid antagonist for the treatment of
opioid-induced constipation.
-- Richard Pops assumed the role of President and Chief Executive Officer
of Alkermes while maintaining his role as Chairman of the Board.
"Our financial and operating results remain strong and serve as the foundation for our future. Our team is now focused on taking Alkermes to the next level of significant growth with initiatives throughout the company, including our traditional areas of innovation in new product development, as well as the business and strategy areas," commented Richard Pops, Chief Executive Officer of Alkermes. "We very much look forward to executing on our plan and creating major value for our shareholders."
Key operating results for the quarter ended September 30, 2009, include the following:
-- GAAP net loss of $8.7 million or a basic and diluted loss per share of
$0.09, including $5.6 million of share-based compensation and severance
expense and $4.1 million of charges associated with the planned
relocation of the company's headquarters. For the same period in 2008,
GAAP net income was $1.7 million or a basic and diluted earnings per
share of $0.02, including $3.8 million of share-based compensation
expense.
-- Pro forma net income was $1.1 million or a basic and diluted earnings
per share of $0.01, compared to a pro forma net income of $5.5 million
or a basic and diluted earnings per share of $0.06 for the same period
in 2008.
Alkermes is providing pro forma results as a complement to GAAP results. The pro forma measure excludes certain noncash or nonrecurring items and Alkermes' management believes these pro forma measures help to indicate underlying trends in the company's ongoing operations. The reconciliation between pro forma diluted earnings per share and reported diluted (loss) earnings per share for the second quarters of fiscal 2010 and 2009 is provided in the following table:
Pro Forma Charges Related to Share-Based Reported GAAP
the
Diluted Relocation of the Compensation and Diluted (Loss)
Earnings Company's Severance Expense Earnings
Headquarters
Q2 FY 2010 $0.01 ($0.04 ) ($0.06 ) ($0.09 )
Q2 FY 2009 $0.06 $ -- ($0.04 ) $ 0.02
"We are pleased to report a solid quarter, which reflects the continued growth of RISPERDAL CONSTA in the marketplace, as well as the financial strength of our balance sheet," commented James Frates, Chief Financial Officer of Alkermes. "Looking forward, we continue to expect strong performance from RISPERDAL CONSTA, as well as progress throughout our pipeline. Now that we are more than halfway through our fiscal year, we are refining our financial guidance to better reflect our results year-to-date and expectations for the second half of the fiscal year."
Revenues
-- Total revenues for the quarter ended September 30, 2009, were $48.2
million, compared to $47.3 million for the same period in 2008.
-- Manufacturing revenues for the quarter ended September 30, 2009, were
$32.8 million, compared to $33.0 million for the same period in 2008.
Manufacturing revenues for the quarter ended September 30, 2009,
included $31.9 million related to RISPERDAL CONSTA, compared to $30.7
million for RISPERDAL CONSTA and $2.3 million for VIVITROL(R) for the
same period in 2008.
-- Royalty revenues for the quarter ended September 30, 2009, were $8.8
million, based on RISPERDAL CONSTA sales of $352.6 million, compared to
$8.4 million, based on RISPERDAL CONSTA sales of $337.5 million for the
same period in 2008.
-- Net sales from VIVITROL recorded by Alkermes for the quarter ended
September 30, 2009, were $4.6 million, compared to net sales of $4.1
million recorded by Cephalon, Inc. (Cephalon) for the same period in
2008.
-- Research and development (R&D) revenue under collaborative arrangements
for the quarter ended September 30, 2009, was $1.2 million, compared to
$5.3 million for the same period in 2008.
-- Net collaborative profit for the quarter ended September 30, 2009, was
$0.7 million, compared to $0.6 million for the same period in 2008,
completing the recognition of the $11.0 million payment received from
Cephalon to cover its share of VIVITROL losses.
