News: Alkermes Announces Third Quarter Fiscal 2008 Results. …
Alkermes, Inc. (NASDAQ: ALKS) today announced financial results
for its third quarter of fiscal 2008. Financial highlights for the
quarter ended December 31, 2007 include:
— Sixth consecutive profitable quarter on a GAAP basis, with net
income of $168.9 million. Net income for the third quarter
included proceeds from the sale of the company’s stake in
Reliant Pharmaceuticals, Inc.
— Quarterly revenues of $50.8 million. Worldwide sales of
RISPERDAL(R) CONSTA(R) by Janssen were $295.1 million for the
third quarter of fiscal 2008 and over $1.1 billion for the
calendar year ended December 31, 2007.
— Positive cash flow in the quarter and the first nine months of
the fiscal year; cash and total investments of $516.6 million.
— Initiated stock repurchase program of up to $175 million in
common stock, which utilizes proceeds from the Reliant
transaction. The company today announced a $60 million
accelerated stock repurchase program as part of the buyback
plan.
“We are pleased to report another successful quarter, with
significant income and cash generated from the sale of the company’s
stake in Reliant,” commented James Frates, chief financial officer of
Alkermes. “As we enter 2008, we will continue to invest in our
pipeline while managing the business for long-term profitability and
growth. Based on our confidence in our future, we announced a stock
repurchase program in November in order to maximize value for our
shareholders.”
Key operating results for the quarter ended December 31, 2007
include the following:
— Net income was $168.9 million or a basic earnings per share of
$1.66 and a diluted earnings per share of $1.63, including
$5.2 million in share-based compensation expense. Net income
for the quarter included $174.6 million from the sale of the
company’s stake in Reliant Pharmaceuticals, Inc. and $3.3
million of associated taxes. For the same period in 2006, net
income was $2.9 million or a basic and diluted earnings per
share of $0.03, which included $7.5 million in share-based
compensation expense.
— Pro forma net income was $2.8 million or a basic and diluted
earnings per share of $0.03, compared to a net income of $11.1
million or a basic and diluted earnings per share of $0.11 for
the same period in 2006.
Alkermes is providing pro forma results as a complement to GAAP
results. The pro forma net income 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 and reported diluted
earnings per share for the third quarters of fiscal 2008 and 2007 is
provided in the following table:
Pro Forma Income Share-Based Net Reported
Diluted from Compensation Change GAAP
Earnings Sale of Expense in Fair Diluted
Stake in Value of Earnings
Reliant, Warrants
Net
of Taxes
———————————————————————-
Q3 FY 2008 $0.03 $1.65 ($0.05) — $1.63
———————————————————————-
Q3 FY 2007 $0.11 — ($0.07) ($0.01) $0.03
———————————————————————-
The following financial results are reported on a GAAP basis and
include share-based compensation expense:
Revenues
— Total revenues for the quarter ended December 31, 2007 were
$50.8 million, compared to $62.4 million for the same period
in 2006.
— Total manufacturing revenues for the quarter ended December
31, 2007 were $14.3 million, consisting of $12.9 million for
RISPERDAL CONSTA and $1.4 million for VIVITROL(R), compared to
$28.8 million for the same period in 2006, consisting of $23.6
million for RISPERDAL CONSTA and $5.2 million for VIVITROL.
The decrease in manufacturing revenues for RISPERDAL CONSTA
was a result of planned lower shipments to Janssen as it
manages its level of product inventory. The company expects
manufacturing revenues related to RISPERDAL CONSTA to range
from $26 million to $30 million in the fourth quarter of
fiscal 2008.
— Royalty revenues for the quarter ended December 31, 2007 were
$7.4 million based on RISPERDAL CONSTA sales of $295.1
million, compared to $5.7 million based on RISPERDAL CONSTA
sales of $226.3 million for the same period in 2006.
— Research and development (R&D) revenue under collaborative
arrangements for the quarter ended December 31, 2007 was $24.0
million, which included a $5.0 million milestone payment from
Amylin Pharmaceuticals, Inc. in connection with the phase 3
clinical program for exenatide once weekly. R&D revenue was
$19.5 million for the same period in 2006.
