Alkermes plc Reports Financial Results for the Year Ended Dec. 31, 2014 and Provides Financial Expectations for 2015

Record Revenues of $618.8 Million and Non-GAAP Diluted EPS of $0.35 for Calendar 2014

Preparing for Launch of Aripiprazole Lauroxil and Advancing Pivotal Development Programs for ALKS 5461, ALKS 3831 and ALKS 8700 —

DUBLIN--()--Alkermes plc (NASDAQ: ALKS) today reported financial results for the twelve months ended Dec. 31, 2014 and provided financial expectations for 2015.

“We had a tremendous year of achievement in 2014, marked by successful execution of our ambitious business plan and exciting clinical validation of our development pipeline, as we continue on our path to create a major biopharmaceutical company. In the last two months, the momentum has continued as we reported positive data for three potential blockbuster opportunities: ALKS 5461 in major depressive disorder, ALKS 3831 in schizophrenia and ALKS 8700 for multiple sclerosis,” said Richard Pops, Chief Executive Officer of Alkermes. “We have major opportunities ahead in 2015, as we advance this pipeline of valuable CNS medicines. We are preparing to launch aripiprazole lauroxil as an important new treatment option for patients with schizophrenia and their caregivers, and we look forward to continued clinical progress across the rest of our development pipeline in 2015.”

“Our financial results for 2014 were ahead of expectations, demonstrating our successful performance and the strength of our business model. We ended the year with more than $800 million in cash and investments, which provides the financial flexibility to further execute on our strategic plan, including resources to invest in a remarkable late-stage pipeline that we control entirely,” commented James Frates, Chief Financial Officer of Alkermes. “Our financial expectations for 2015 reflect investments in this increasingly valuable late-stage pipeline, as well as significant investment in our commercial organization in preparation for the launch of aripiprazole lauroxil later this year.”

Quarter Ended Dec. 31, 2014 Financial Highlights

  • Total revenues for the quarter grew 13% to $175.2 million from $154.5 million for the same period in the prior year.
  • Non-GAAP net income was $16.8 million, or a non-GAAP diluted earnings per share (EPS) of $0.11 for the quarter. This compared to non-GAAP net income of $39.9 million, or a non-GAAP diluted EPS of $0.27, for the same period in the prior year and reflected increased investment in the company’s rapidly advancing late-stage pipeline and commercial infrastructure.
  • GAAP net income was $30.5 million, or a basic GAAP EPS of $0.21 and a diluted GAAP EPS of $0.20, for the quarter, including approximately $60 million that Alkermes earned related to the acquisition of Civitas Therapeutics, Inc. (Civitas) by Acorda Therapeutics, Inc. This compared to GAAP net income of $18.1 million, or a basic GAAP EPS of $0.13 and diluted GAAP EPS of $0.12, for the same period in the prior year.
  • Free cash flow was $3.5 million for the quarter, compared to $30.0 million for the same period in the prior year.

Quarter Ended Dec. 31, 2014 Financial Results

Revenues

  • Manufacturing and royalty revenues from the company’s long-acting atypical antipsychotic franchise, RISPERDAL® CONSTA® and INVEGA® SUSTENNA®/XEPLION®, were $70.3 million, compared to $71.2 million for the same period in the prior year.
  • Manufacturing and royalty revenues from AMPYRA®/FAMPYRA®1 were $24.3 million, compared to $18.6 million for the same period in the prior year.
  • Net sales of VIVITROL® were $29.7 million, compared to $20.6 million for the same period in the prior year, representing an increase of 44%.
  • Royalty revenue from BYDUREON® was $9.8 million, compared to $7.7 million for the same period in the prior year.

Costs and Expenses

  • Operating expenses for the quarter ended Dec. 31, 2014 were $190.8 million, compared to $148.6 million for the same period in the prior year, reflecting increased investment in the company’s rapidly advancing development pipeline and prelaunch activities for aripiprazole lauroxil.
  • Income tax expense for the quarter ended Dec. 31, 2014 was $10.3 million, compared to an income tax benefit of $15.2 million for the same period in the prior year.

