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| [May 22, 2008] |
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Alkermes Reports Financial Results for Fiscal 2008 and Provides Financial Expectations for Fiscal 2009
CAMBRIDGE, Mass. --(Business Wire)-- Alkermes, Inc. (NASDAQ: ALKS) today reported financial results for its fiscal year ended March 31, 2008. Financial highlights for the year include the following:
-- Record GAAP net income of $167.0 million.
-- Manufacturing and royalty revenues from RISPERDAL(R) CONSTA(R) of $124.6 million. Worldwide sales of RISPERDAL CONSTA by Janssen, Division of Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen-Cilag (Janssen) were approximately $1.2 billion in fiscal 2008, a 27 percent increase over sales of RISPERDAL CONSTA in fiscal 2007.
-- Repurchase of 7.0 million shares of common stock for $93.4 million as part of an ongoing stock repurchase program.
-- Strong financial position, with cash and total investments of $460.4 million.
"We are very proud of our financial results for fiscal 2008. The foundation of our business is strong and enables us to invest in our pipeline while also continuing our stock repurchase program," commented James Frates, chief financial officer of Alkermes. "In fiscal 2009, we will continue to both generate cash and invest in our growing pipeline."
Key operating results for fiscal 2008 include the following:
-- Net income was $167.0 million or a basic earnings per share of $1.66 and diluted earnings per share of $1.62, including $19.4 million in share-based compensation expense, compared to a net income of $9.4 million or a basic earnings per share of $0.10 and diluted earnings per share of $0.09 for fiscal 2007. Net income for the year included $174.6 million from the sale of the company's stake in Reliant Pharmaceuticals, Inc. and $3.3 million of associated taxes, as well as restructuring and impairment charges of $18.1 million related primarily to the decision by Eli Lilly and Company (Lilly) to terminate the AIR(R) Insulin program.
-- Pro forma net income was $31.8 million or a basic earnings per share of $0.32 and diluted earnings per share of $0.31, compared to a pro forma net income of $37.9 million or a basic earnings per share of $0.38 and diluted earnings per share of $0.37 for fiscal 2007.
Alkermes is providing pro forma results as a complement to reported results. The pro forma net income excludes certain noncash or nonrecurring items, and Alkermes' management believes these pro forma measures help to indicate underlying trends in the company's ongoing operations. The reconciliation between pro forma and reported diluted earnings per share for fiscal 2008 and fiscal 2007 is provided in the following table:
Net
Income Change
from Share- in Fair Reported
Pro Forma Sale of Based Restruc- Value of Diluted
Diluted Stake in Compensa- turing and Warrants Earnings
Earnings Reliant, tion Impairment and per
Net of Expense Charges Deriv- Share
Taxes ative
Loss on
Notes
----------------------------------------------------------------
------
FY 2008 $0.31 $1.66 ($0.19) ($0.18) $0.01 $1.62
----------------------------------------------------------------
------
FY 2007 $0.37 -- ($0.27) -- ($0.01) $0.09
----------------------------------------------------------------
------
Note: Amounts may not sum due to rounding.
Revenues
-- Total revenues for fiscal 2008 were $240.7 million, compared to $240.0 million for fiscal 2007.
-- Total manufacturing revenues for fiscal 2008 were $101.7 million, consisting of $95.2 million for RISPERDAL CONSTA and $6.5 million for VIVITROL(R), compared to $105.4 million for fiscal 2007, consisting of $88.6 million for RISPERDAL CONSTA and $16.8 million for VIVITROL.
-- Royalty revenues for fiscal 2008 were $29.5 million based on RISPERDAL CONSTA sales of $1.2 billion, compared to $23.2 million based on RISPERDAL CONSTA sales of $924.2 million for fiscal 2007.
-- Research and development revenue under collaborative arrangements for fiscal 2008 was $89.5 million, compared to $74.5 million for fiscal 2007.
-- Net collaborative profit for fiscal 2008 was $20.0 million, compared to $36.9 million for fiscal 2007. Gross sales of VIVITROL for fiscal 2008 were $18.0 million, compared to $6.5 million for fiscal 2007.
Costs and Expenses
-- Cost of goods manufactured for fiscal 2008 was $40.7 million, of which $34.8 million related to RISPERDAL CONSTA and $5.9 million related to VIVITROL, compared to $45.2 million for fiscal 2007, of which $29.9 million related to RISPERDAL CONSTA and $15.3 million related to VIVITROL.
