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ALKS > SEC Filings for ALKS > Form 10-Q on 2-Feb-2012All Recent SEC Filings

Show all filings for ALKERMES PLC.

Form 10-Q for ALKERMES PLC.


Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes beginning on page 3 of this Quarterly Report on Form 10-Q, and Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in (i) our Registration Statement on Form S-4, as amended (Registration No. 333-175078), which was declared effective by the United States ("U.S.") Securities and Exchange Commission ("SEC") on August 4, 2011, (the "Registration Statement ") and (ii) the Alkermes, Inc. Annual Report on Form 10-K for the year ended March 31, 2011, as amended (the "Annual Report"), which has been filed with the SEC.

Alkermes plc develops medicines that address the unmet needs and challenges of people living with chronic disease. A fully integrated global biopharmaceutical company, Alkermes applies proven scientific expertise, proprietary technologies and global development capabilities to the creation of innovative treatments for major clinical conditions with a focus on central nervous system (CNS) disorders, such as schizophrenia, addiction and depression.

We create new, proprietary pharmaceutical products for our own account, and we collaborate with other pharmaceutical and biotechnology companies. We are increasingly focused on maintaining rights to commercialize our leading product candidates in certain markets. Each of these approaches is discussed in more detail in "Products and Development Programs."

Our headquarters are located in Dublin, Ireland, and we operate R&D and GMP manufacturing facilities in Ireland and the U.S. Alkermes' technologies are incorporated in over 20 commercial-stage products sold in over 90 countries.

Use of the terms such as "us," "we," "our" or the "Company" in this Management's Discussion and Analysis of Financial Condition and Results of Operations refers to Alkermes plc and its subsidiaries, except when the context makes clear that the time period being referenced is prior to September 16, 2011, in which case such terms shall refer to Alkermes, Inc. Prior to September 16, 2011, Alkermes, Inc. was an independent pharmaceutical company incorporated in the Commonwealth of Pennsylvania and traded on the NASDAQ under the symbol "ALKS."

Forward-Looking Statements

This document contains and incorporates by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements, trend analyses and other information contained herein about the markets for the services and products and trends in revenue, as well as other statements identified by the use of forward-looking terminology, including "may," "will," "could," "should," "would," "expect," "anticipate," "continue," or the negative of these terms or other similar expressions, constitute forward-looking statements. These forward-looking statements are based on estimates reflecting the best judgment of senior management. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth herein. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following:

† our expectations regarding our financial performance, including revenues, expenses, gross margins, liquidity, capital expenditures and income taxes;

† our expectations regarding the commercialization of our products, including the sales and marketing efforts of our partners and, for VIVITROL® (naltrexone for extended-release injectable suspension), our ability to establish and maintain successful sales and marketing, reimbursement and distribution arrangements;

† our efforts and ability to evaluate and license product candidates and build our pipeline;

† our expectations regarding our products, including the development, regulatory review (including expectations about regulatory approval and regulatory timelines) and therapeutic and commercial potential of such products and the costs and expenses related thereto;

† our expectations regarding the initiation, timing and results of clinical trials of our products;

† our expectations regarding the successful manufacture of our products, by us or our partners for commercial sale;

† the continuation of our collaborations and other significant agreements and our ability to establish and maintain successful development collaborations;

† our expectations regarding the financial impact of health care reform legislation and foreign currency exchange rate fluctuations and valuations;

† the impact of new accounting pronouncements;

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† our beliefs regarding Adjusted EBITDA;

† our ability to protect our intellectual property rights and the impact of patent reform legislation;

† our expectations regarding near-term changes in the nature of our market risk exposures or in management's objectives and strategies with respect to managing such exposures;

† our ability to comply with restrictive covenants of our indebtedness and our ability to fund our debt service obligations;

† our expectations concerning the status, intended use, and financial impact of, and arrangements involving, our properties, including manufacturing facilities;

† our future capital requirements and capital expenditures and our ability to finance our operations and capital requirements; and

† other risk factors included herein and under "Risk Factors" in our Registration Statement and Quarterly Report on Form 10-Q for the period ended September 30, 2011.

Actual results might differ materially from those expressed or implied by these forward-looking statements because these forward-looking statements are subject to assumptions and uncertainties. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning the matters addressed in this document and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by applicable law or regulation, we do not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.

