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-- Profitable Quarter Driven By Revenues From RISPERDAL(R) CONSTA(R) --
-- Strengthened Financial Position, Retiring $60 Million in Debt and Repurchasing Common Stock; Holds $425 Million in Cash and Investments --
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Nov. 6, 2008--Alkermes, Inc. (NASDAQ: ALKS) today announced financial results for its second quarter of fiscal 2009. Financial highlights for the quarter ended September 30, 2008 include:
"Our solid financial performance and our ability to generate cash from operations demonstrate the success of our business. With two commercial products and more than $425 million in cash and investments, Alkermes is in a unique position among its biotechnology peers," stated James Frates, chief financial officer of Alkermes. "Alkermes is focused on being profitable and cash flow positive on an operating basis for the fiscal year."
Key operating results for the quarter ended September 30, 2008 include the following:
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 second quarters of fiscal 2009 and 2008 is provided in the following table:
Pro Forma Share-Based Net Change in Reported
Diluted Compensation Fair Value of GAAP
Earnings Expense Warrants Diluted
Earnings
Q2 FY 2009 $0.06 ($0.04) $-- $0.02
Q2 FY 2008 $0.11 ($0.04) $0.01 $0.07
Amounts may not sum due to rounding.
The following financial results are reported on a GAAP basis and include share-based compensation expense:
Revenues
Costs and Expenses
At September 30, 2008, Alkermes had cash and total investments of $425.8 million, compared to $473.3 million at June 30, 2008. During the quarter, Alkermes purchased $60 million principal of its non-recourse RISPERDAL CONSTA secured 7% notes for $57.7 million. Under its ongoing share repurchase program, Alkermes repurchased 38,700 shares of its common stock for $0.5 million. Excluding these transactions, Alkermes generated $10.7 million of cash during the quarter.
Financial Expectations
The following outlines Alkermes' financial expectations for the fiscal year ending March 31, 2009. 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, 2008, as filed with the Securities & Exchange Commission.
Alkermes today maintained its financial expectations for net income for fiscal 2009. The company updated its financial expectations for certain operating expenses and net collaborative profit due to a change in expectation for end-market VIVITROL sales.
Conference Call
Alkermes will host a conference call at 4:30 p.m. EST on Thursday, November 6, 2008 to discuss these financial results and provide an update on the company. The conference call may be accessed by dialing 1-866-256-9239 for domestic callers and 1-703-639-1213 for international callers. The conference call ID number is 1298438. In addition, a replay of the conference call will be available from 7:30 p.m. EST on Thursday, November 6, 2008 through 5:00 p.m. EST on Thursday, November 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 1298438. 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 Thursday, November 13, 2008.
About Alkermes
Alkermes, Inc., a biotechnology company committed to developing innovative medicines to improve patients' lives, manufactures RISPERDAL(R) CONSTA(R) for schizophrenia and developed and manufactures VIVITROL(R) for alcohol dependence. 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 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 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: actions or decisions by the company's partners with regard to development and regulatory strategy, timing and funding of the company's proprietary and partnered product candidates, which are out of the company's 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 the occurrence of unintended side effects, adverse reactions or incidents of misuse related to the company's products and product candidates that could cause the FDA or other foreign regulatory authorities to require post approval studies, new labeling, or removal of such 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 Cephalon, Inc.; RISPERDAL(R) CONSTA(R) is a registered trademark of Janssen-Cilag group of companies.
