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Revenues Skyrocket at Merged Alkermes - Analyst Blog

Posted
2/3/2012 10:15:00 AM
By: Zacks.com
Referenced Stocks:ALKS;AMLN;EDT;ELN;JNJ

Alkermes plc ( ALKS ) reported earnings of 1 cent per share (excluding merger related costs and amortization of acquired intangible assets) in the third quarter of fiscal 2012 (ending March 31, 2012). The Zacks Consensus loss estimate hinted at a loss of 21 cents per share.

This was the first full quarter following the purchase of Elan Corporation 's ( ELN ) drug delivery unit, Elan Drug Technologies ( EDT ). We remind investors that Alkermes purchased the EDT unit in September 2011.

Alkermes suffered a loss of 12 cents per share in the year-ago quarter. However, results of the year-ago quarter only comprised figures from the standalone Alkermes. The company, prior to the purchase of the EDT unit, was headquartered in Cambridge, Massachusetts. However, the company shifted its base to Dublin, Ireland, post-merger.

Total revenue for the third quarter of fiscal 2012 jumped 185.7% to $125.6 million. The massive jump was attributable to the 214% rise in manufacturing and royalty revenues due to the expanded product portfolio following the purchase of the EDT unit. Revenues blew past the Zacks Consensus Estimate of $113.0 million.

In the reported quarter, Alkermes recorded $47.6 million as manufacturing and royalty revenues from its long-acting atypical antipsychotic franchise comprising of Risperdal Consta and Invega Sustenna/Xeplion. These schizophrenia drugs are marketed by Johnson & Johnson ( JNJ ). Alkermes recorded manufacturing and royalty revenues from Ampyra/Fampyra, marketed for improving walking ability in multiple sclerosis patients,to the tune of $10.2 million in the reported quarter.

Alkermes earned $0.3 million in royalty revenues from type II diabetes treatment Bydureon, whose launch is underway in the EU following its approval in June 2011. The drug was cleared in the US last month. On the conference call, Alkermes announced that Bydureon is currently cleared in 31 nations and commercial launches are in progress in 10.

We remind investors that Alkermes initially co-developed the drug with Amylin Pharmaceuticals, Inc. ( AMLN ) and Eli Lilly & Company ( LLY ). However, in November 2011, Amylin and Eli Lilly terminated their agreement.

Vivitrol, a legacy product of Alkermes, originally approved for the treatment of alcohol dependence, also performed well in the reported quarter. The label of the drug was expanded in 2010 to prevent the relapse to opioid dependence, following opioid detoxification. Sales of the product climbed approximately 38% year over year to $10.6 million in the reported quarter.

Research and development (R&D) revenue from collaborations went up to $2.3 million in the reported quarter from $0.3 million a year ago. Total expenses at Alkermes (excluding the merger related costs included and amortization of acquired intangible assets) climbed 104.5% to $114.27 million. The massive increase was primarily attributable to the rise in the cost of goods sold and research and development expenses following the merger.

Fiscal 2012 Projection

Apart from announcing the financial results, Alkermes also provided an outlook for fiscal 2012. The expanded portfolio following the merger has caused Alkermes to increase its revenues projection. Revenues are projected in the range of $370-$400 million, up from the previous guidance of $350 -$380 million. The fiscal 2012 Zacks Consensus Estimate of $369 million is just below the guidance range provided by Alkermes.

The projections for the principal items of operating expenses are unchanged. R&D expenses are projected in the range of $135-$145 million. SG&A expenses are projected in the range of $130 -$140 million.

Our Recommendation

We are Neutral on Alkermes in the long-run. The stock carries a Zacks #3 Rank (Hold rating) in the short-run.


 
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