Alkermes plc (ALKS) Earnings & Analysis

Latest quarter

Alkermes reported Q3 revenue of $480.1 million, up from $394.2 million a year earlier. Its filing attributed the increase primarily to the addition of LUMRYZ following the Avadel acquisition. The company also said ARISTADA and LYBALVI unit sales rose year over year.

Diluted earnings per share fell to $0.09 from $0.49. The filing attributed the decline in net income primarily to higher operating and interest expenses, with the operating expense increase primarily related to the acquisition.

Alkermes reported a gross margin of 80.4%, down from 86.9% a year earlier, and an operating margin of 7.50%, down from 22.6%. The filing said cost of goods sold included amortization of the step-up in acquired LUMRYZ inventory, as well as costs associated with out-of-specification batches and investigations for ARISTADA and VIVITROL.

Free cash flow rose to $93.5 million from $84.4 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Joshua Reed said sales of Alkermes’ proprietary medicines reflected contributions from all four products and underlying demand across the commercial business. Chief commercial officer Todd Nichols said LUMRYZ sales reflected approximately $7.0 million of inventory drawdown that the company had highlighted previously. He also said VIVITROL sales benefited from favorable gross-to-net adjustments, primarily driven by patient mix.

Reed said selling, general and administrative expenses rose to $208.5 million, with Avadel’s commercial infrastructure the primary driver of the year-over-year increase. He said research and development spending reflected continued investment in the orexin portfolio. Reed expects lower cost of goods sold next year as the vast majority of the acquired LUMRYZ inventory fair-value step-up is recognized this year.

CEO Blair Jackson said the company had completed enrollment in its idiopathic hypersomnia study of alixorexton and expected results around year-end or early next year. Jackson said the study would help inform a potential registration program, including dose selection and endpoints. In response to questions, he said the study would also offer a first look at split dosing in patients and whether it provides additional afternoon efficacy.

Asked about competition for LUMRYZ from orexin medicines, Nichols said he expected an initial impact on oxybates, but that he thought it would be marginal at first. He said clinicians had expressed interest in using both mechanisms and that stable patients on LUMRYZ tended to stay on treatment.

Nichols said pricing was within the company’s expectations and that he had not seen significant changes in LUMRYZ’s market-access profile. Jackson said Alkermes had started a study of its orexin candidate in major depressive disorder and would examine both the overall patient group and a subgroup with excessive daytime sleepiness.

Guidance

CFO Joshua Reed said Alkermes was reiterating the financial expectations it provided in July across all line items. He said the company expects lower cost of goods sold next year as the vast majority of the LUMRYZ inventory fair-value step-up is recognized this year. Reed said Alkermes would provide its full expectations for next year on its February call.