Executive Summary

On September 16, 2011, the business of Alkermes, Inc. and the drug technologies business ("EDT") of Elan Corporation, plc ("Elan") were combined (this combination is referred to as the "Business Combination," the "acquisition of EDT," or the "EDT acquisition") under Alkermes. As part of the Business Combination, Antler Acquisition Corp., a wholly owned subsidiary of the Company, merged with and into Alkermes, Inc. (the "Merger"), with Alkermes, Inc. surviving as a wholly owned subsidiary of the Company. Prior to the Merger, EDT was carved-out of Elan and reorganized under the Company. We paid Elan $500.0 million in cash and issued Elan 31.9 million ordinary shares, which had a fair value of $525.1 million on the closing date, for the EDT business. Upon consummation of the Merger, the former shareholders of Alkermes, Inc. owned approximately 75% of the Company, with the remaining approximately 25% of the Company owned by a subsidiary of Elan pursuant to the terms of a shareholder's agreement.

For a more detailed discussion of the Business Combination, please refer to the notes to our condensed consolidated financial statements, including Note 1, The Company, and Note 3, Acquisitions, in the accompanying Notes to Condensed Consolidated Financial Statements.

The Business Combination is being accounted for using the acquisition method of accounting for business combinations with Alkermes, Inc. being treated as the accounting acquirer under accounting principles generally accepted in the U.S. ("GAAP"), which means that the operating results of Alkermes, Inc. are included for all periods being presented, whereas the operating results of the acquiree, EDT, are included only after the date of acquisition through the end of the period. Accordingly, our financial results for the nine months ended December 31, 2011 reflect the full nine months of operations of Alkermes, Inc., and the operations of the former EDT business from September 17, 2011 through December 31, 2011, together with the consolidated balance sheet as of December 31, 2011.

Net loss for the three months ended December 31, 2011, was $14.8 million, or $0.11 per common share - basic and diluted, as compared to a net loss of $11.4 million, or $0.12 per common share - basic and diluted, for the three months ended December 31, 2010. Net loss for the nine months ended December 31, 2011, was $50.3 million, or $0.46 per common share - basic and diluted, as compared to a net loss of $32.5 million, or $0.34 per common share - basic and diluted, for the nine months ended December 31, 2010.

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As a complement to GAAP results, we are also providing a non-GAAP measure of adjusted EBITDA ("Adjusted EBITDA"), which we believe better indicates underlying trends in ongoing operations. Adjusted EBITDA excludes from GAAP results the following: interest expense, taxes, depreciation and amortization, share-based compensation expense and certain noncash or nonrecurring items. For the three and nine months ended December 31, 2011, we had Adjusted EBITDA of $29.7 million and $45.9 million, respectively as compared to Adjusted EBITDA of $(4.0) million and $(8.7) million for the three and nine months ended December 31, 2010, respectively. Refer to the reconciliation of net loss as calculated under GAAP to Adjusted EBITDA under the caption "Non-GAAP Financial Measures."


We have five principal commercial products with long patent protection which either currently, or in the future, are expected to, contribute meaningfully to our revenues.


RISPERDAL CONSTA (risperidone long-acting injection) is a product of Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica International, a division of Cilag International AG ("Janssen"), and is the first and only long-acting, atypical antipsychotic approved by the U.S. Food and Drug Administration ("FDA") for the treatment of schizophrenia and bipolar I disorder. The medication uses our polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levels in the body through one injection every two weeks. RISPERDAL CONSTA is marketed by Janssen and is sold in more than 90 countries, and is exclusively manufactured by us. We earn manufacturing revenues and royalties on worldwide sales of RISPERDAL CONSTA.


INVEGA SUSTENNA (paliperidone palmitate) extended-release injectable suspension is a product of Janssen and was approved in July 2009 in the U.S. for the acute and maintenance treatment of schizophrenia in adults. It is the first once-monthly, long-acting, injectable atypical antipsychotic approved for this use in the U.S. The medication uses our nanoparticle injectable extended-release technology to increase the rate of dissolution and enable the formulation of an aqueous suspension for once-monthly intramuscular administration. INVEGA SUSTENNA is manufactured and commercialized by Janssen. Paliperidone palmitate extended-release for injectable suspension is also approved in the European Union ("EU") and other countries worldwide, and is commercialized in the EU under the trade name XEPLION. We earn royalties on worldwide sales of INVEGA SUSTENNA and XEPLION.