— Net collaborative profit for the quarter ended December 31,
2007 was $5.1 million, compared to $8.4 million for the same
period in 2006. Gross sales of VIVITROL during the quarter
were $5.0 million, compared to $2.3 million for the same
period in 2006.
Costs and Expenses
— Cost of goods manufactured for the quarter ended December 31,
2007 was $7.5 million, of which $5.9 million related to
RISPERDAL CONSTA and $1.6 million related to VIVITROL,
compared to $13.0 million for the same period in 2006, of
which $8.2 million related to RISPERDAL CONSTA and $4.8
million related to VIVITROL.
— R&D expenses for the quarter ended December 31, 2007 were
$30.4 million, compared to $29.9 million for the same period
in 2006.
— Selling, general and administrative (SG&A) expenses for the
quarter ended December 31, 2007 were $15.2 million, compared
to $16.4 million for the same period in 2006.
— Share-based compensation expense (included in the expenses
above) for the quarter ended December 31, 2007 was $5.2
million, of which $0.3 million related to cost of goods
manufactured, $2.1 million related to R&D expenses and $2.8
million related to SG&A expenses. Share-based compensation
expense for the quarter ended December 31, 2006 was $7.5
million, of which $0.9 million related to cost of goods
manufactured, $1.9 million related to R&D expenses and $4.7
million related to SG&A expenses.
— Interest income for the quarter ended December 31, 2007 was
$4.3 million, compared to $4.3 million for the same period in
2006. Interest expense for the quarter ended December 31, 2007
was $4.1 million, compared to $4.1 million for the same period
in 2006.
— Income tax expense for the quarter ended December 31, 2007 was
$3.2 million, compared to $0.4 million for the same period in
2006.
At December 31, 2007, Alkermes had cash and total investments of
$516.6 million, compared to $362.9 million at September 30, 2007.
Recent Highlights
— Progress toward label expansion for RISPERDAL CONSTA for the
treatment of bipolar disorder: Positive data were reported
from a one-year, phase 3 study designed to explore the use of
RISPERDAL CONSTA in the maintenance treatment of frequently
relapsing bipolar disorder. The trial showed that time to
relapse was significantly longer in patients receiving
RISPERDAL CONSTA combined with standard treatment compared
with placebo plus standard treatment (p=0.004), with a
relative risk of relapse 2.4 times higher with placebo. The
relapse rates were 47.8% with placebo and 22.2% with RISPERDAL
CONSTA. The most common adverse events were tremor, insomnia,
muscle rigidity, weight increase and hypokinesia. These data
were presented on February 3, 2008 at the 14th Biennial Winter
Workshop on Schizophrenia and Bipolar Disorders in
Montreux, Switzerland.
— Agreement for commercialization of VIVITROL in Russia/CIS:
Alkermes entered into an exclusive agreement with Cilag GmbH
International, a subsidiary of Johnson & Johnson, to
commercialize VIVITROL for the treatment of alcohol and opioid
dependence in Russia and other countries in the Commonwealth
of Independent States (CIS). Under the agreement, Cilag GmbH
International made an initial payment of $5.0 million to
Alkermes and will make additional milestone payments up to
$34.0 million. Alkermes will also receive manufacturing
revenues and a royalty based on product sales.
— Sale of stake in Reliant Pharmaceuticals: Alkermes received
$166.9 million upon completion of the sale of its stake in
Reliant Pharmaceuticals, Inc. to GlaxoSmithKline. An
additional $7.7 million is due to Alkermes subject to the
terms and conditions of an escrow arrangement that will remain
in effect for a 15-month period following the closing of the
transaction.
— Stock repurchase program underway: Alkermes announced plans to
utilize proceeds from the sale of its stake in Reliant and
existing cash to repurchase up to $175 million of its common
stock. Since initiating the stock repurchase program, the
company has repurchased $33.3 million of its common stock.
With the initiation of the accelerated stock repurchase
program announced today, Alkermes has committed $93.3 million
dollars to repurchasing its common stock.
