ALKS

Alkermes plc (ALKS)

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Alkermes, Inc. (ALKS)

F2Q13 Earnings Call

November 1, 2012 8:30 AM ET

Executives

Rebecca Peterson - SVP, Corporate Communications

Jim Frates - CFO

Richard Pops - CEO

Analysts

Anant Padmanabhan - Cowen & Company

Karen Jay - JPMorgan

Steve Byrne - Bank of America

Jonathan Eckard - Citibank

Bill Tanner - Lazard Capital Markets

Terence Flynn - Goldman Sachs

Ami Fadia - UBS

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Alkermes PLC Conference Call to discuss the Company's Second Quarter Fiscal 2013 Financial Results. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at Alkermes’ request.

At this time, I would like to introduce your host for today’s call, Ms. Rebecca Peterson, Senior Vice President of Corporate Communications at Alkermes. Please go ahead.

Rebecca Peterson

Thank you. And welcome to the Alkermes PLC conference call to discuss our financial results for the second quarter of fiscal year 2013, which ended on September 30, 2012. With me today are Richard Pops, our CEO; Shane Cooke, our President; and Jim Frates, our CFO.

Before we begin today, let me remind you that we will make forward-looking statements relating to among other things, our expectations concerning the commercialization of our products, our future financial expectations and business performance and our expectations concerning the therapeutic value and clinical development of our products. Listeners are cautioned that these forward-looking statements are neither promises nor guarantees and are subject to a high degree of risk and uncertainty.

Our Press Release issued today, our Annual Report on Form 10-K filed with the SEC and our other filings with the SEC identify risk factors that could cause our actual performance and results to differ materially from those projected or suggested in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments.

This morning, Jim Frates will discuss our second quarter financial results and Richard Pops will provide a brief update on the company. After our remarks, we will open up the call for Q&A.

Now I'd like to turn over the call to Jim.

Jim Frates

Thanks, Rebecca. Good morning, everyone. I am very pleased to report yet another strong financial quarter for Alkermes. The business has been performing well and our results for the second fiscal quarter came in at the high end of our expectations, driven by strong top line performance by our commercial product portfolio and lower costs.

In September, we were able to take advantage of favourable market conditions to reduce our debt and improve our financial structure with the refinancing of the term loans used to complete the merger with EDT last year. This will result in a significant reduction in our cash interest expense going forward.

Move over, based on the solid performance we’ve seen during the first six months of our fiscal year, today we are further improving our financial expectations for fiscal 2013, which I will go into in a few moments.

First let me start with the review from our results for the quarter. We recorded total revenues of $124 million, representing a 72% increase over the second quarter of last year, during which we completed the merger with EDT. This growth was driven by our key commercial products and strong performance from certain legacy products.

Let me now highlight the contributions from our five key commercial products. First, revenues related to our long acting atypical franchise RISPERDAL CONSTA and INVEGA SUSTENNA, which is sold as XEPLION outside the U.S. were once again the most significant contributors to our top line during the second quarter.

End market sales for RISPERDAL CONSTA and INVEGA SUSTENNA during the quarter were approximately $564 million. Year-over-year, the combined franchise grew approximately 15% on a dollar basis and as J&J reported, achieved operational growth of nearly 20% due to an increase in combined market share. For the quarter, Alkermes recorded manufacturing and royalty revenues of $50.3 million for this product franchise, compared to $44.9 million of revenues in the second quarter of fiscal 2012.

For AMPYRA and FAMPYRA, manufacturing and royalty revenues were $5 million during the second quarter, reflecting the timing of manufacturing shipments and lighter royalty contributions from FAMPYRA based on the $12.2 million in net sales reported by Biogen outside the United States.

Regarding ex-U.S. sales, recall that Biogen is booking the sales conservatively for the second half of calendar 2012 until final pricing negotiations in Germany are concluded in early 2013. In the U.S., Acorda reported net sales of AMPYRA that increased to approximately $69.8 million for the quarter and reiterated their guidance of $255 million to $275 million in AMPYRA sales for calendar 2012.

Turning to VIVITROL, net sales for the second quarter of fiscal 2013 were $15.2 million. As we mentioned in today’s press release, during the quarter we adopted a new revenue recognition policy for VIVITROL which resulted in a onetime increase of $1.7 million in net sales.

Excluding this adjustment, VIVITROL net sales were $13.5 million, marking the 13th consecutive quarter of growth for the product. VIVITROL revenues grew approximately 9% quarter-over-quarter and were up 36% year-over-year, net of the effect of the new accounting treatment.

During the second quarter Alkermes recognized BYDUREON royalty revenues of $3.3 million, based on estimated end market sales of approximately $46 million for the quarter. These end market BYDUREON sales represented a 33% increase compared to the first quarter and this in a quarter where ownership of Amylin changed and Bristol-Myers’ and AstraZeneca’s combined commercial efforts are only now just beginning.

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