-- Research and development (R&D) expenses for fiscal 2008 were $125.3 million, compared to $117.3 million for fiscal 2007.
-- Selling, general and administrative (SG&A) expenses for fiscal 2008 were $59.5 million, compared to $66.4 million for fiscal 2007.
-- Share-based compensation expense (included in the expenses above) for fiscal 2008 was $19.4 million, of which $1.8 million related to cost of goods manufactured, $7.0 million related to R&D expenses and $10.6 million related to SG&A expenses. Share-based compensation expense for fiscal 2007 was $27.7 million, of which $2.7 million related to cost of goods manufactured, $8.6 million related to R&D expenses and $16.4 million related to SG&A expenses.
-- Impairment expense for fiscal 2008 was $11.6 million and was incurred due to Lilly's decision to terminate the AIR Insulin program. The assets included in the impairment charge were dedicated to the AIR Insulin program.
-- Restructuring expenses for fiscal 2008 were $6.4 million, consisting of a charge of $6.9 million related to Lilly's decision to terminate the AIR Insulin program, partially offset by the reversal of $0.5 million related to a previous restructuring accrual.
-- Interest income for fiscal 2008 was $17.8 million, compared to $17.7 million for fiscal 2007. Interest expense for fiscal 2008 was $16.4 million, compared to $17.7 million for fiscal 2007.
-- Income tax expense for fiscal 2008 was $5.9 million, compared to $1.1 million for fiscal 2007.
At March 31, 2008, Alkermes had cash and total investments of $460.4 million, compared to $516.6 million at December 31, 2007 and $356.7 million at March 31, 2007.
Recent Highlights
-- RISPERDAL CONSTA data presented at the American Psychiatric Association Annual Meeting. Fourteen posters related to RISPERDAL CONSTA were presented at the American Psychiatric Association (APA) 161st Annual Meeting, including data from a 24-month, open-label study in 710 patients showing that the time to relapse was significantly longer for patients treated with RISPERDAL CONSTA (607 days) compared to patients treated with quetiapine (533 days), p(less than)0.0001. Both RISPERDAL CONSTA and quetiapine had generally comparable safety profiles.
-- Supplemental new drug application for RISPERDAL CONSTA submitted to U.S. Food and Drug Administration. Alkermes' partner, Johnson & Johnson Pharmaceutical Research & Development, L.L.C. (J&JPRD), submitted a Supplemental New Drug Application (sNDA) for RISPERDAL CONSTA to the U.S. Food and Drug Administration (FDA) seeking approval for adjunctive maintenance treatment to delay the occurrence of mood episodes in patients with frequently relapsing bipolar disorder (FRBD).
-- Accelerated stock repurchase program completed. During the fourth quarter of fiscal 2008, Alkermes concluded the $60 million accelerated stock repurchase program announced in February 2008. Under the program, the company repurchased 4.7 million shares of common stock.
-- New drug application for VIVITROL submitted in Russia. Alkermes' collaborator, Cilag GmbH International, a subsidiary of Johnson & Johnson, submitted a new drug application to the Russian regulatory authorities. In December 2007, the companies signed an agreement to commercialize VIVITROL for the treatment of alcohol dependence in Russia and other countries in the Commonwealth of Independent States.
Financial Expectations for Fiscal 2009
The following outlines Alkermes' financial expectations for the fiscal year ending March 31, 2009. These financial expectations include the impact of share-based compensation expense. Certain statements set forth below constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For information with respect to factors that could cause Alkermes' actual results to differ materially from its expectations, please see the risk factors provided at the end of this press release.
-- Revenues: The company expects total revenues for fiscal 2009 to range from $175 to $200 million.
-- The company expects total manufacturing revenues to range from $113 to $125 million. The expected manufacturing revenues for RISPERDAL CONSTA range from $106 to $114 million and are based on a purchase forecast from Janssen. The expected manufacturing revenues for VIVITROL range from $7 to $11 million and are based on the latest expectations with respect to manufacturing volumes in fiscal 2009. End-market gross sales of VIVITROL are expected to range from $25 to $35 million. The company is continuing to work toward its goal of reaching break-even on the product in collaboration with Cephalon, Inc (Cephalon). Both Janssen and Cephalon have the right to change the timing and amount of their purchases. Alkermes' revenue estimates are also dependent upon its ability to manufacture sufficient quantities of RISPERDAL CONSTA and VIVITROL to meet its partners' estimates.
