Marginal Earnings Miss at Alkermes

Zacks

Alkermes’ (ALKS) adjusted earnings (including stock-based compensation expense but excluding other special items) of 12 cents per share for the 3-month period ended Sep 30, 2013 compared favorably with the year-ago earnings of 10 cents per share. The year-over-year growth in earnings was attributable to higher revenues. The Zacks Consensus Estimate hinted at earnings of 13 cents per share.

Total revenue for the 3-month period ended Sep 30, 2013 climbed 12.7% to $139.8 million. Results in the reported quarter were boosted by higher product sales. Alkermes’ product portfolio has been strengthened significantly following its purchase of Elan Corporation’s (ELN) Elan Drug Technologies (EDT) unit in Sep 2011. Revenues surpassed the Zacks Consensus Estimate of $135 million.
    
For the 3-month period ended Sep 30, 2013, Alkermes recorded $62.6 million (up 24.5% year over year) of manufacturing and royalty revenues from its long-acting atypical antipsychotic franchise comprising Risperdal Consta and Invega Sustenna/Xeplion.

The drugs are marketed by Johnson & Johnson (JNJ). Alkermes recorded manufacturing and royalty revenues of $12.6 million (up 152% year over year) from Ampyra (EU trade name: Fampyra). Alkermes earned royalty revenues of $7 million from type II diabetes treatment Bydureon, as opposed to $3 million in the year-ago period. Bydureon is co-marketed with Bristol-Myers Squibb Company (BMY).

Vivitrol, a legacy Alkermes product, performed well during the 3-month period. Sales of the product climbed approximately 26% to $19.2 million. Alkermes also earned revenues from TriCor 145 ($3.5 million) and Ritalin LA/Focalin XR franchise ($9.2 million) and Verelan ($4.4 million). Reported total expenses were $143.7 million during the period, up from the year-ago figure of $118.6 million.

We note that in May 2013, Alkermes had announced a change in its fiscal year end from Mar 31 to Dec. 31. The company maintained its outlook (provided in May) for the 9-month period starting from Apr 2013 to Dec 2013 for all items apart from selling, general and administrative (SG&A) expenses.

SG&A expenses for the 9- month period are now projected in the range of $105-$115 million (old guidance: $95-$105 million). The increase was due to activities related to the potential launch of phase III schizophrenia candidate aripiprazole lauroxil. The rise in SG&A guidance also reflects the company’s increased investment on Vivitrol. Alkermes still expects adjusted earnings for the period to be in the range of $0.61 - $0.75 per share. Revenues for the 9-month period are projected in the range of $395 - $425 million.

Alkermes currently carries a Zacks Rank #3 (Hold). Johnson & Johnson looks attractive with a Zacks Rank #2 (Buy).

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