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Alkermes Reports Loss in Q2 on Higher Costs, Revenues Up

Zacks Equity Research

Alkermes (ALKS) reported a loss of 1 cent per share (including stock-based compensation expense) in the second quarter of 2014 which compared unfavorably with the Zacks Consensus Estimate of earnings of 4 cents and the year-ago earnings of 23 cents per share.  Higher costs hurt results in the second quarter of 2014.

Total revenues climbed 10.7% to $153.4 million, above the Zacks Consensus Estimate of $148 million. Manufacturing and royalty revenues at Alkermes climbed 8.8% to $130.4 million in the quarter leading to the top-line beat. Manufacturing and royalty revenues included $60 million (up 7%) from the company’s long-acting atypical antipsychotic franchise, Risperdal Consta and Invega Sustenna/Xeplion. The drugs are marketed by Johnson & Johnson (JNJ).

Alkermes recorded manufacturing and royalty revenues of $19.5 million (down 2%) from Ampyra (EU trade name: Fampyra). Alkermes earned royalty revenues of $8.8 million from type II diabetes treatment Bydureon compared with $5.4 million in the year-ago quarter.

Alkermes also earned revenues from Emend ($5.1 million) and Ritalin LA/Focalin XR franchise ($10.9 million) and Verelan ($6.6 million). Vivitrol sales, a legacy Alkermes product, climbed 24.2% to $21.6 million in the reported quarter. Research and development revenues accounted for the balance.

Reported total expenses were $176.2 million, up from the year-ago figure of $125.1 million. Research & development (R&D) expenses more than doubled to $67.2 million in the reported quarter. The increase was attributable to Alkermes’ efforts to develop its pipeline. Costs associated with the anticipated launch of schizophrenia candidate aripiprazole lauroxil also led to the increase. Alkermes intends to seek U.S. approval of the schizophrenia candidate by Sep 30, 2014. The approval would boost Alkermes' top line since the schizophrenia market offers significant commercial potential. Alkermes is also evaluating a once every two months dosing regimen for aripiprazole lauroxil.

2014 Outlook

Alkermes still expects total revenues in the range of $580 million to $610 million. Adjusted earnings per share are now projected in the range of 19 cents to 32 cents (old guidance: 41 cents to 54 cents). The Zacks Consensus Estimate for 2014 indicates earnings of 17 cents per share on revenues of $598 million.

The company continues to expect selling, general and administrative (SG&A) expenses in the range of $190 million to $200 million. R&D expenses are now projected in the band of $260 million and $280 million (old guidance: $225 million to $245 million). Alkermes increased the R&D guidance since it is expediting and expanding some clinical trials.

Alkermes, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). Better-ranked biopharma stocks include Actelion (ALIOF) and Alexion Pharmaceuticals (ALXN). While Actelion sports a Zacks Rank #1 (Strong Buy), Alexion is a Zacks Ranked #2 (Buy) stock.

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