Dalfampridine, marketed and sold in the U.S. under the trade name AMPYRA and outside the U.S. under the trade name FAMPYRA, was approved by the FDA in January 2010 as a treatment to improve walking in patients with multiple sclerosis ("MS"). It is the first and currently only product to be approved for this indication. A product of Acorda Therapeutics, Inc. ("Acorda"), it incorporates our OCR technology. AMPYRA and FAMPYRA are manufactured by us and are marketed in the U.S. by Acorda and outside the U.S. by Biogen Idec, Inc. FAMPYRA received conditional marketing approval in the EU in July 2011 and is currently being sold in select European countries, as well as Australia. We earn manufacturing revenues and royalties on worldwide sales of AMPYRA/FAMPYRA.


We developed, manufacture and commercialize VIVITROL as the first and only once-monthly injectable medication for the treatment of alcohol dependence and for the prevention of relapse to opioid dependence, following opioid detoxification. VIVITROL was approved by the FDA in April 2006 for the treatment of alcohol dependence and was launched in the U.S. in June 2006. VIVITROL was approved for the prevention of relapse to opioid dependence following opioid detoxification in October 2010. We exclusively licensed the rights to commercialize VIVITROL in Russia and the Commonwealth of Independent States ("CIS") to Cilag GmbH International in December 2007, and VIVITROL has been available in Russia for the treatment of alcohol dependence since March 2009 and for the prevention of relapse to opioid dependence following opioid detoxification, since April 2011.

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In November 2011, we announced positive results from a one-year, open-label extension of our six-month pivotal study of VIVITROL. This study showed sustained efficacy of VIVITROL, as measured by the number of opioid-free urine screens, in patients who received VIVITROL, in combination with psychosocial treatment, for a total of 18 months of treatment. Additionally, all safety events observed during the open-label extension were consistent with those set forth in the approved product labeling. During the total observation period of 18 months, improvements during the six-month pivotal trial observed in patients treated with VIVITROL were maintained for the duration of the subsequent one-year, open-label extension study. Approximately half of the patients (49%) who entered the one-year extension study, after receiving six months of VIVITROL in the pivotal study, were completely abstinent for the duration of the extension study, based on opioid-free urine screens.


We collaborated with Amylin Pharmaceuticals, Inc. ("Amylin") on the development of a once-weekly formulation of exenatide, called BYDUREON, for the treatment of type 2 diabetes. BYDUREON, an injectable formulation of Amylin's BYETTA® (exenatide), uses our polymer-based microsphere injectable extended-release technology. Amylin is responsible for commercializing exenatide products, including BYDUREON, in the U.S. Eli Lilly and Company ("Lilly") has exclusive rights to commercialize exenatide products outside of the U.S. until December 31, 2013, or such earlier date as agreed upon between Lilly and Amylin pursuant to the terms of their transition agreement.

In June 2011, the European Commission granted marketing authorization for BYDUREON for the treatment of type 2 diabetes in adult patients in combination with metformin, a sulfonylurea, a thiazolidinedione, metformin plus a sulfonylurea or metformin plus a thiazolidinedione. In July 2011, Lilly launched BYDUREON in the United Kingdom, and in September 2011, BYDUREON was launched in Germany. We received a $7.0 million milestone payment upon first commercial sale of BYDUREON in the EU, which was recognized during the three months ended September 30, 2011.

In January 2012, the FDA approved BYDUREON as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes. We will receive an additional $7.0 million milestone payment upon first commercial sale of BYDUREON in the U.S. BYDUREON is expected to be launched in February 2012.

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We expect revenues from our other commercial products, set forth in the table below, to decrease in the future due to existing and expected competition from generic manufacturers. For a more detailed discussion of current and expected future revenue contribution of such products, please refer to the "Results of Operations" section in this Management's Discussion and Analysis of Financial Condition and Results of Operation.