Costs and Expenses
-- Cost of goods manufactured and sold for the quarter ended September 30,
2009, was $15.1 million, which included $12.1 million related to
RISPERDAL CONSTA and $2.6 million related to VIVITROL, compared to $12.1
million for the same period in 2008, of which $8.1 million related to
RISPERDAL CONSTA and $4.0 million related to VIVITROL.
-- R&D expenses for the quarter ended September 30, 2009, were $20.7
million, compared to $19.7 million for the same period in 2008.
-- Selling, general and administrative (SG&A) expenses for the quarter
ended September 30, 2009, were $20.6 million, compared to $11.7 million
for the same period in 2008. SG&A expenses for the quarter ended
September 30, 2009 included $1.4 million of severance and $0.9 million
of share-based compensation expense related to the resignation of the
former CEO.
-- Share-based compensation expense (included in the expenses above) for
the quarter ended September 30, 2009, was $4.2 million, of which $0.5
million related to cost of goods manufactured and sold, $0.9 million
related to R&D expenses and $2.8 million related to SG&A expenses.
Share-based compensation expense for the same period in 2008 was $3.8
million, of which $0.4 million related to cost of goods manufactured and
sold, $1.3 million related to R&D expenses and $2.1 million related to
SG&A expenses.
-- Interest income for the quarter ended September 30, 2009, was $1.1
million, compared to $2.7 million for the same period in 2008. Interest
expense for the quarter ended September 30, 2009, was $1.6 million,
compared to $4.2 million for the same period in 2008.
At September 30, 2009, Alkermes had cash and total investments of $369.5 million, compared to $380.4 million at June 30, 2009. During the quarter, the company retired $6.4 million of the non-recourse RISPERDAL CONSTA secured 7% Notes through a scheduled principal payment.
Updated Financial Expectations for Fiscal 2010
Alkermes today updated its financial expectations for the fiscal year ending March 31, 2010. These financial expectations include the impact of share-based compensation expense. Certain statements set forth below constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For information with respect to factors that could cause Alkermes' actual results to differ materially from its expectations, please see the risk factors provided at the end of this press release and in Alkermes' Form 10-K for the fiscal year ended March 31, 2009, as filed with the U.S. Securities and Exchange Commission.
-- Manufacturing Revenues: The company is adjusting its expectation for
manufacturing revenues to a range of $105 to $111 million, revised from
an expectation of $116 to $122 million, due to changes in the purchase
forecasts from Janssen. These revised expectations include manufacturing
revenues related to RISPERDAL CONSTA in the range of $105 to $110
million, revised from an expectation of $115 to $120 million, and
manufacturing revenue related to VIVITROL for the Russian market in the
range of $0 to $1 million, revised from an expectation of $1 to $2
million.
-- Royalty Revenues: The company expects royalty revenues from RISPERDAL
CONSTA to remain in the range of $36 to $38 million.
-- Product Sales, Net:The company is adjusting its expectation for net
sales from VIVITROL to a range of $20 to $25 million, revised from an
expectation of $23 to $28 million, due to lower than anticipated sales
in the first half of fiscal 2010.
-- R&D Revenues: The company expects R&D revenues to remain in the range of
$2 to $4 million.
-- Net Collaborative Profit: The company expects net collaborative profit
to remain at $5 million, as the company has recognized all of the funds
received from Cephalon to cover its share of VIVITROL losses.
-- Total Revenues:The company is adjusting its expectation for total
revenues for fiscal 2010 to a range of $168 to $183 million, revised
from an expectation of $182 to $197 million.
-- Cost of Goods Manufactured and Sold: The company is adjusting its
expectation for cost of goods manufactured and sold to a range of $47 to
$56 million, revised from an expectation of $50 to $60 million. This
revised expectation includes cost of goods manufactured and sold related
to RISPERDAL CONSTA in the range of $38 to $42 million, revised from an
expectation of $40 to $44 million, and cost of goods manufactured and
sold related to VIVITROL in the range of $9 to $14 million, revised from
an expectation of $10 to $16 million.