Calendar Year 2014 Financial Highlights

  • Total revenues were $618.8 million in calendar 2014, which included VIVITROL net sales of $94.2 million. This compared to total revenues of $596.3 million for calendar 2013, which included $30.0 million of one-time intellectual property license revenue. Please see the tables at the end of this press release for a detailed breakdown of the revenues from our key commercial products.
  • Non-GAAP net income was $54.6 million, or a non-GAAP diluted EPS of $0.35, for calendar 2014. This compared to non-GAAP net income of $170.7 million, or a non-GAAP diluted EPS of $1.19, for calendar 2013 and reflected increased investment in the company’s rapidly advancing late-stage pipeline and commercial infrastructure.
  • GAAP net loss was $30.1 million, or a basic and diluted GAAP loss per share of $0.21, for calendar 2014. This compared to a GAAP net income of $20.6 million, or a basic GAAP EPS of $0.15 and diluted GAAP EPS of $0.14, for calendar 2013.
  • Free cash flow was $20.9 million for calendar 2014, compared to $143.4 million for calendar 2013.
  • At Dec. 31, 2014, Alkermes recorded cash and total investments of $801.6 million, compared to $450.0 million at Dec. 31, 2013. The increase in cash reflects the company’s active management of the business and was primarily driven by gross proceeds of $250.0 million related to the sale of Alkermes’ ordinary shares through a registered direct offering in January 2014. Additionally, the company received net proceeds of approximately $96 million from the sale of its stakes in Civitas and Acceleron Pharma Inc. and from the sale of two buildings in Athlone, Ireland. At Dec. 31, 2014, the company’s total debt outstanding was $358.0 million.

Financial Expectations for 2015

The following outlines the company’s financial expectations for 2015. The following statements are forward-looking, and actual results may differ materially. Please see “Note Regarding Forward-Looking Statements” at the end of this press release for risks that could cause results to differ materially from these forward-looking statements.

  • Revenues: The company expects total revenues to range from $640 million to $670 million. Included in this total revenue expectation, Alkermes expects VIVITROL net sales to range from $125 million to $135 million and net sales from the anticipated launch of aripiprazole lauroxil to range from $5 million to $10 million.
  • Cost of Goods Manufactured and Sold: The company expects cost of goods manufactured and sold to range from $155 million to $165 million.
  • Research and Development (R&D) Expenses: The company expects R&D expenses to range from $345 million to $365 million.
  • Selling, General and Administrative (SG&A) Expenses: The company expects SG&A expenses to range from $310 million to $330 million.
  • Amortization of Intangible Assets: The company expects amortization of intangibles to be approximately $65 million.
  • Net Interest Expense: The company expects net interest expense to range from $10 million to $15 million.
  • Income Tax Expense: The company expects income tax expense to range from $10 million to $15 million.
  • GAAP Net Loss: The company expects a GAAP net loss in the range of $255 million to $285 million, or a basic and diluted loss per share of $1.70 to $1.90, based on a weighted average basic and diluted share count of approximately 150 million shares outstanding.
  • Non-GAAP Net Loss: The company expects a non-GAAP net loss in the range of $40 million to $60 million, and non-GAAP basic and diluted EPS to range from $0.27 to $0.40.
  • Capital Expenditures: The company expects capital expenditures to be approximately $55 million.
  • Free Cash Flow: The company expects a free cash outflow in the range of $95 million to $115 million.

Conference Call

Alkermes will host a conference call at 8:30 a.m. EST (1:30 p.m. GMT) on Tuesday, Feb. 24, 2015, 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 U.S. callers and +1 847 585 4422 for international callers. The conference call ID number is 6037988. In addition, a replay of the conference call will be available from 11:00 a.m. EST (4:00 p.m. GMT) on Tuesday, Feb. 24, 2015, through 5:00 p.m. EST (10:00 p.m. GMT) on Tuesday, March 3, 2015, and may be accessed by visiting Alkermes’ website or by dialing +1 888 843 7419 for U.S. callers and +1 630 652 3042 for international callers. The replay access code is 6037988.