Marketer               Product              Indication        Technology      Territory        Revenue Source
Abbott            TriCor®              Cholesterol lowering   NanoCrystal   Worldwide        Royalty
Laboratories      Lipanthyl®

Acorda            Zanaflex® Capsules   Muscle spasticity      OCR           United States    Manufacturing and
Therapeutics,     ZANAFLEX TABLETS                            (SODAS)                        Royalty

Pfizer Inc.       Avinza®              Chronic pain           OCR           United States    Manufacturing and
                                                              (SODAS)                        Royalty

Merck & Co.,      Emend®               Nausea associated      NanoCrystal   Worldwide        Royalty
Inc.                                   with chemotherapy      Technology

Novartis AG       Focalin XR®          Attention Deficit      OCR           Worldwide        Manufacturing and
                  Ritalin LA®          Hyperactivity          (SODAS)                        Royalty

Strativa          Megace® ES           Cachexia associated    NanoCrystal   United States    Royalty
(a business                            with AIDS
division of Par

Jazz              LUVOX CR®            Obsessive-compulsive   OCR           United States    Manufacturing and
Pharmaceuticals                        disorder               (SODAS)                        Royalty

Pfizer Inc.       Rapamune®            Renal transplant       NanoCrystal   Worldwide        Manufacturing

Shionogi Inc.     Naprelan®            Various mild to        OCR           United States    Manufacturing
                                       moderate pain          (IPDAS)
Sunovion                               indications                          Canada
Canada, Inc.

UCB, Inc.;        VERAPAMIL SR         Hypertension           OCR           Licensed on      Manufacturing
Watson;           Verelan®                                    (SODAS)       country/region
Cephalon;         Verelan® PM                                               basis
Aspen;            VERAPIMIL OD                                              throughout the
Orient            VERECAPS®                                                 world


We have several proprietary and partnered product candidates in various stages of development.


ALKS 37 is an orally active, peripherally restricted opioid antagonist for the treatment of opioid-induced constipation, ("OIC"). In May 2011, we presented positive results from a phase 2 double-blind, randomized, placebo-controlled, multi-dose clinical study of ALKS 37 for the treatment of OIC. Data from the study showed that ALKS 37 significantly improved gastrointestinal motility, demonstrated by increased frequency of bowel movements in patients with OIC, while simultaneously preserving the analgesic effects of opioid treatment. The study also demonstrated that ALKS 37 was generally well tolerated with limited bioavailability and systemic exposure. In July 2011, we announced the initiation of a multicenter, randomized, double-blind, placebo-controlled, repeat-dose phase 2b study of ALKS 37 to assess the safety, tolerability, efficacy and pharmacokinetic profile of ALKS 37 in approximately 150 patients. In October 2011, we announced the initiation of a second phase 2b study of ALKS 37. This multicenter, randomized, double-blind, placebo-controlled, fixed-dose study is designed to assess the safety and efficacy of daily administration of a 100 mg dose of ALKS 37 versus placebo for 12 weeks in approximately 80 patients with OIC. The results of this phase 2b study, along with those from the dose-ranging, four-week phase 2b study initiated earlier in 2011, are expected in mid-calendar year 2012.

ALKS 9070

We are studying ALKS 9070 for the treatment of schizophrenia. ALKS 9070 is designed to provide once-monthly dosing of a medication that converts in vivo into aripiprazole, a molecule that is commercially available under the name ABILIFY®. ALKS 9070 is our first product candidate to leverage our proprietary LinkeRx™ product platform. In June 2011, we announced positive

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topline results from a phase 1b, double-blind, randomized, placebo-controlled, 20-week study that assessed the safety, tolerability and pharmacokinetic profile of a single administration of three ascending doses of ALKS 9070 in 32 patients with chronic, stable schizophrenia. Data from the study showed that ALKS 9070 was generally well tolerated, achieved therapeutically relevant plasma concentrations of aripiprazole with a pharmacokinetic profile that supports once-monthly dosing.

Based on these results, we announced the initiation of a phase 3 clinical trial of ALKS 9070 in December 2011. The phase 3 randomized, multicenter, double-blind study is designed to assess the efficacy, safety and tolerability of ALKS 9070 compared to placebo in patients experiencing acute exacerbation of schizophrenia. Approximately 690 subjects will be randomized to receive once-monthly intramuscular injections of ALKS 9070 300 mg, ALKS 9070 600 mg or placebo for twelve weeks. In addition, subjects will receive oral study drug for the first three weeks after randomization. Subjects randomized to one of the two ALKS 9070 treatment groups will receive oral aripiprazole, while subjects randomized to the placebo group will receive matching oral placebo. The primary efficacy endpoint of the study is the change in Positive and Negative Syndrome Scale total score from baseline. The clinical data from this study, expected mid-calendar 2013 will form the basis of a NDA to the FDA for ALKS 9070 for the treatment of schizophrenia.