-- The company expects royalty revenues from RISPERDAL CONSTA to range from $32 to $35 million and no significant changes in exchange rates. This expectation assumes continued sales growth in the U.S. and around the world. Alkermes relies on sales projections received from Janssen to determine royalty revenue expectations and such projections are subject to change. RISPERDAL CONSTA sales are dependent on Janssen.
-- The company expects research and development revenues to range from $20 to $25 million. Research and development revenues, which are received from Alkermes' corporate partners, can fluctuate as these partners may terminate or change the scope and timing of the programs at any time.
-- The company expects net collaborative profit to range from $10 to $15 million. This expectation reflects the recognition of milestone revenue related to the license provided by the company to Cephalon and sharing the net profit or loss earned on the product. Spending on the VIVITROL program is approved jointly by Alkermes and Cephalon and is subject to change at any time.
-- Cost of Goods Manufactured: The company expects total cost of goods manufactured to range from $40 to $50 million. The expected cost of goods manufactured related to RISPERDAL CONSTA range from $35 to $40 million. The expected cost of goods manufactured related to VIVITROL range from $5 to $10 million. These costs are estimated based on projected orders from Janssen and Cephalon and are based on the company's historical manufacturing yields. Margins on RISPERDAL CONSTA are dependent on many factors and may fluctuate. Orders from Janssen and Cephalon are subject to change at any time.
-- Research and Development Expenses: The company expects R&D expenses to range from $95 to $100 million. These expectations reflect the company's continuing efforts to advance its product candidates toward commercialization. There are no expenses related to the development of AIR Insulin following the termination of the program by Lilly.
-- Selling, General and Administrative Expenses: The company expects SG&A expenses to range from $55 to $60 million.
-- Operating Loss: The company expects operating loss to range from $10 to $15 million.
-- Net Interest and Income Taxes: The company expects interest income will offset interest expense and that the company will not pay income taxes due to the generation of a taxable loss in fiscal 2009.
-- Net Loss: The company expects net loss to range from $10 to $15 million, or a basic and diluted loss per share of approximately $0.11 to $0.16 per share. The basic loss per share is based on an estimated 95 million weighted average shares outstanding for fiscal 2009.
-- Cash Flow from Operations: The company expects positive cash flow from operations to range from $1 to $5 million in fiscal 2009.
-- SFAS 123R: The company has included share-based compensation expense in the expense expectations provided. The company expects to recognize this expense within cost of goods manufactured, R&D expenses and SG&A expenses in the approximate ratio of 10%, 35% and 55%, respectively. Based on the company's expectation with respect to fiscal 2009 stock grants and the estimates used to value such grants, the company expects share-based compensation expense to be in the range of $15 to $20 million or $0.15 to $0.21 per share for fiscal 2009.
Conference Call
Alkermes will host a conference call at 4:30 p.m. EDT on Thursday, May 22, 2008 to discuss these financial results and provide an update on the company. The conference call may be accessed by dialing 1-866-847-7861 for domestic callers and 1-703-639-1428 for international callers. The conference call ID number is 1237335. In addition, a replay of the conference call will be available from 7:30 p.m. EDT on Thursday, May 22, 2008 through 5:00 p.m. EDT on Wednesday, May 28, 2008, and may be accessed by visiting Alkermes' website or by dialing 1-888-266-2081 for domestic callers and 1-703-925-2533 for international callers. The replay access code is 1237335. Alkermes is also providing a podcast MP3 file available for download on the Alkermes website, which will be available shortly following the conference call and will be available until May 28, 2008.
About Alkermes
Alkermes, Inc., a biotechnology company committed to developing innovative medicines to improve patients' lives, manufactures RISPERDAL(R) CONSTA(R) for schizophrenia and developed and manufactures VIVITROL(R) for alcohol dependence. Alkermes' robust pipeline includes extended-release injectable, pulmonary and oral products for the treatment of prevalent, chronic diseases, such as central nervous system disorders, addiction and diabetes. Headquartered in Cambridge, Massachusetts, Alkermes has research and manufacturing facilities in Massachusetts and Ohio.
