Revenues Dip at Alkermes – Analyst Blog

 

Alkermes Inc. (ALKS) reported a fourth quarter fiscal 2010 net loss of 12 cents per share (excluding special items but including stock-based compensation) compared with a loss of 13 cents per share in the year-ago period; excluding the impact of the termination of  collaboration agreements with Cephalon Inc. (CEPH) and Eli Lilly & Co. (LLY) but including stock-based compensation. The Zacks Consensus Estimate was a loss of 15 cents per share.

 

 

Total revenues for the reported quarter declined 12.3% year-over-year to $38.5 million. Manufacturing revenues for the fourth quarter of fiscal 2010 declined 8% year-over-year to $22.6 million. Royalty revenues for the quarter came in at $9.5 million.

 

Research and development revenue under collaborative arrangements dropped to $0.4 million from $1.7 million in the year-ago quarter. The company also reported net product sales of $5.9 million for the reported quarter, as against $4.5 million in the year-ago quarter.

 

Research and development expenses for the fourth quarter of fiscal 2010 stood at $26.5 million. Research and development spend was $24.8 million in the year-ago quarter. Selling, general and administrative expenses for the reported quarter came in at $18.9 million.

 

 

For the fiscal year 2010, the biotechnology company suffered a loss of 22 cents per share as against a loss of 15 cents per share in fiscal 2009. Annual revenues declined 45% year-over-year to $178.3 million.

 

Manufacturing revenues for the year declined 3.3% year-over-year to $112.9 million. Manufacturing revenues included $109 million related to Risperdal Consta which is marketed worldwide by Johnson & Johnson (JNJ) and manufactured by Alkermes and $3.4 million related to the manufacture of polymer for Byetta once every week (trade name: Bydureon) and $0.5 million for Alkermes’ other marketed product– Vivitrol.

 

Royalty revenues for fiscal 2010 came in at $37 million on sales of $1.5 billion of Consta, up from $33.2 million on sales of $1.3 billion of the schizophrenia drug in the previous year.

 

Research and development revenue under collaborative arrangements stood at $3.1 million for fiscal 2010. The company also reported net product sales of $20.2 million for in fiscal 2010. In fiscal 2010, the company had a net collaborative profit of $5 million as against $130.2 million in fiscal 2009 inclusive of $120.7 million recognized as milestone and deferred revenue pertaining to the termination of Alkermes’ previous agreements with Cephalon.

 

The company exited fiscal 2010 with cash and total investments of $350.2 million, opposed to $357.5 million at December 31, 2009.

 

 

For fiscal 2011, Alkermes projects a loss per share in the range of 47 cents to 58 cents. Revenues for the year are forecasted in the range of $170 million to $195 million. The Zacks Consensus Estimate for fiscal 2011 is a loss of 5 cents per share.

 

 

Currently we are Neutral on Alkermes. We are pleased with the impressive revenues generated by its lead product Risperdal Consta. The company’s endeavor to expand the label of Vivitrol, presently approved for the treatment of alcohol dependence, is encouraging and should boost sales of the drug, if approved for treating. Recently the US Food and Drug Administration (FDA) delayed the approval for its type II diabetes candidate– Bydureon, but did not ask for any additional trials to be conducted. This is encouraging news as additional studies would have delayed approval to a great extend.

 

A decision from the US agency on Bydureon will be out by October 22, 2010. We believe the final label is likely to contain warnings regarding the risk of pancreatitis and thyroid cancer, on approval. Bydureon is also under review in Europe. However, the candidate will face intense competition once it enters the market. Alkermes has other interesting products in its pipeline. The successful development and commercialization of these candidates should boost the company’s top-line.

 

Our Neutral long-term outlook on the stock indicates that it will perform in line with the overall US equity market over the next six to twelve months. We advise investors to retain the stock over this time period.