ALKS 5461

ALKS 5461 is a combination of ALKS 33 and buprenorphine that we are developing to be a non-addictive therapy for the treatment of major depressive disorder ("MDD") in patients who have an inadequate response to standard antidepressant therapies, and for the treatment of cocaine dependence.

Major Depressive Disorder

In January 2012, we announced positive results from a phase 1/2 study of ALKS 5461 compared to placebo in 32 patients with MDD who did not adequately respond to standard antidepressant therapies. In the study, ALKS 5461 was shown to significantly reduce depressive symptoms, as measured by the Hamilton Depression Rating Scale (HAM-D17; a standard, clinician-assessed measure of depression severity), in patients who received ALKS 5461 for the seven-day treatment period. In addition, data from the study showed that ALKS 5461 was generally well tolerated. Based on these results, we initiated a randomized, double-blind, multicenter, placebo-controlled phase 2 study to evaluate the efficacy and safety of ALKS 5461 when administered once daily for four weeks in approximately 130 patients with MDD who have inadequate response to antidepressant therapy. Data from the study are expected in the first half of calendar year 2013.

Cocaine Dependence

Our randomized, double-blind, multidose, placebo-controlled phase 1 clinical study assessed the safety, tolerability and pharmacodynamic effects of the combination of ALKS 33 and buprenorphine when administered alone, and in combination as ALKS 5461, to 12 opioid-experienced users. Data from the study showed that ALKS 5461 was generally well-tolerated and sublingual administration of ALKS 33 effectively blocked the agonist effects of buprenorphine.

Based on these positive results, we filed an Investigational New Drug application ("IND") for ALKS 5461 for the treatment of cocaine dependence in June 2011. In the second half of 2011, we initiated a phase 2a study of ALKS 5461 for cocaine dependence, which is being funded through a grant from the National Institute on Drug Abuse ("NIDA"). NIDA has granted us up to $2.4 million to accelerate the clinical development of ALKS 5461 for the treatment of cocaine dependence. Currently, there are no medications approved for the treatment of cocaine dependence.


ALKS 33 is an oral opioid modulator characterized by limited hepatic metabolism and durable pharmacologic activity in modulating brain opioid receptors. ALKS 33 is currently being evaluated as a potential treatment for alcohol dependence.

We conducted two phase 1 studies and one phase 2 study of ALKS 33. The first phase 1 study was a randomized, double-blind, placebo-controlled, multidose study designed to assess the steady-state pharmacokinetics, safety and tolerability of ALKS 33. In the study, ALKS 33 demonstrated rapid oral absorption and sustained pharmacologically active plasma levels supporting once-daily dosing. The second phase 1 study was a randomized, single-blind, placebo-controlled, single-dose study designed to test the ability of ALKS 33 to block the subjective and objective effects of a potent opioid agonist, remifentanil, a commercially available analgesic. Data showed that the onset of action of ALKS 33 was rapid and observed as early as 15 minutes following oral administration. A full blockade of the opioid agonist was observed and sustained for more than 24 hours following a single administration of ALKS 33. ALKS 33 was generally well tolerated in both studies.

The phase 2 study of ALKS 33 was designed to assess the safety, tolerability, pharmacokinetics and efficacy of daily oral administration of three different dose levels of ALKS 33 compared to placebo in 400 alcohol dependent patients. The phase 2 study showed that ALKS 33 was generally well tolerated and characterized by its potential for daily dosing, non-hepatic metabolism, extended pharmacologic benefit in the event of missed doses and pharmacologic activity in reducing heavy drinking behavior.


ZOHYDRO™ (hydrocodone bitartrate) extended-release capsule is a novel, oral, single-entity (without acetaminophen), controlled-release formulation of hydrocodone in development by Zogenix, Inc. ("Zogenix") for the U.S. market. ZOHYDRO utilizes our oral controlled-release technology, which potentially enables longer-lasting and more consistent pain relief with fewer daily doses than the commercially available formulations of hydrocodone. In August 2011, . . .

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