Alkermes (NASDAQ: ALKS), a commercial-stage biopharmaceutical company focused on diseases of the central nervous system, reported its third-quarter earnings results on Thursday, Oct. 26. While sales of key drugs Vivitrol and Aristada continue to grow rapidly, Alkermes' overall revenue growth came in much weaker than expected. As a result, management dialed back its revenue growth expectations for the full year. However, containment efforts helped the company to beat expectations on the bottom-line.
Alkermes Q3 results: The raw numbers
Continue Reading Below
|Metric||Q3 2017||Q3 2016||Year-Over-Year Change|
|Revenue||$217.4 million||$180.2 million||21%|
|GAAP net income||($36.3 million)||($62.7 million)||--|
|Non-GAAP net income||$4.2 million||$14.1 million||(70%)|
|Non-GAAP earnings per share||$0.03||$0.09||(66%)|
What happened with Alkermes this quarter?
- Revenue growth of 21% was strong in absolute terms, but the $217 million in sales came up well short of the $231 million that Wall Street had expected.
- Sales of the company's opioid and alcohol abuse prevention drug Vivitrol rose 24% to $69.2 million.
- Sales of the Alkermes' schizophrenia drug, Aristada, increased 43% to $24.5 million.
- Royalty and manufacturing revenue related to Johnson & Johnson's three schizophrenia drugs jumped 8% to $79.4 million.
- Manufacturing and royalty revenues from Acorda Therapeutics' drug Ampyra/Fampyra fell 90% to $12.9 million.
- Operating costs grew 6%.
- Non-GAAP EPS of $0.03 was better than the $0.01-per-share loss that market watchers had projected.
- Alkermes' ended the quarter with $569 million in cash and $282 million in debt.
What management had to say
CEO Richard Pops reminded investors that the company's proprietary drugs still have plenty of opportunities ahead: "Vivitrol and Aristada both operate in markets where there remains significant unmet patient need. With new health and economic data being generated to support the long-term potential of these important medicines, we continue to progress Vivitrol and Aristada and work toward ensuring access for the patients that need these medicines."
He also did his best to ignite investor enthusiasm for the upcoming year: "2018 will be a transformative year for Alkermes' proprietary development pipeline, with key events across the development portfolio, highlighted by FDA review of the ALKS 5461 NDA, the phase 3 data readout for ALKS 3831, submission of the ALKS 8700 NDA, and important phase 1 data for ALKS 4230."
With three quarters of 2017 now in the books, management made a number of changes to its full-year financial guidance:
- Revenue is now expected to land between $850 million to $880 million. That's down from management's prior outlook of $870 million to $920 million.
- Vivitrol sales guidance was cut to $265 million to $275 million. That's a steep drop from management's prior guidance of $280 million to $300 million.
- Research and development costs, capital expenditures, and selling, general, and administrative expense guidance were cut as a result of timing and "disciplined expense management."
- Management now expects to record a $5 million income tax benefit. That's a stark change from its prior guidance of a $10 million income tax expense.
- On a GAAP basis, net loss guidance was cut to $160 million to $190 million, down from its prior outlook of $180 million to $210 million in net losses.
- Non-GAAP net income guidance of roughly breakeven was left untouched.
Commenting on this guidance, CFO James Frates stated: "We continue to focus on executing on our business strategy to grow our commercial products and invest in the late-stage development programs that we expect will be the growth drivers for the future."
Investors knocked Alkermes' stock down by a few percent in early morning trading following this report. The downward movement is most likely a response to the lower-than-hoped-for revenue growth of Vivitrol.
Still, Alkermes' overall results show that market acceptance of Vivitrol and Aristada is growing. With several catalysts expected in 2018 like the all-important NDA submission for ALKS 8700, investors still have plenty of reasons to be excited about this company's future.
10 stocks we like better than AlkermesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Alkermes wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of October 9, 2017