About Alkermes plc

Alkermes plc is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to develop innovative medicines that improve patient outcomes. The company has a diversified portfolio of more than 20 commercial drug products and a substantial clinical pipeline of product candidates that address central nervous system (CNS) disorders such as addiction, schizophrenia, depression and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and manufacturing facilities in Gainesville, Georgia and Wilmington, Ohio. For more information, please visit Alkermes’ website at www.alkermes.com.

Non-GAAP Financial Measures

This press release includes information about certain financial measures that are not prepared in accordance with generally accepted accounting principles in the U.S. (GAAP), including non-GAAP net income, non-GAAP diluted earnings per share and free cash flow. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies.

Management defines its non-GAAP financial measures as follows:

  • Non-GAAP net income adjusts for one-time and non-cash charges by excluding from GAAP results: share-based compensation expense; amortization; depreciation; non-cash net interest expense; non-cash tax expense; deferred revenue; and certain other one-time or non-cash items.
  • Free cash flow represents non-GAAP net income less capital expenditures.

The company’s management believes that these non-GAAP financial measures, when viewed with the company’s results under GAAP and the accompanying reconciliations, better indicate underlying trends in ongoing operations and cash flows. However, non-GAAP net income, non-GAAP diluted earnings per share and free cash flow are not measures of financial performance under GAAP and, accordingly, should not be considered as alternatives to GAAP measures as indicators of operating performance.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release.

Note Regarding Forward-Looking Statements

Certain statements set forth above may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including, but not limited to: statements concerning future financial and operating performance, business plans or prospects; the likelihood of continued revenue growth from the company’s commercial products; the therapeutic and commercial value of the company’s products; and expectations concerning the timing and results of clinical development activities, including regulatory approval of aripiprazole lauroxil. The company cautions that forward-looking statements are inherently uncertain. 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 they are necessarily subject to a high degree of uncertainty and risk. Actual performance and results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. These risks and uncertainties include, among others: clinical development activities may not be completed on time or at all and the results of such activities may not be predictive of real-world results or of results in subsequent clinical trials; regulatory submissions may not occur or be submitted in a timely manner; the company, and its partners, may not be able to continue to successfully commercialize its products; there may be a reduction in payment rate or reimbursement for the company’s products or an increase in the company’s financial obligations to governmental payers; the U.S. Food and Drug Administration or regulatory authorities outside the U.S. may make adverse decisions regarding the company’s products; the company’s products may prove difficult to manufacture, be precluded from commercialization by the proprietary rights of third parties, or have unintended side effects, adverse reactions or incidents of misuse; and those risks and uncertainties described under the heading “Risk Factors” in the company’s Transition Report on Form 10-K for the fiscal period ended Dec. 31, 2013, and in any other subsequent filings made by the company with the Securities and Exchange Commission (“SEC”) and which are available on the SEC’s website at www.sec.gov. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. The information contained in this press release is provided by the company as of the date hereof and, except as required by law, the company disclaims any intention or responsibility for updating or revising any forward-looking information contained in this press release.

VIVITROL® is a registered trademark of Alkermes, Inc.; RISPERDAL® CONSTA®, INVEGA® SUSTENNA® and XEPLION® are registered trademarks of Johnson & Johnson Corporation; AMPYRA® and FAMPYRA® are registered trademarks of Acorda Therapeutics, Inc.; BYDUREON® is a registered trademark of Amylin Pharmaceuticals, LLC.

1AMPYRA® (dalfampridine) Extended Release Tablets, 10 mg is developed and marketed in the U.S. by Acorda Therapeutics, Inc. and outside the U.S. by Biogen Idec, under a licensing agreement with Acorda Therapeutics, as FAMPYRA® (prolonged-release fampridine tablets).

 
Alkermes plc and Subsidiaries
Selected Financial Information (Unaudited)
       
Condensed Consolidated Statements of Operations - GAAP
(In thousands, except per share data)

