Alkermes PLC is pulling $20 million to $30 million from its research and development investments for the year in a restructuring bid to cut costs by $150 million and change the beleaguered company's therapeutic profile.
According to Evercore analyst Umer Raffat, Alkermes had been "breaking even on EPS" due to high expenditures, and by cutting costs could now be moving toward more positive earnings territory.
As part of its restructuring plan, Alkermes will ax approximately 160 jobs and in the meantime turn its attention to novel drug candidates amid slipping sales of its approved medicines, substance use disorder treatment Vivitrol and schizophrenia drug Aristada. Aristada missed sales estimates in the first fiscal quarter.
Alkermes' third-quarter earnings saw some recovery for Aristada, for which net sales increased about 48% year over year to $53.6 million. Vivitrol net sales went up approximately 7% to $85.2 million. Total third-quarter revenues were $255.2 million, and the GAAP net loss widened to $0.34 per share, compared to a basic and diluted GAAP net loss per share of $0.22 in the same period last year.
The Dublin-based drugmaker also reiterated revenue guidance of $1.14 billion to $1.19 billion for 2019 but decreased sales expectations for Vivitrol and Aristada. Vivitrol's 2019 net sales are expected to range from $330 million to $340 million, rather than the previous range of $330 million to $350 million. Aristada's net sales guidance decreased to a range of $185 million to $190 million rather than $200 million to $210 million.
"We were just too optimistic at the beginning of the year," CEO Richard Pops said during the Oct. 23 earnings call, in response to an analyst's question about Aristada's lowered sales expectations.
Evercore's Raffat asked in his Oct. 23 note whether the restructuring plan would cause "more lackluster performance" on Vivitrol and Aristada.
Raffat also brought up ongoing opioid litigation during the call, specifically Teva Pharmaceutical Industries Ltd.'s proposed settlement, which would include free distribution of opioid dependence medicines. Raffat asked whether free opioid use disorder drugs would compete with Vivitrol, which addresses opioid dependence as well as alcohol use disorder.
However, Pops responded that Vivitrol is a "completely different" therapeutic option for patients, and said the drug's price point — about $500 to $600 a month — is "exactly right."
Pops said Alkermes' collaboration with Biogen Inc. on multiple sclerosis drug Vumerity should begin bringing in revenue in the fourth quarter and beyond. Vumerity received tentative approval from the U.S. Food and Drug Administration and is intended to replace Biogen's own multiple sclerosis treatment, Tecfidera, which is facing generic drug competition.
Biogen could potentially convert 33% of Tecfidera patients to Vumerity, equaling $1 billion in sales to Biogen and thus $150 million in royalties for Alkermes, according to Raffat.
Alkermes' stock jumped about 5.8% to $19.52, as of 12:40 p.m. ET and was up 1.19% to $18.67 at 3:39 p.m.
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Turning to new drugs
Despite the cut in R&D investment, Alkermes executives spotlighted central nervous system and oncology drug candidates, namely ALKS 3831 and ALKS 4230.
"The key objective for this restructuring was preserving our ability to invest appropriately and what we believe to be our most high-value opportunities," CFO James Frates said.
Frates confirmed that Alkermes plans to spend about $75 million on ALKS 4230, an immunotherapy candidate targeting interleukin-2 to activate the immune system against cancer.
The CFO added that Alkermes is looking for research partners to potentially test ALKS 4230 in combination with other cancer treatments, including Merck & Co. Inc.'s blockbuster immunotherapy Keytruda.
Alkermes also plans to file ALKS 3831 for FDA approval in the fourth quarter, to treat both schizophrenia and bipolar I disorder. ALKS 3831 is a combination of olanzapine and samidorphan, and was engineered to reduce weight gain side effects commonly seen in schizophrenia drugs.
"Concentration in these focus areas will complete the company's transition that's been underway for several years, moving away from our legacy of drug delivery and precedented pharmacology to our new molecules," Pops said.