Alkermes
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10‑K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934for the fiscal year ended December 31, 2018OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001‑35299ALKERMES PUBLIC LIMITED COMPANY(Exact name of registrant as specified in its charter) Ireland(State or other jurisdiction ofincorporation or organization) 98‑1007018(I.R.S. EmployerIdentification No.)Connaught House1 Burlington RoadDublin 4, Ireland(Address of principal executive offices) (Zip code) +353‑1‑772‑8000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Ordinary shares, $0.01 par value Nasdaq Global Select MarketTitle of each class Name of each exchange on which registered Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§ 229.405 of this chapter) is not contained herein, and will not becontained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to thisForm 10‑K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.(Check one): Large accelerated filer☒ Accelerated filer☐Non-accelerated filer☐ Smaller reporting company☐ Emerging growth company☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒The aggregate market value of the registrant’s ordinary shares held by non‑affiliates of the registrant (without admitting that any person whose shares are not included insuch calculation is an affiliate) computed by reference to the price at which the ordinary shares were last sold as of the last business day of the registrant’s most recently completedsecond fiscal quarter was $6,322,607,110.As of February 4, 2019, 156,039,212 ordinary shares were outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement for our 2019 Annual General Meeting of Shareholders are incorporated by reference into Part III of this report. Table of ContentsALKERMES PLC ANDSUBSIDIARIESANNUAL REPORT ON FORM 10‑KFOR THE YEAR ENDED DECEMBER 31, 2018INDEXPART I Item 1. Business 5Item 1A. Risk Factors 26Item 1B. Unresolved Staff Comments 44Item 2. Properties 44Item 3. Legal Proceedings 44Item 4. Mine Safety Disclosures 44PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45Item 6. Selected Financial Data 48Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49Item 7A. Quantitative and Qualitative Disclosures about Market Risk 66Item 8. Financial Statements and Supplementary Data 67Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 67Item 9A. Controls and Procedures 68Item 9B. Other Information 68PART III Item 10. Directors, Executive Officers and Corporate Governance 69Item 11. Executive Compensation 69Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 69Item 13. Certain Relationships and Related Transactions, and Director Independence 69Item 14. Principal Accounting Fees and Services 69PART IV Item 15. Exhibits and Financial Statement Schedules 70Item 16 Form 10-K Summary 77SIGNATURES 78 2Table of ContentsCAUTIONARY NOTE CONCERNING FORWARD‑LOOKING STATEMENTSThis document contains and incorporates by reference “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933,as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, thesestatements can be identified by the use of forward‑looking terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,”“continue,” “believe,” “plan,” “estimate,” “intend,” or other similar words. These statements discuss future expectations and contain projections of results ofoperations or of financial condition, or state trends and known uncertainties or other forward‑looking information. Forward‑looking statements in this AnnualReport on Form 10‑K (“Annual Report”) include, without limitation, statements regarding: •our expectations regarding our financial performance, including revenues, expenses, gross margins, liquidity, capital expenditures and incometaxes; •our expectations regarding our products, including those expectations related to product development, regulatory filings, regulatory approvalsand regulatory timelines, therapeutic and commercial scope and potential, and the costs and expenses related to such activities; •our expectations regarding the initiation, timing and results of clinical trials of our products; •our expectations regarding the competitive landscape, and changes therein, related to our products, including competition from generic formsof our products or competitive products and competitive development programs; •our expectations regarding the financial impact of currency exchange rate fluctuations and valuations; •our expectations regarding future amortization of intangible assets; •our expectations regarding our collaborations, licensing arrangements and other significant agreements with third parties relating to ourproducts, including our development programs; •our expectations regarding the impact of new legislation and related regulations and the adoption of new accounting pronouncements; •our expectations regarding near‑term changes in the nature of our market risk exposures or in management’s objectives and strategies withrespect to managing such exposures; •our ability to comply with restrictive