Certain statements set forth above may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to: statements concerning future business and operating results; the successful manufacture and commercialization of VIVITROL and RISPERDAL CONSTA; continued revenue growth from RISPERDAL CONSTA; and the successful continuation of development activities for the company's programs. Although the company believes that such statements are based on reasonable assumptions within the bounds of its knowledge of its business and operations, the forward-looking statements are neither promises nor guarantees and the company's business is subject to significant risk and uncertainties and there can be no assurance that its actual results will not differ materially from its expectations. These risks and uncertainties include, among others: whether the company will achieve the financial expectations provided; whether the company can continue to manufacture RISPERDAL CONSTA and VIVITROL on a commercial scale, economically or in sufficient quantities to supply the market; whether VIVITROL will be commercialized successfully by Alkermes and its partner, Cephalon; whether RISPERDAL CONSTA will continue to be commercialized successfully by its partner Janssen; whether the company is able to successfully and efficiently scale up and manufacture its product candidates; whether advancement of the company's partnered product candidates will be delayed due to actions or decisions by its partners with regard to development and regulatory strategy, timing and funding which are out of its control; the outcome of clinical and preclinical work the company and its partners are pursuing; decisions by the FDA or foreign regulatory authorities regarding the company's product candidates; potential changes in cost, scope and duration of clinical trials; and whether RISPERDAL CONSTA, VIVITROL and the company's product candidates, in commercial use, may have unintended side effects, adverse reactions or incidents of misuse that could cause the FDA or other health authorities to require post-approval studies or require removal of its products from the market. For further information with respect to factors that could cause the company's actual results to differ materially from expectations, reference is made to the reports the company filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The forward-looking statements made in this release are made only as of the date hereof and the company disclaims any intention or responsibility for updating predictions or financial expectations contained in this release. (tables follow)
VIVITROL(R) is a registered trademark of Cephalon, Inc.; RISPERDAL(R) CONSTA(R) is a registered trademark of Janssen-Cilag group of companies.
Alkermes, Inc. and Subsidiaries
Selected Financial Information
Year Year
Ended Ended
Consolidated Statements of Income March 31, March 31,
(In thousands, except per share data) 2008 2007
---------------------------------------------------------------[F
EED_CRLF]Revenues:
Manufacturing revenues $101,700 $105,416
Royalty revenues 29,457 23,151
Research and development revenue
under collaborative arrangements 89,510 74,483
Net collaborative profit 20,050 36,915
---------------------------------------------------------------
Total Revenues 240,717 239,965
--------------------------------------------------------------
-
Expenses:
Cost of goods manufactured 40,677 45,209
Research and development 125,268 117,315
Selling, general and administrative 59,508 66,399
Impairment of long-lived assets 11,630 -
Restructuring 6,423 -
---------------------------------------------------------------[FEED
_CRLF] Total Expenses 243,506 228,923
--------------------------------------------------------------
-
Operating (Loss) Income (2,789) 11,042
---------------------------------------------------------------
Other Income (Expense):
Gain on sale of investment in
Reliant Pharmaceuticals, Inc. 174,631 -
Interest income 17,834 17,707
Interest expense (16,370) (17,725)
Other expense (476) (481)
---------------------------------------------------------------[
FEED_CRLF] Total Other Income (Expense) 175,619 (499)
---------------------------------------------------------------[
FEED_CRLF]Income Before Income Taxes 172,830 10,543
---------------------------------------------------------------
Income Taxes (5,851) (1,098)
--------------------------------------------------------------
-
Net Income $166,979 $9,445
---------------------------------------------------------------
Earnings per Common Share:
Basic $1.66 $0.10
---------------------------------------------------------------[
FEED_CRLF] Diluted $1.62 $0.09
---------------------------------------------------------------[
FEED_CRLF]Weighted Average Number of Common Shares Outstanding (GAAP and
Pro Forma):
Basic 100,742 99,242
---------------------------------------------------------------
Diluted 102,923 103,351
--------------------------------------------------------------
-
Pro Forma Reconciliation:
Net Income - GAAP $166,979 $9,445
Share-based compensation expense 19,445 27,687
Impairment of long-lived assets 11,630 -
Restructuring 6,423 -
Gain on sale of investment in
Reliant Pharmaceuticals, Inc. (net
of income taxes) (171,294) -
Net (increase) decrease in the fair
value of warrants (1,423) 743
---------------------------------------------------------------[FE
ED_CRLF]Net Income - Pro Forma $31,760 $37,875
--------------------------------------------------------------
-
Pro Forma Earnings per Common Share:
Basic $0.32 $0.38
---------------------------------------------------------------[
FEED_CRLF] Diluted $0.31 $0.37
---------------------------------------------------------------[
FEED_CRLF]
Condensed Consolidated Balance Sheets March March
31, 31,
(In thousands) 2008 2007
-----------------------------------------------------------------
--
Cash, cash equivalents and total investments $460,361 $357,466(1)
Receivables 47,249 56,049
Prepaid expenses and other current assets 5,720 7,054
Inventory 18,884 18,190
Property, plant and equipment, net 112,539 123,595
Other assets 11,558 6,267(1)
-------------------------------------------------------------
------
Total Assets $656,311 $568,621
-------------------------------------------------------------
------
Unearned milestone revenue - current portion $5,927 $11,450
Other current liabilities 36,093 50,610
Non-recourse RISPERDAL CONSTA secured 7% notes 160,324 156,851
Unearned milestone revenue - long-term portion 111,730 117,300
Deferred revenue - long-term portion 27,837 22,153
Other long-term liabilities 9,086 6,796
Total shareholders' equity 305,314 203,461
--------------------------------------------------------------
-----
Total Liabilities and Shareholders' Equity $656,311 $568,621
-------------------------------------------------------------
------
Note:
(1) Long-term investments of $0.7 million that were classified as
other assets in fiscal 2007, were reclassified to cash, cash
equivalents and total investments to conform to the fiscal 2008
presentation.