Three Months
Ended
December 31,
2014

Three Months
Ended
December 31,
2013

Revenues:
Manufacturing and royalty revenues $ 143,202 $ 132,680
Product sales, net 29,684 20,609
Research and development revenues 2,275   1,189  
Total Revenues 175,161   154,478  
Expenses:
Cost of goods manufactured and sold 46,368 42,892
Research and development 74,433 48,716
Selling, general and administrative 54,804 44,171
Amortization of acquired intangible assets 15,244   12,856  
Total Expenses 190,849   148,635  
Operating (Loss) Income (15,688 ) 5,843  
Other Income (Expense), net:
Interest income 592 255
Interest expense (3,333 ) (3,434 )
Gain on sale of property, plant and equipment 29,612 -
Gain on sale of investment in Civitas Therapeutics, Inc. 29,564 -
Other income, net 33   210  
Total Other Income (Expense), net 56,468   (2,969 )
Income Before Income Taxes 40,780   2,874  
Income Tax Provision (Benefit) 10,266   (15,203 )
Net Income — GAAP $ 30,514   $ 18,077  
 
Earnings Per Share:
GAAP earnings per share — basic $ 0.21   $ 0.13  
GAAP earnings per share — diluted $ 0.20   $ 0.12  
Non-GAAP earnings per share — basic $ 0.11   $ 0.29  
Non-GAAP earnings per share — diluted $ 0.11   $ 0.27  
 
Weighted Average Number of Ordinary Shares Outstanding:
Basic — GAAP 146,882   137,158  
Diluted — GAAP 155,527   146,304  
Basic — Non-GAAP 146,882   137,158  
Diluted — Non-GAAP 155,527   146,304  
 
An itemized reconciliation between net income on a GAAP basis and non-GAAP net income is as follows:
Net Income — GAAP $ 30,514 $ 18,077
Adjustments:
Amortization expense 15,244 12,856
Share-based compensation expense 13,341 10,391
Depreciation expense 10,124 10,532
Non-cash taxes 7,324 (15,616 )
Non-cash net interest expense 237 243
Deferred revenue (390 ) 3,381
Gain on sale of property, plant and equipment (29,612 ) -
Net gain on transactions with equity method investee (29,961 ) -  
Non-GAAP Net Income $ 16,821 $ 39,864
Capital expenditures (13,325 ) (9,856 )
Free Cash Flow $ 3,496   $ 30,008  
 
       
Condensed Consolidated Statements of Operations - GAAP
(In thousands, except per share data)
Year Ended
December 31,
2014
Year Ended
December 31,
2013
Revenues:
Manufacturing and royalty revenues $ 516,876 $ 517,958
Product sales, net 94,160 71,841
Research and development revenues 7,753   6,534  
Total Revenues 618,789   596,333  
Expenses:
Cost of goods manufactured and sold 175,832 182,297
Research and development 272,043 163,925
Selling, general and administrative 199,905 151,237
Amortization of acquired intangible assets 58,153 48,750
Restructuring - 12,300
Impairment of long-lived assets -   3,346  
Total Expenses 705,933   561,855  
Operating (Loss) Income (87,144 ) 34,478  
Other Income (Expense), net:
Interest income 1,972 882
Interest expense (13,430 ) (21,852 )
Gain on sale of property, plant and equipment 41,933 -
Gain on sale of investment in Civitas Therapeutics, Inc. 29,564 -
Gain on sale of investment in Acceleron Pharma Inc. 15,296 -
Other (expense), net (2,220 ) (245 )
Total Other Income (Expense), net 73,115   (21,215 )
(Loss) Income Before Income Taxes (14,029 ) 13,263  
Income Tax Provision (Benefit) 16,032   (7,385 )
Net (Loss) Income — GAAP $ (30,061 ) $ 20,648  
 
(Loss) Earnings Per Share:
GAAP (loss) earnings per share — basic $ (0.21 ) $ 0.15  
GAAP (loss) earnings per share — diluted $ (0.21 ) $ 0.14  
Non-GAAP earnings per share — basic $ 0.38   $ 1.26  
Non-GAAP earnings per share — diluted $ 0.35   $ 1.19  
 
Weighted Average Number of Ordinary Shares Outstanding:
Basic — GAAP 145,274   135,297  
Diluted — GAAP 145,274   144,012  
Basic — Non-GAAP 145,274   135,297  
Diluted — Non-GAAP 154,415   144,012  
 

An itemized reconciliation between net (loss) income on a GAAP basis and
non-GAAP net income is as follows:

