Alkermes Inc.’s (ALKS) second quarter fiscal 2011 net loss (excluding special items) of 6 cents per share compared unfavorably with the year-ago loss of 5 cents per share. The Zacks Consensus Estimate was a loss of 15 cents per share. The narrower-than-expected loss was attributable to the higher revenues recorded in the quarter.
Total revenues for the reported quarter climbed 2% to $49.2 million. The increase was primarily attributable to higher manufacturing, royalty and sales revenues. Revenues for the reported quarter surpassed the Zacks Consensus Estimate of $43 million.
We note that Alkermes derives the bulk of its revenue from schizophrenia drug Risperdal Consta. The drug is marketed worldwide by Johnson & Johnson (JNJ) and manufactured by Alkermes.
Alkermes generated $32.6 million from manufacturing the drug in the reported quarter as against $31.9 million in the comparable period of fiscal 2010. Moreover, the company derived $0.6 million in manufacturing revenues from diabetes candidate Bydureon as against $0.4 million in the year-ago quarter.
Alkermes generated $9.5 million in royalty revenues during the quarter on global sales of $378 million for Risperdal Consta as opposed to $8.8 million on $352.6 million global sales of the drug in the second quarter of fiscal 2010.
The other approved product at Alkermes is Vivitrol. The label of the drug, originally approved for the treatment of alcohol dependence, was recently expanded to prevent the relapse to opioid dependence, following opioid detoxification. Sales of the product climbed 41.3% to $6.5 million in the most recent quarter.
Research and development revenue from collaborations dropped to $0.2 million in the reported quarter from $1.2 million in the second quarter of fiscal 2010. The company did not report any net collaborative profits in the reported quarter as against $0.7 million a year ago.
Research and development expenses for the second quarter of fiscal 2011 climbed 15.8% to $23.9 million. Selling, general and administrative expenses slipped 10.7% to $18.4 million in the reported quarter.
FDA’s Mixed Response on Alkermes’ Drugs
We note that Alkermes, which faced two action dates in October 2010, received mixed news from the US Food and Drug Administration (FDA). While Vivitrol was approved for the prevention of relapse to opioid dependence after opioid detoxification, diabetes candidate Bydureon was refused approval.
The FDA issued a complete response letter to Alkermes, Eli Lilly and Company (LLY) and Amylin Pharmaceuticals, Inc. (AMLN) who had co-developed the candidate for treating type II diabetes. The US regulatory body asked the partners to conduct a thorough QT study.
Fiscal 2011 Projection Trimmed
The setback regarding Bydureon caused Alkermes to trim its projections for fiscal 2011. The company now projects fiscal 2011 revenues between $161 million and $180 million as opposed to the previously projected range of $170 million to $195 million.
Alkermes also expects to incur a higher loss for fiscal 2011. The company expects to suffer a loss between $53 million and $68 million as opposed to the previous projection of $45 million and $55 million.
Currently, we have a Neutral stance on Alkermes in the long run and a Zacks #3 Rank (short-term Hold rating) on the stock.
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