This selected financial information should be read in conjunction with
the consolidated financial statements and notes thereto included in
the company's Annual Report on Form 10-K for the year ended March 31,
2008, which the company intends to file by May 30, 2008.
Alkermes, Inc. and Subsidiaries
Quarterly Financial Data Fiscal Year 2008
Three Months Ended
--------------------------------------
(Unaudited) September December
June 30, 30, 31, March 31,
(In thousands, except per share
data) 2007 2007 2007 2008
-----------------------------------------------------------------
-----
Revenues:
Manufacturing revenues $31,517 $24,137 $14,275 $31,771
Royalty revenues 6,982 7,348 7,384 7,743
Research and development
revenue under collaborative
arrangements 23,450 21,206 23,985 20,869
Net collaborative profit 6,989 5,909 5,127 2,025
----------------------------------------------------------------
------
Total Revenues 68,938 58,600 50,771 62,408
---------------------------------------------------------------
-------
Expenses:
Cost of goods manufactured 10,145 9,218 7,499 13,815
Research and development 32,619 28,317 30,395 33,937
Selling, general and
administrative 15,400 14,487 15,249 14,372
Impairment of long-lived
assets - - - 11,630
Restructuring - - - 6,423
----------------------------------------------------------------
------
Total Expenses 58,164 52,022 53,143 80,177
---------------------------------------------------------------
-------
Operating Income (Loss) 10,774 6,578 (2,372) (17,769)
-------------------------------------------------------------
---------
Other Income (Expense):
Gain on sale of investment
in Reliant Pharmaceuticals,
Inc. - - 174,631 -
Interest income 4,402 4,246 4,292 4,894
Interest expense (4,073) (4,077) (4,088) (4,132)
Other income (expense), net 26 1,151 (393) (1,260)
--------------------------------------------------------------
--------
Total Other Income
(Expense) 355 1,320 174,442 (498)
----------------------------------------------------------------
------
Income (Loss) before Income
Taxes 11,129 7,898 172,070 (18,267)
-------------------------------------------------------------
---------
Income taxes (2,382) (200) (3,189) (80)
-----------------------------------------------------------------
-----
Net Income (Loss) $8,747 $7,698 $168,881 ($18,347)
------------------------------------------------------------
----------
Earnings (Loss) per common
share:
Basic $0.09 $0.08 $1.66 ($0.19)
--------------------------------------------------------------
--------
Diluted $0.08 $0.07 $1.63 ($0.19)
--------------------------------------------------------------
--------
Weighted Average Number of
Common Shares Outstanding:
Basic 101,324 101,595 101,703 97,919
---------------------------------------------------------------
-------
Diluted 104,191 104,315 103,914 97,919
---------------------------------------------------------------
-------
Year Ended
--------------
(Unaudited) March 31,
(In thousands, except per share data) 2008
--------------------------------------------------------------[FE
ED_CRLF]Revenues:
Manufacturing revenues $101,700
Royalty revenues 29,457
Research and development revenue under
collaborative arrangements 89,510
Net collaborative profit 20,050
--------------------------------------------------------------[
FEED_CRLF] Total Revenues 240,717
--------------------------------------------------------------
Expenses:
Cost of goods manufactured 40,677
Research and development 125,268
Selling, general and administrative 59,508
Impairment of long-lived assets 11,630
Restructuring 6,423
--------------------------------------------------------------[F
EED_CRLF] Total Expenses 243,506
--------------------------------------------------------------
Operating Income (Loss) (2,789)
--------------------------------------------------------------
Other Income (Expense):
Gain on sale of investment in Reliant
Pharmaceuticals, Inc. 174,631
Interest income 17,834
Interest expense (16,370)
Other income (expense), net (476)
--------------------------------------------------------------[F
EED_CRLF] Total Other Income (Expense) 175,619
--------------------------------------------------------------
Income (Loss) before Income Taxes 172,830
--------------------------------------------------------------
Income taxes (5,851)
--------------------------------------------------------------
Net Income (Loss) $166,979
-------------------------------------------------------------
-
Earnings (Loss) per common share:
Basic $1.66
--------------------------------------------------------------[F
EED_CRLF] Diluted $1.62
--------------------------------------------------------------[F
EED_CRLF]Weighted Average Number of Common Shares
Outstanding:
Basic 100,742
--------------------------------------------------------------
Diluted 102,923
--------------------------------------------------------------
This quarterly financial data should be read in conjunction with the
consolidated financial statements and notes thereto included in the
company's Annual Report on Form 10-K for the year ended March 31,
2008, which the company intends to file by May 30, 2008.