Alkermes, Inc. and Subsidiaries
Selected Financial Information (Unaudited)
Three Three
Months Months
Ended Ended
Condensed Consolidated Statements of Income September September
30, 30,
(In thousands, except per share data) 2008 2007
--------- ---------
Revenues:
Manufacturing revenues $33,039 $24,137
Royalty revenues 8,439 7,348
Research and development revenue under
collaborative arrangements 5,252 21,206
Net collaborative profit 581 5,909
--------- ---------
Total Revenues 47,311 58,600
--------- ---------
Expenses:
Cost of goods manufactured 12,071 9,218
Research and development 19,710 28,317
Selling, general and administrative 11,679 14,487
--------- ---------
Total Expenses 43,460 52,022
--------- ---------
Operating Income 3,851 6,578
--------- ---------
Other (Expense) Income:
Interest income 2,693 4,246
Interest expense (4,243) (4,077)
Other (expense) income, net (666) 1,151
--------- ---------
Total Other (Expense) Income (2,216) 1,320
--------- ---------
Income before Income Taxes 1,635 7,898
--------- ---------
Income tax (benefit) provision (63) 200
--------- ---------
Net Income $1,698 $7,698
========= =========
Earnings per Common Share:
Basic $0.02 $0.08
========= =========
Diluted $0.02 $0.07
========= =========
Weighted Average Number of Common Shares
Outstanding (GAAP and Pro Forma):
Basic 95,637 101,595
========= =========
Diluted 97,356 104,315
========= =========
Pro Forma Reconciliation:
Net Income - GAAP $1,698 $7,698
Share-based compensation expense 3,814 4,548
Net increase in the fair value of warrants - (1,230)
--------- ---------
Net Income - Pro Forma $5,512 $11,016
========= =========
Pro Forma Earnings per Common Share:
Basic $0.06 $0.11
========= =========
Diluted $0.06 $0.11
========= =========
Condensed Consolidated Balance Sheets September March 31,
30,
(In thousands) 2008 2008
--------- ---------
Cash, cash equivalents and total investments $425,833 $460,361
Receivables 36,047 47,249
Prepaid expenses and other current assets 15,354 5,720
Inventory 15,721 18,884
Property, plant and equipment, net 108,807 112,539
Other assets 3,256 11,558
--------- ---------
Total Assets $605,018 $656,311
========= =========
Unearned milestone revenue - current portion $5,728 $5,927
Non-recourse RISPERDAL CONSTA secured 7% notes -
current portion 15,835 -
Other current liabilities 23,921 36,093
Non-recourse RISPERDAL CONSTA secured 7% notes -
long-term portion 76,054 160,324
Unearned milestone revenue - long-term portion 108,890 111,730
Deferred revenue - long-term portion 28,397 27,837
Other long-term liabilities 7,228 9,086
Total shareholders' equity 338,965 305,314
--------- ---------
Total Liabilities and Shareholders' Equity $605,018 $656,311
========= =========
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,
2008, and the company's report on Form 10-Q for the three months
ended September 30, 2008, which the company intends to file in
November 2008.
VIVITROL(R) Selected Financial Information Three Three
Months Months
--------------------------------------------------
Ended Ended
(Unaudited, in thousands) September September
30, 30,
2008 2007
--------- ---------
VIVITROL Income Statement
Alkermes' expenses $3,780 $4,597
Cephalon's net losses 5,428 13,473
--------- ---------
VIVITROL net losses $9,208 $18,070
--------- ---------
Flow of funds
Cephalon paid Alkermes: Alkermes' expenses
in excess of the net loss cap through
December 31, 2007 $-- $4,597
Alkermes paid Cephalon: Cephalon's net
losses in excess of its share of net
product losses after December 31, 2007 (731) --
--------- ---------
Net flow of funds (to)/from Cephalon (3) ($731) $4,597
--------- ---------
Net Collaborative Profit
Milestone revenue recognized to offset
collaboration expenses and Alkermes' non-
shared expenses up to the net loss cap (1) $-- $--
Milestone revenue recognized with respect
to the license (2) 1,312 1,312
Net flow of funds (to)/from Cephalon (3) (731) 4,597
--------- ---------
Net collaborative profit $581 $5,909
========= =========
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 reimbursed Alkermes for its VIVITROL expenses through
December 31, 2007. Effective January 1, 2008, the two
companies share any net profits or losses on the product.
Through September 30, 2008, Alkermes has recognized $160.0
million of milestone revenue out of the $274.6 million
received from Cephalon. In addition to (1) and (2) above, this
recognition includes $2.5 million of milestone revenue related
to a 10% mark-up on manufacturing revenue, which is reported
by Alkermes within manufacturing revenues in the condensed
consolidated statements of income.
CONTACT: Alkermes Contacts:
For Investors:
Rebecca Peterson, 617-583-6378
or
For Media:
Jennifer Snyder, 617-583-6166
SOURCE: Alkermes, Inc.
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