Wider-than-expected Loss at Alkermes, Revenues Slip - Analyst Blog

Alkermes ALKS reported a loss of 5 cents per share (including depreciation and stock based compensation expense) in the first quarter of 2014, wider than the the Zacks Consensus Estimate of a loss of a penny. Moreover, first quarter 2014 results compared unfavorably to the year-ago earnings of 29 cents per share.  Lower revenues and higher costs hurt results in the first quarter of 2014.

Total revenues in the first quarter of 2014 declined 20.3% to $130.2 million. A 24.2% reduction in manufacturing and royalty revenues to $111.3 million was the main reason behind the top line decline at Alkermes. Product sales climbed 16.8% to $17.1 million in the reported quarter. Research and development revenues accounted for the balance. Revenues were well short of the Zacks Consensus Estimate of $140 million.

Alkermes recorded $49.6 million (up 8.8% year over year) of manufacturing and royalty revenues from its long-acting atypical antipsychotic franchise comprising Risperdal Consta and Invega Sustenna/Xeplion in the first quarter of 2014. The drugs are marketed by Johnson & Johnson JNJ.

Alkermes recorded manufacturing and royalty revenues of $20.6 million (down 16.6%) from Ampyra (EU trade name: Fampyra). Alkermes earned royalty revenues of $7.7 million from type II diabetes treatment Bydureon as opposed to $4.8 million in the year-ago quarter.

Sales of Vivitrol, a legacy Alkermes product, declined 17% sequentially to $17.1 million in the reported quarter mainly due to the extremely cold winter. Quarterly sales of the product were up 17% on a year-over-year basis. Alkermes also earned revenues from TriCor 145 ($6.2 million) and Ritalin LA/Focalin XR franchise ($10.6 million) and Verelan ($6.7 million).

Reported total expenses were $146.1 million during the reported quarter, up from the year-ago figure of $144.4 million. 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. In Apr 2014, Alkermes presented encouraging phase III data on aripiprazole lauroxil. Encouraged by the positive phase III data, Alkermes intends to seek U.S. approval of the schizophrenia candidate in the third quarter of 2014.

2014 Outlook Backed

Alkermes maintained its outlook for 2014 that was provided in February this year. Alkermes still expects total revenues in the range of $580–$610 million. Revenues from Vivitrol sales are still projected in the range of $90 to $100 million. Adjusted earnings are still projected in the range of $0.41–$0.54. The Zacks Consensus Estimate for 2014 hints at earnings of 15 cents per share on revenues of $600 million.

The company continues to expect selling, general and administrative (SG&A) expenses and research and development (R&D) costs to increase from 2013. The rise in costs is due to promotional activities for Vivitrol, 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 costs are projected between $225 and $245 million.

Alkermes, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). Better-ranked biopharma stocks include Alexion Pharmaceuticals ALXN and Gilead Sciences GILD. Both are Zacks Rank #1 (Strong Buy) stocks.