Alkermes, Inc. and Subsidiaries
VIVITROL(R) Selected Financial Three Fiscal
Information Months Year
Ended Ended
(Unaudited, in thousands) March 31, March 31, Cumulative
2008 2008 Collaboration
--------- --------- -------------
VIVITROL Income Statement
Alkermes'
expenses $3,495 $17,588 $68,809
Cephalon's
net
product
losses 2,184 37,844 105,968
---------------------------------
VIVITROL net losses $5,679 $55,432 $174,777
---------------------------------
Flow of funds
Alkermes
paid
Cephalon:
net
product
losses up
to the
$124.6
million
net loss
cap (1) $0 ($5,223) ($73,347)
Cephalon
paid
Alkermes:
Alkermes'
expenses
in excess
of the net
loss cap
through
December
31, 2007 0 14,060 14,060
Cephalon
paid
Alkermes:
Alkermes'
expenses
in excess
of its
share of
net
product
losses
after
December
31, 2007 713 713 713
---------------------------------
Net flow of funds from (to)
Cephalon (3) $713 $9,550 ($58,574)
---------------------------------
Net Collaborative Profit
Milestone
revenue
recognized
to offset
Alkermes'
non-shared
expenses
and
expenses
up to the
net loss
cap (1) $0 $5,256 $144,493
Milestone
revenue
recognized
with
respect to
the
license
(2) 1,312 5,244 10,331
Net flow of
funds from
(to)
Cephalon
(3) 713 9,550 (58,574)
---------------------------------
Net collaborative profit $2,025 $20,050 $96,250
=================================
Notes
------------------------
(1)Expenses incurred on behalf of the
collaboration by Alkermes, Inc. ("Alkermes")
and net losses incurred on behalf of the
collaboration by Cephalon, Inc. ("Cephalon")
contribute to the cumulative net product
losses incurred on VIVITROL. Alkermes was
responsible for the first $124.6 million of
these cumulative net product losses (the
"net loss cap"). Alkermes recognized
milestone revenue to offset the net product
losses incurred up to the net loss cap. The
collaboration reached the net loss cap in
April 2007, at which point the recognition
of milestone revenue related to this
accounting unit stopped. In addition, in
prior periods, Alkermes recognized $19.9
million of milestone revenue to offset
expenses it incurred for which it was solely
responsible, related to the successful FDA
approval of VIVITROL and the successful
completion of the first VIVITROL
manufacturing line. These $19.9 million of
expenses, did not contribute to the
cumulative net product losses.
(2)Milestone revenue related to the license
commenced upon approval of VIVITROL, by the
FDA, on April 13, 2006 and is being
recognized on a straight line basis over 10
years, at the rate of approximately $1.3
million per quarter.
(3)Alkermes was responsible for net losses up to
the net loss cap and reimbursed Cephalon for
their net losses during this period. Once
the net loss cap was reached in April 2007,
Cephalon reimbursed Alkermes for its
VIVITROL expenses through December 31, 2007.
Effective January 1, 2008, the two companies
share any net profits or losses on the
product.
Through March 31, 2008, Alkermes has
recognized $157.0 million of milestone
revenue out of the $274.6 million received
from Cephalon. In addition to (1) and (2)
above, this recognition includes $2.1
million of milestone revenue related to a
10% mark-up on manufacturing revenue, which
is reported by Alkermes within manufacturing
revenues in the consolidated statements of
income and comprehensive income.
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