Alkermes plc

Greetings, and welcome to Alchemy's first quarter 2022 financial results conference call. My name is Rob, and I'll be your operator for today's call. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandra, you may now begin.

Thank you. Good morning. Welcome to the Alkermes PLC conference call to discuss our financial results and business updates for the quarter ended March 31, 2022. With me today are Richard Pops, our CEO, Ian Brown, our CFO, and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the Investor section of Alkermes.com to find our press release, related financial tables, and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see slide two of the accompanying presentation, our press release issued this morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we'll open the call for Q&A, and now I'll turn the call over to Ian.

Great. Thank you, Sandy, and hello, everyone. I'm pleased to report our first quarter 2022 results that demonstrate ongoing momentum across the company, the strength of our proprietary commercial product portfolio, our continued focus on operating efficiency, and the commercial leverage we have built into the business that's becoming more evident with the launch of Libolvi. We are in a strong financial position to execute our strategic priorities and achieve our long-term profitability targets. Based on these first quarter results, today we are reiterating our financial guidance for full year 2022, which was detailed in our press release in 8K, filed earlier this year on February the 16th. For the first quarter of 2022, we generated total revenues of $278.5 million, driven by strong year-over-year growth of Vivitrol and Aristarda, the launch of Libolvi, and growing revenues from Vumerity. Taken together, net sales from our proprietary commercial product portfolio and revenues from Vumerity increased 41% year-over-year. So, starting with Vivitrol. Net sales in the first quarter were $84.9 million, reflecting 14% growth year over year, driven primarily by an increase in units sold of approximately 7%. Growth to net adjustments in the first quarter were slightly lower at 49.4%, reflecting favorable adjustments of approximately $4 million related to lower Medicaid utilization. In Q1, inventory in the channel decreased by approximately $4 million, consistent with typical seasonal patterns. And for the full year, we continue to expect Vivitrol net sales in the range of $355 to $385 million. The Aristata product family generated net sales of $72.5 million, a 31% increase year over year, driven primarily by 27% volume growth. Growth to net adjustments were 53.4% in the first quarter, consistent with what we saw in 2021. In Q1, inventory levels were flat sequentially, as expected, and for the full year, we continue to expect Aristada net sales in the range of $290 to $320 million. Now, for Levolvi, in the first full quarter of launch, we recorded net sales of $13.9 million. These results exceeded our initial expectations of $8 to $10 million, driven primarily by higher volumes and favorable growth to net adjustments. Volume growth in the quarter was driven primarily by a significant increase in underlying demand. The remainder of the initial launch stocking was consumed in the quarter, and the absolute loot inventory level increased in line with demand. During the quarter, growth to net adjustments were 27 percent, reflecting less restrictive initial commercial payer coverage which reduced the cost associated with our patient co-pay assistance program. As we look ahead, we expect the growth to net adjustments will continue to be dynamic during the first year of launch, and heavily dependent on the payer mix across Medicaid, Medicare Part D, and commercial. With those factors in mind, we currently expect to achieve Levolvi net sales in the range of 18 to $20 million in the second quarter, which would put us on track to achieve the higher end of our expectations of $55 to $75 million for the year. We're encouraged by what we've seen from the launch to date and look forward to updating you on our progress as we move into the second half of the year. Moving on to our manufacturing and royalty business, in the first quarter, our manufacturing and royalty revenues were $105.2 million, compared to $119.8 million in the prior year. The decrease was driven primarily by J&J's partial termination of the license agreement related to royalties from long-acting and vega products in the U.S., which took effect starting in February of this year. We continue to disagree with J&J's actions and last week initiated binding arbitration proceedings related to this matter. In the first quarter, we recognized $37.1 million of total worldwide royalty revenue from these products. down from $61.6 million in the first quarter of last year. Meanwhile, revenues from Boomerity in the quarter increased 128 percent year-over-year to $30.6 million. Turning now to expenses, total operating expenses were $305.1 million for the first quarter, compared to $267.9 million in the same period in the prior year. This increase was primarily driven by higher sales and marketing expenses in support of the launch of LeBolvi and higher cost of goods sold related to growing sales of our proprietary products and Boomerity. For the first quarter, cost of goods sold increased approximately $14 million year over year to $55.2 million, driven by higher volumes of these key products. Blended gross margins of our proprietary products were over 85% in the quarter, and we would expect this to improve over time as the products continue to grow. R&D expenses for the first quarter were $96 million compared to $92.3 million for the prior year, reflecting focused investment in Nembolucan and our earlier stage neuroscience and oncology development programs. SG&A expenses were $145.1 million, compared to $125.2 million for the prior year. We are investing in the launch of La Balvie, but are doing so while heavily leveraging our existing commercial infrastructure in order to drive efficient growth from the launch. Our non-operating expenses in the quarter included a non-cash reduction in the fair value of contingent consideration of $19.1 million, related to increased risk of nonpayment of milestone payments by BaudaxBio. However, this did not impact our non-GAAP results for the quarter. All told, during the quarter, we generated a GAAP net loss of $35.9 million and a non-GAAP net income of $19.6 million. Turning to our balance sheet, we ended the first quarter with approximately $759 million in cash and total investments, and total debt outstanding of approximately $295 million, resulting in a net cash position of close to $464 million. We are in a strong financial position to execute our strategic priorities. At a time when many companies in the biotech space rely on the public markets for capital, Alchemist is well capitalized with a diversified portfolio of revenue generating products that serve as our financial engine. We remain committed to the efficient management of our cost structure and achievement of our long-term profitability targets as we leverage our commercial infrastructure to launch Levolvi and efficiently advance our oncology and neuroscience pipeline candidates. And with that, I'll hand the call over to Todd to provide more detail on the commercial performance.