Alkermes plc (ALKS)

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Alkermes, Inc. (ALKS)

Credit Suisse 2012 Healthcare Conference

November 14, 2012 05:00 PM ET


James Frates - CFO


Catherine Arnold - Credit Suisse


Catherine Arnold - Credit Suisse

So we are going to get into the Alkermes presentation with – certainly with the EDT integration and portfolio transition, there is no shortage of topics to discuss. So we’re happy to have the CFO of Alkermes, Jim Frates, with us. So I’ll turn it over to Jim.

James Frates

Thanks, Catherine. It’s great to be back here. I think this is my 14th as to when I started it was the DLJ Conference and I still have a snappy green windbreaker from DLJ back in the day. But it’s been – it’s always good to come out here and see investors from I have seen people from the West Coast, from Canada, from New York, from Boston, which is very nice and of course all the folks listening on the webcast.

But its – and Alkermes has changed remarkably over the last 14 years, now a Company with cash flow and over $500 million in annual revenues. It’s been fun to be part of that transition. And I will make forward-looking statements today. It’s pretty hard to talk about a Biotech Company without talking about the future and I think we have an exciting future ahead of us.

So please review our SEC filings and risk factors that you will find there. As it is also a very risky business. But one of the things we pride ourselves on actually is that, we think we’ve gotten over a major hump with over 20 products that we have rights to selling around the world. We have a very, very powerful financial engine.

We’re going to talk about five key commercial products that are very much in their early stage of their launches around the world. They’re all approved. So we have the FDA regulatory risk behind us in these products. And they all have the opportunity to surprise, I believe on the upside. We’re very happy with all of them. They have long patent lives and so we don’t have any cliffs we are looking at and we think that’s unique.

Also for a Company of our size, roughly $2.5 billion market cap plus or minus that diversification is something that you very rarely find. So we’re not dependent on any one product. But again have upside for many. I think combined with that we have a management team that over 14 years in my own case, Richard, our CEO has been there for over 20; there is very much a track record. And I think you can – we know many of you over the years and there is a track record and a commitment, I hope to manage the business actively and that’s something that I think is one of the hallmark.

So, we will talk a lot about the financial engine and the financial performance, since the combination with EDT slightly over a year-ago. But the other thing that’s very important for us, is we believe very firmly in the power of science. And the power of high quality science probably comes from our early days interacting with Genentech, Johnson & Johnson, Eli Lilly, other pharmaceutical companies where we see the value of the long-term valuable products that change the way patient outcomes and patient experiences occur. That’s what drives us.

We have focus on high science and developing products that matter with long patent lives. We think that’s how the industry creates the most value. The era of me-too products is long gone, certainly listening to professor Reinhart today. That elasticity that’s going to be now coming to pharmaceutical pricing is something where you’re going to have to create a real benefit in terms of health outcomes and pharmacoeconomic outcomes for the patients and we think our pipeline in our five key products fit into that very well. They’re unique – very much unique in their own right and have long patent lives.

We also have a very much an ROI driven strategy on R&D, and we will talk about that. What does that mean? That means get to major answers fast. Let’s get to proof-of-concept fast, if in known areas where we’re making a medical difference. And if we can do that fast, we ought to have a better outcome in our long-term investments.

Just a snapshot of our financials in the growth. It’s been driven by the growth of our products and by the EDT combination. You can see our fiscal ’13 expectations, we were happy to be able to raise them on our earnings call at the beginning of the month as the EDT business and the broad business continues to perform well. So revenues in the $510 million to $540 million range and it’s pretty exciting to talk about a non-GAAP diluted earnings of $0.88 to a $1.2 per share.

And I should mention too, we’re talking about generating between $120 million and $140 million of cash this year before we get to CapEx of around $25 million. So, that’s a very exciting thing for us, generating cash is something we focus a lot on and we will be focused on earlier. Earlier in the year I should also mention too, our capital structure, we have about $375 million in debt, down from the $450 million we incurred from the EDT acquisition last year. We did a very nice financing to refinance that and pay-off $75 million of debt in September. And now the blended interest on that debt for us is roughly – is exactly 4.4%, as long as LIBOR stays below 100 and it looks like with under the guidance of Chairman Bernanke, that certainly is the goal for the next few years. So, we’re very pleased with that, with our capital structure. That’s going to free up roughly – that refinancing is going to free up roughly $18 million in additional cash for you all, our shareholders, rather than our debtholders. So, that’s a good thing for us as well.

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