Alkermes plc

Greetings and welcome to the Alchemy's third quarter 2023 financial results conference call. My name is Donna and I will be your operator for today's call. All participant lines will be placed on mute to prevent background noise. If you should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I'll now turn the call over to Sandy Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Thank you, Sandy. You may now begin.

Good morning. Welcome to the Alkermes PLC conference call to discuss our financial results and business update for the quarter-ended September 30, 2023, as well as initial clinical data related to ALK2680 presented during this week's World's Week meeting. With me today are Richard Topps, our CEO, Ian Brown, our CFO, Todd Nichols, our Chief Commercial Officer, and Dr. Craig Hopkinson, our Chief Medical Officer. During today's call, we will be referencing slides which are available on the investor events section of our website. Additionally, I encourage everyone to go to the investor section of thealchemy.com to find our press release, related financial tables, and reconciliations of the gaps and non-gap financial measures that we'll discuss today. We believe the non-gap financial results in conjunction with the gap 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 FDC 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. Our prepared remarks today will include initial patient data from our Phase I clinical trial for ALPS 2680. These data may not be indicative of future data from this trial or future results of clinical trials. After our prepared remarks, we will open the call for Q&A, and now I'll turn the call over to Ian.

Thank you, Sandy, and hello, everyone. I'm pleased to report solid results for the third quarter that demonstrate the financial strength of the business. The quarter was highlighted by year-on-year growth across our proprietary commercial products, solid contributions from manufacturing and royalty revenue streams, disciplined expense management, and strong GAAP and non-GAAP profitability. With the favorable outcome of the Janssen arbitration earlier this year, the successful settlement of the Vivitrol patent litigation and the expected completion of the separation of the oncology business in the coming weeks, the potential of the business to deliver enhanced profitability has come more clearly into focus. This has been our plan, and it's gratifying to see it taking shape. For the third quarter, we generated total revenues of $380.9 million, compared to $252.4 million in the same period in the prior year. This reflects the reinstatement of royalties on U.S. sales of the long-acting Invega products and solid performance across our proprietary product portfolio, which grew 16% year over year. Starting with Vivitrol, net sales in the quarter were $99.3 million, reflecting 3% growth year over year, driven by the alcohol dependence indication. Inventory in the channel was stable and growth-to-net deductions were consistent and within normal ranges for the quarter. Moving on to the Aristada product family, for the quarter, Aristada net sales increased 8 percent year-over-year to $81.8 million, primarily driven by underlying demand. Inventory in the channel was stable, and growth to net adjustments were unchanged sequentially. LaVolvi net sales for the quarter were $50.7 million, up 8 percent sequentially. Underlying prescription growth was 10% on a months of therapy basis. During the quarter, inventory in the channel decreased by approximately $1.3 million, and gross to net adjustments of 25.1% reflected the continuation of our contracting strategy in the commercial space and a one-time favorable Medicaid adjustment. Moving on to our manufacturing and royalty business, In the third quarter, we recorded manufacturing and royalty revenues of $149.1 million compared to $52.9 million in the same period in the prior year. Revenues from the Long-Acting and Vega products were $76.1 million compared to $26.7 million in the same period in the prior year, reflecting the favorable resolution of the arbitration related to these products earlier this year. Revenues from Boomerity were $34.6 million compared to $26.3 million in the same period in the prior year. Turning to expenses, total operating expenses were $337.1 million for the third quarter compared to $313 million in the same period in the prior year. R&D expenses for the third quarter decreased to $97.1 million compared to $100.4 million for the same period in the prior year. This reflects lower spending across the Nembolucan and LeBolvi clinical programs, partially offset by increased investment in the AUX2680 clinical program. SG&A expenses increased to $169.4 million from $152.8 million for the same period in the prior year, reflecting continued investment in the launch of LeBolvi particularly the DTC campaign, and certain non-recurring expenses related to the separation of the oncology business. I'm pleased to report that our top-line results, combined with our continued focus on disciplined operating expense management, delivered gap net income of $47.8 million and non-gap net income of $109.5 million for the quarter. Today, we are reiterating our financial expectations for 2023 that we provided in our press release on June 6, 2023. As a reminder, our financial expectations reflect the combined neuroscience and oncology business for the full year. Turning to our balance sheet, we're in a strong financial position as we ended the third quarter with approximately $996 million in cash and total investments, and total debt outstanding of approximately $291 million. We currently expect that on separation, Alchemist will provide $275 million of cash to Mural Oncology, which we believe will enable Mural to fund its operations through top-line data readouts for Artistry 6 and Artistry 7 and into the fourth quarter of 2025. In the coming weeks, we'll provide additional information regarding the separation and distribution of mural shares to our shareholders. Post-separation, Alchemist will emerge as a pure-play neuroscience business with enhanced profitability and a strong balance sheet. Our focus will remain on the execution of our strategic priorities and disciplined management of our cost structure as we invest in those opportunities that we believe will drive future growth, including the AUX2680 development program and the continued launch of Levolvi. And with that, I'll hand the call over to Todd for a review of the proprietary commercial products.