Conference Call
Alkermes will host a conference call at 4:30 p.m. EST on Thursday,
February 7, 2008 to discuss these financial results and provide an
update on the company. The conference call may be accessed by dialing
1-866-814-8476 for domestic callers and 1-703-639-1370 for
international callers. The conference call ID number is 1190768. In
addition, a replay of the conference call will be available from 7:30
p.m. EST on Thursday, February 7, 2008 through 5:00 p.m. EST on
Wednesday, February 13, 2008, and may be accessed by visiting
Alkermes’ website or by dialing 1-888-266-2081 for domestic callers
and 1-703-925-2533 for international callers. The replay access code
is 1190768. Alkermes is also providing a podcast MP3 file available
for download on the Alkermes website, which will be available shortly
following the conference call and will be available until Wednesday,
February 13, 2008.
About Alkermes
Alkermes, Inc. is a biotechnology company that uses proprietary
technologies and know-how to create innovative medicines designed to
yield better therapeutic outcomes for patients with serious disease.
Alkermes manufactures RISPERDAL(R) CONSTA(R), marketed by divisions of
Johnson & Johnson, and developed and manufactures VIVITROL(R),
marketed in the U.S. primarily by Cephalon, Inc. The company’s
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. Alkermes is
headquartered in Cambridge, Massachusetts, with research and
manufacturing facilities in Massachusetts and 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 and profitability;
the successful registration, launch and commercialization of VIVITROL
in Russia and other countries in the CIS; the successful manufacture
of VIVITROL for sale in Russia and other countries in the CIS; the
escrow arrangement from the sale of the company’s stake in Reliant;
whether the company will purchase up to $175 million of its common
stock; the therapeutic value of the company’s product candidates to
patients; and the successful continuation of development activities
for proprietary and partnered 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 Alkermes will receive the full amount,
or any, of the proceeds placed in escrow due to claims against the
escrow account; the timing, cost and amount of share repurchases;
whether advancement of the company’s proprietary and 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, and the outcome of clinical and
preclinical work the company is pursuing, both on its own and with
partners; 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 and the company’s product candidates, in commercial use, have
unintended side effects, adverse reactions or incidents of misuse that
could cause the FDA or other foreign regulatory 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.
AIR(R) is a registered trademark of Alkermes, Inc.; VIVITROL(R) is
a registered trademark of Cephalon, Inc.; RISPERDAL(R) CONSTA(R) is a
registered trademark of Janssen-Cilag.
Alkermes, Inc. and Subsidiaries
Selected Financial Information (Unaudited)
Three Months Three Months
Ended Ended
Condensed Consolidated Statements of Income December 31, December 31,
(In thousands, except per share data) 2007 2006
———————————————————————-
Revenues:
Manufacturing revenues $14,275 $28,763
Royalty revenues 7,384 5,673
Research and development revenue under
collaborative arrangements 23,985 19,532
Net collaborative profit 5,127 8,445
———————————————————————-
Total Revenues 50,771 62,413
———————————————————————-
Expenses:
Cost of goods manufactured 7,499 12,989
Research and development 30,395 29,908
Selling, general and administrative 15,249 16,365
———————————————————————-
Total Expenses 53,143 59,262
———————————————————————-
Operating (Loss) Income (2,372) 3,151
———————————————————————-
Other Income (Expense):
Gain on sale of investment in Reliant
Pharmaceuticals, Inc. 174,631 -
Interest income 4,292 4,260
Interest expense (4,088) (4,141)
Other (expense) income, net (393) 89
———————————————————————-
Total Other Income (Expense) 174,442 208
———————————————————————-
Income Before Income Taxes 172,070 3,359
———————————————————————-
Income Taxes 3,189 426
———————————————————————-
Net Income $168,881 $2,933
———————————————————————-
Earnings per Common Share:
Basic $1.66 $0.03
———————————————————————-
Diluted $1.63 $0.03
———————————————————————-
Weighted Average Number of Common Shares Outstanding
(GAAP and Pro Forma):
Basic 101,703 100,896
———————————————————————-