-- R&D Expenses: The company expects R&D expenses to remain in the range of
$93 to $100 million.
-- SG&A Expenses: The company is adjusting its expectation for SG&A
expenses to a range of $73 to $79 million, revised from an expectation
of $69 to $77 million, largely due to expenses related to severance.
-- Operating Loss:The company is adjusting its expectation for operating
loss to a range of $45 to $52 million, revised from an expectation of
$30 to $40 million.
-- Other Income/Expense:The company is adjusting its expectation for other
income/expense to a net expense in the range of $0 to $3 million,
revised from an expectation of $0.
-- Income Taxes: The company continues to expect no income taxes payable.
-- GAAP Net Loss:The company is adjusting its expectation for net loss to a
range of $45 to $55 million, revised from an expectation of $30 to $40
million.
-- Cash Flow from Operations: The company is adjusting its expectation for
cash flow from operations to an outflow of $10 to $15 million, revised
from an expectation of an inflow of $1 to $5 million.
-- SFAS 123R:The company expects share-based compensation expense, included
in the operating expenses above, to remain in the range of $10 to $15
million.
-- Relocation of Company's Headquarters: The company expects the non-cash
charges related to the relocation of its headquarters, included in the
operating expenses above, to remain in the range of $18 to $23 million.
Conference Call
Alkermes will host a conference call at 4:30 p.m. ET on Thursday, November 5, 2009, to discuss these financial results and provide an update on the company. The conference call may be accessed by dialing 1 (888) 424-8151 for domestic callers and 1 (847) 585-4422 for international callers. The conference call ID number is 6332284. In addition, a replay of the conference call will be available from 7:30 p.m. ET on Thursday, November 5, 2009, through 5:00 p.m. ET on Thursday, November 12, 2009, and may be accessed by visiting Alkermes' website or by dialing 1 (888) 843-8996 for domestic callers and 1 (630) 652-3044 for international callers. The replay access code is 6332284.
About Alkermes
Alkermes, Inc. is a fully integrated biotechnology company committed to developing innovative medicines to improve patients' lives. Alkermes developed, manufactures and commercializes VIVITROL(R) for alcohol dependence and manufactures RISPERDAL(R) CONSTA(R) for schizophrenia and bipolar I disorder. Alkermes' robust pipeline includes extended-release injectable, pulmonary and oral products for the treatment of prevalent, chronic diseases, such as central nervous system disorders, addiction and diabetes. Headquartered in Cambridge, Massachusetts, Alkermes has research facilities in Massachusetts and a commercial manufacturing facility in Ohio.
Certain statements set forth above may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to: statements concerning future business and operating results; the successful manufacture and commercialization of VIVITROL and RISPERDAL CONSTA; continued revenue growth from RISPERDAL CONSTA; and the successful continuation of development activities for the company's programs. Although the company believes that such statements are based on reasonable assumptions within the bounds of its knowledge of its business and operations, the forward-looking statements are neither promises nor guarantees and the company's business is subject to significant risk and uncertainties, and there can be no assurance that its actual results will not differ materially from its expectations. These risks and uncertainties include, among others: whether the company will achieve the financial expectations provided; whether the company can continue to manufacture RISPERDAL CONSTA and VIVITROL on a commercial scale, economically or in sufficient quantities to supply the market; whether VIVITROL will be commercialized successfully by Alkermes in the U.S. or by Cilag GmbH International in Russia; whether RISPERDAL CONSTA will be commercialized effectively by its partner Janssen; whether the company and its partners are able to successfully and efficiently scale up and manufacture their product candidates; whether exenatide once weekly will be approved by the FDA and whether clinical trial results regarding superiority of exenatide once weekly will be predictive of real-world results; whether advancement of the company's partnered product candidates will be delayed due to actions or decisions by its partners with regard to development and regulatory strategy, timing and funding which are out of its control; the outcome of clinical and preclinical work the company and its partners are pursuing; decisions by the FDA or foreign regulatory authorities regarding the company's product candidates; potential changes in cost, scope and duration of clinical trials; and whether RISPERDAL CONSTA, VIVITROL, exenatide once weekly and the company's product candidates, in commercial use, may have unintended side effects, adverse reactions or incidents of misuse that could cause the FDA or other health authorities to require post-approval studies or require removal of its products from the market. For further information with respect to factors that could cause the company's actual results to differ materially from expectations, reference is made to the reports the company filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The forward-looking statements made in this release are made only as of the date hereof and the company disclaims any intention or responsibility for updating predictions or financial expectations contained in this release.