Net (Loss) Income — GAAP $ (30,061 ) $ 20,648
Adjustments:
Share-based compensation expense 59,579 41,290
Amortization expense 58,153 48,750
Depreciation expense 39,934 40,360
Non-cash taxes 12,379 (7,747 )
Non-cash net interest expense 954 1,078
Deferred revenue (997 ) 3,171
Gain on sale of investment in Acceleron Pharma Inc. (15,296 ) -
Net gain on transactions with equity method investee (28,119 ) -
Gain on sale of property, plant and equipment (41,933 ) -
Restructuring - 12,300
Loss on debt refinancing and repricing - 7,541
Impairment of long-lived assets -   3,346  
Non-GAAP Net Income $ 54,593 $ 170,737
Capital expenditures (33,651 ) (27,313 )
Free Cash Flow $ 20,942   $ 143,424  
 
       
Condensed Consolidated Balance Sheets
(In thousands)
December 31,
2014
December 31,
2013
Cash, cash equivalents and total investments $ 801,646 $ 449,995
Receivables 151,551 134,154
Inventory 51,357 46,218
Prepaid expenses and other current assets 42,719 27,535
Property, plant and equipment, net 265,740 274,490
Intangible assets, net and goodwill 573,624 630,305
Other assets 34,635 14,891
Total Assets $ 1,921,272 $ 1,577,588
Long-term debt — current portion $ 6,750 $ 6,750
Other current liabilities 123,832 94,147
Long-term debt 351,220 357,543
Deferred revenue — long-term 11,801 12,213
Other long-term liabilities 30,832 41,749
Total shareholders' equity 1,396,837 1,065,186
Total Liabilities and Shareholders' Equity $ 1,921,272 $ 1,577,588
 
Ordinary shares outstanding (in thousands) 147,539 137,793
 
 

This selected financial information should be read in conjunction with the consolidated financial statements
and notes thereto included in Alkermes plc's Annual Report on Form 10-K for the year ended
December 31, 2014, which the company intends to file in February 2015.

                   

Revenues for Calendar Year 2014

 
 
(In thousands, except per share data)     Three Months
Ended
March 31,
2014
    Three Months
Ended
June 30,
2014
    Three Months
Ended
September 30,
2014
    Three Months
Ended
December 31,
2014
    Year
Ended
December 31,
2014
Revenues:
RISPERDAL CONSTA/INVEGA SUSTENNA Franchise $ 49,608 $ 60,001 $ 68,472 $ 70,311 $ 248,392
AMPYRA/FAMPYRA 20,631 19,518 16,503 24,273 80,925
BYDUREON 7,700 8,784 10,254 9,849 36,587
VIVITROL     17,079     21,595     25,802     29,684     94,160
Key Commercial Product Revenues 95,018 109,898 121,031 134,117 460,064
 
Total Legacy Product Revenues 33,341 42,063 36,799 38,769 150,972
Research and Development Revenues     1,853     1,463     2,162     2,275     7,753
Total Revenues     $ 130,212     $ 153,424     $ 159,992     $175,161     $ 618,789
           
2015 Guidance — GAAP to Non-GAAP Adjustments
 

An itemized reconciliation between projected loss per share on a GAAP basis and projected earnings per share
on a non-GAAP basis is as follows:

 

(In millions, except per share data)

   

Amount

    Shares     (Loss)/Earnings
Per Share
Projected Net Loss — GAAP $ (270.0 ) 150 $ (1.80 )
Adjustments:
Non-cash net interest expense 1.0
Non-cash taxes 10.0
Depreciation expense 35.0
Amortization expense 65.0
Share-based compensation expense 110.0
Deferred revenue (1.0 )  
Projected Non-GAAP Net Loss $ (50.0 ) 150 $ (0.33 )
 
Capital expenditures 55.0  
Projected Free Cash Outflow $ (105.0 )
 
Projected GAAP and non-GAAP measures reflect mid-points within ranges of estimated guidance.
 

Contacts

Alkermes
For Investors:
Rebecca Peterson, 781-609-6378
or
For Media:
Jennifer Snyder, 781-609-6166

Contacts

Alkermes
For Investors:
Rebecca Peterson, 781-609-6378
or
For Media:
Jennifer Snyder, 781-609-6166