Diluted 103,914 104,746
———————————————————————-
Pro Forma Reconciliation:
Net Income - GAAP $168,881 $2,933
Share-based compensation expense 5,182 7,500
Gain on sale of investment in Reliant
Pharmaceuticals, Inc. (net of income
taxes) (171,294) -
Net decrease in the fair value of
warrants 2 662
———————————————————————-
Net Income - Pro Forma $2,771 $11,095
———————————————————————-
Pro Forma Earnings per Common Share:
Basic $0.03 $0.11
———————————————————————-
Diluted $0.03 $0.11
———————————————————————-Condensed Consolidated Balance Sheets December 31, March 31,
(In thousands) 2007 2007
———————————————————————-
Cash, cash equivalents and total investments $516,612 $356,726
Receivables 40,256 56,049
Prepaid expenses and other current assets 7,088 7,054
Inventory 23,054 18,190
Property, plant and equipment, net 131,516 123,595
Other assets 11,958 7,007
———————————————————————-
Total Assets $730,484 $568,621
———————————————————————-
Unearned milestone revenue - current portion $5,820 $11,450
Other current liabilities 33,584 50,610
Non-recourse RISPERDAL CONSTA secured 7% notes 159,430 156,851
Unearned milestone revenue - long-term portion 113,393 117,300
Deferred revenue - long-term portion 27,837 22,153
Other long-term liabilities 5,774 6,796
Total shareholders’ equity 384,646 203,461
———————————————————————-
Total Liabilities and Shareholders’ Equity $730,484 $568,621
———————————————————————-
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, 2007, and the company’s report on Form 10-Q for the three months
ended December 31, 2007, which the company intends to file in February
2008.
VIVITROL(R) Selected Financial Information
——————————————–
Three Months
Ended
(Unaudited, in thousands) December 31, Cumulative
2007 Collaboration
———— ————-
VIVITROL Income Statement
Alkermes’ expenses $3,815 $65,313
Cephalon’s net losses 3,105 103,785
———— ————-
VIVITROL net losses $6,920 $169,098
———— ————-
Flow of funds
Alkermes paid Cephalon: net losses up
to the $124.6 million net loss cap
(1) $0 ($73,347)
Cephalon paid Alkermes: Alkermes’
expenses in excess of the net loss
cap 3,815 14,060
———— ————-
Net flow of funds from (to) Cephalon (3) $3,815 ($59,287)
———— ————-
Net Collaborative Profit
Milestone revenue recognized to offset
losses up to the net loss cap (1) $0 $144,493
Milestone revenue recognized with
respect to the license (2) 1,312 9,019
Net flow of funds from (to) Cephalon
(3) 3,815 (59,287)
———— ————-
Net collaborative profit $5,127 $94,225
============ =============
Notes
—–
(1) Expenses incurred on behalf of the collaboration by Alkermes,
Inc. (”Alkermes”) and net losses incurred on behalf of the
collaboration by Cephalon, Inc. (”Cephalon”) contribute to the
cumulative net product losses incurred on VIVITROL. Alkermes
was responsible for the first $124.6 million of these
cumulative net product losses (the “net loss cap”). Alkermes
recognized milestone revenue to offset the net product losses
incurred up to the net loss cap. The collaboration reached the
net loss cap in April 2007, at which point the recognition of
milestone revenue related to this accounting unit stopped. In
addition, in prior periods, Alkermes recognized $19.9 million
of milestone revenue to offset expenses it incurred for which
it was solely responsible, related to the successful FDA
approval of VIVITROL and the successful completion of the first
VIVITROL manufacturing line. These $19.9 million of expenses
did not contribute to the cumulative net product losses.
(2) Milestone revenue related to the license commenced upon approval
of VIVITROL, by the FDA, on April 13, 2006 and is being
recognized on a straight line basis over 10 years, at the rate
of approximately $1.3 million per quarter.
(3) Alkermes was responsible for net losses up to the net loss cap
and reimbursed Cephalon for their net losses during this
period. Once the net loss cap was reached in April 2007,
Cephalon started to reimburse Alkermes for its VIVITROL
expenses. This continued through December 31, 2007, after which
the two companies share any net profits or losses.
Through December 31, 2007, Alkermes has recognized $155.4
million of milestone revenue out of the $274.6 million received
from Cephalon. In addition to (1) and (2) above, this
recognition includes $1.9 million of milestone revenue related
to a 10% mark-up on manufacturing revenue, which is reported by
Alkermes within manufacturing revenues in the unaudited
condensed consolidated statement of operations.
*T