VIVITROL(R) is a registered trademark of Alkermes, Inc. and RISPERDAL(R) CONSTA(R) is a registered trademark of Janssen-Cilag group of companies.
(tables follow)
Alkermes, Inc. and Subsidiaries
Selected Financial Information (Unaudited)
Three Months Three Months
Ended Ended
Condensed Consolidated Statements of Operations September 30, September 30,
(In thousands, except per share data) 2009 2008
Revenues:
Manufacturing revenues $ 32,835 $ 33,039
Royalty revenues 8,818 8,439
Product sales, net 4,643 -
Research and development revenue under 1,174 5,252
collaborative arrangements
Net collaborative profit 687 581
Total Revenues 48,157 47,311
Expenses:
Cost of goods manufactured and sold 15,092 12,071
Research and development 20,664 19,710
Selling, general and administrative 20,625 11,679
Total Expenses 56,381 43,460
Operating (Loss) Income (8,224 ) 3,851
Other Expense, net:
Interest income 1,088 2,693
Interest expense (1,566 ) (4,243 )
Other expense, net (67 ) (666 )
Total Other Expense, net (545 ) (2,216 )
(Loss) Income Before Income Taxes (8,769 ) 1,635
Income tax benefit (60 ) (63 )
Net (Loss) Income $ (8,709 ) $ 1,698
(Loss) Earnings per Common Share:
Basic $ (0.09 ) $ 0.02
Diluted $ (0.09 ) $ 0.02
Weighted Average Number of Common Shares
Outstanding (GAAP):
Basic 94,886 95,637
Diluted 94,886 97,356
Pro Forma Reconciliation:
Net (Loss) Income - GAAP $ (8,709 ) $ 1,698
Share-based compensation expense 4,208 3,814
Costs incurred related to the move of corporate 4,149 -
headquarters
Severance charges 1,406 -
Net Income - Pro Forma $ 1,054 $ 5,512
Pro Forma Earnings per Common Share:
Basic $ 0.01 $ 0.06
Diluted $ 0.01 $ 0.06
Weighted Average Number of Common Shares
Outstanding (Pro Forma):
Basic 94,886 95,637
Diluted 95,969 97,356
Condensed Consolidated Balance Sheets September 30, March 31,
(In thousands) 2009 2009
Cash, cash equivalents and total investments $ 369,525 $ 404,482
Receivables 33,699 24,588
Inventory 18,524 20,297
Prepaid expenses and other current assets 7,856 7,500
Property, plant and equipment, net 94,467 106,461
Other assets 3,206 3,158
Total Assets $ 527,277 $ 566,486
Non-recourse RISPERDAL CONSTA secured 7% Notes - $ 25,667 $ 25,667
current
Other current liabilities 30,152 43,323
Non-recourse RISPERDAL CONSTA secured 7% Notes - 37,862 50,221
long-term
Deferred revenue - long-term 5,115 5,238
Other long-term liabilities 6,450 7,149
Total shareholders' equity 422,031 434,888
Total Liabilities and Shareholders' Equity $ 527,277 $ 566,486
This selected financial information should be read in conjunction with the
consolidated financial statements and notes thereto included in the company's
Annual Report on Form 10-K for the year ended March 31, 2009, and the
company's report on Form 10-Q for the three months ended September 30, 2009,
which the company intends to file in November 2009.
Source: Alkermes, Inc.
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