Alkermes’ (ALKS) adjusted earnings of 10 cents per share for the 3-month period ended Dec 31, 2013 compared unfavorably with the year-ago earnings of 20 cents per share. The year-over-year decline in earnings can be traced back to higher expenses. The decline had a negative impact on the stock. The Zacks Consensus Estimate hinted at earnings of 8 cents per share.
Total revenue for the 3-month period ended Dec 31, 2013 climbed 13.7% to $154.5 million. Higher revenues from manufacturing and royalties boosted Alkermes’ top line in the reported period. Higher product sales also contributed to the revenue growth. Revenues surpassed the Zacks Consensus Estimate of $140 million.
For the reported 3-month period ended Dec 31, 2013, Alkermes recorded $71.2 million (up 36% 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 $18.6 million (flat year over year) from Ampyra (EU trade name: Fampyra). Alkermes earned royalty revenues of $7.7 million from type II diabetes treatment Bydureon, as opposed to $5.3 million in the year-ago period.
Vivitrol, a legacy Alkermes product, performed well during the 3-month period. Sales of the product climbed approximately 20% to $20.6 million. Alkermes also earned revenues from TriCor 145 ($3 million), Ritalin LA/Focalin XR franchise ($10.6 million) and Verelan ($4 million).
Reported total expenses were $148.6 million, higher than the year-ago figure of $110.6 million. The increase was attributable to Alkermes’ efforts to develop its pipeline. Costs associated with the anticipated launch of schizophrenia candidate aripiprazole lauroxil (phase III data expected by Jun 30, 2014: Alkermes intends to submit a new drug application to the U.S. Food and Drug Administration subsequently) were also accounted for.
We note that in May 2013, Alkermes had announced a change in its fiscal year end from Mar 31 to Dec 31.
2014 Outlook
Apart from releasing its earnings results, Alkermes provided guidance for 2014. Alkermes expects total revenues in the range of $580–$610 million. The Zacks Consensus Estimate of $592 million is within the company’s guidance range. Revenues from Vivitrol sales are projected in the range of $90 million to $100 million. Adjusted earnings per share are projected at 41 cents to 54 cents, with the Zacks Consensus Estimate of 49 cents falling within the bracket.
The company expects selling, general and administrative (SG&A) expenses and research and development (R&D) expenses to increase from 2013. The rise would be due to promotional activities for Vivitrol, the anticipated launch of aripiprazole lauroxil and Alkermes’ pipeline development efforts. While SG&A expenses are projected in the range of $190–$200 million, R&D expenses are projected between $225 million and $245 million.
Our Take
We believe investors are currently more interested in Alkermes’ pipeline development efforts than earnings reports of the company. 2014 is expected to be a data rich year for Alkermes with multiple pipeline related events lined up. Positive news on the pipeline will boost the stock.
Alkermes, a biopharmaceutical company, carries a Zacks Rank #1 (Strong Buy). Biopharma stocks Alexion Pharmaceuticals, Inc. (ALXN) and Gilead Sciences, Inc. (GILD) carry the same rank as Alkermes.
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