covenants of our indebtedness and our ability to fund our debt service obligations; •our expectations regarding future capital requirements and capital expenditures and our ability to finance our operations and capitalrequirements; •our expectations regarding the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our patents,other proprietary and intellectual property (“IP”) rights, and our products; and •other factors discussed elsewhere in this Annual Report.Actual results might differ materially from those expressed or implied by these forward‑looking statements because these forward‑looking statementsare subject to risks, assumptions and uncertainties. You are cautioned not to place undue reliance on forward‑looking statements, which speak only as of thedate of this Annual Report. All subsequent written and oral forward‑looking statements concerning the matters addressed in this Annual Report andattributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in thissection. Except as required by applicable law or regulation, we do not undertake any obligation to update publicly or revise any forward‑looking statements,whether as a result of new information, future events or otherwise. In light of these risks, assumptions and uncertainties, the forward‑looking events discussedin this Annual Report might not occur. For more information regarding the risks and uncertainties of our business, see “Item 1A—Risk Factors” in thisAnnual Report.This Annual Report includes data that we obtained from industry publications and third-party research, surveys and studies. Industry publications andthird-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they donot guarantee the accuracy or completeness of such information. This Annual Report also includes data based on our own internal estimates and research. Ourinternal estimates and research have not been verified by any independent source, and, while we believe the industry publications and third-party research,surveys and studies are reliable, we have not independently verified such data. Such third-party data and our internal estimates and research are necessarilysubject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Item 1A—Risk Factors” in this Annual Report. Theseand other factors could cause results to differ materially from those expressed in this Annual Report.3Table of ContentsNOTE REGARDING COMPANY AND PRODUCT REFERENCESUse of the terms such as “us,” “we,” “our,” “Alkermes” or the “Company” in this Annual Report is meant to refer to Alkermes plc and its consolidatedsubsidiaries. Except as otherwise suggested by the context, (a) references to “products” or “our products” in this Annual Report include our marketedproducts, marketed products using our proprietary technologies, our product candidates, product candidates using our proprietary technologies, developmentproducts and development products using our proprietary technologies, (b) references to the “biopharmaceutical industry” in this Annual Report are intendedto include reference to the “biotechnology industry” and/or the “pharmaceutical industry” and (c) references to “licensees” are used interchangeably withreferences to “partners.”NOTE REGARDING TRADEMARKSWe are the owner of various United States (“U.S.”) federal trademark registrations (“®”) and other trademarks (“TM”), including ALKERMES®,ARISTADA®, ARISTADA INITIO®, CODAS®, IPDAS®, LinkeRx®, MXDAS®, NanoCrystal®, SODAS®, and VIVITROL®.The following are trademarks of the respective companies listed: ABILIFY® and ABILIFY MAINTENA®—Otsuka Pharmaceutical Co., Ltd. (“OtsukaPharm. Co.”); AMPYRA®, and FAMPYRA®—Acorda Therapeutics, Inc. (“Acorda”); ANTABUSE®—Teva Women’s Health, Inc.; AUBAGIO® andLEMTRADA®—Sanofi Societe Anonyme France; AVONEX®, PLEGRIDY®, TECFIDERA®, and TYSABRI®—Biogen MA Inc. (together with its affiliates,“Biogen”); BETASERON®—Bayer Pharma AG; BRIXADI®—Braeburn Inc.; BUNAVAILTM—BioDelivery Sciences; BYDUREON®—AmylinPharmaceuticals, LLC (“Amylin”); BYDUREON BCiseTM—AstraZeneca Pharmaceuticals LP;—CAMPRAL®—Merck Sante; COPAXONE®—TevaPharmaceutical Industries Ltd.; EXTAVIA® and GILENYA®—Novartis AG; INVEGA SUSTENNA®, RISPERDAL CONSTA® INVEGA TRINZA®,TREVICTA® and XEPLION®—Johnson & Johnson (or its affiliates); LATUDA®—Dainippon Sumitomo Pharma Co., Ltd.; NOVANTRONE® and REBIF®—Ares Trading S.A.; OCREVUS®—Genentech, Inc. (“Genentech”); PROBUPHINE®— Titan Pharmaceuticals, Inc.; REXULTI®— H. Lundbeck A/S plc;PERSERIS®— SUBOXONE®, SUBUTEX® and SUBLOCADE®—Indivior plc (or its affiliates); VICTOZA®—Novo Nordisk A/S LLC; ZUBSOLV®—OrexoUS, Inc.; ZYPREXA® RELPREVV®—Eli Lilly and Company; and VRAYLAR®— Forest Laboratories, LLC . Other trademarks, trade names and servicemarks appearing in this Annual Report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this AnnualReport are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert,to the fullest extent under applicable law, their rights thereto. 4Table of ContentsPART IItem 1.BusinessThe following discussion contains forward‑looking statements. Actual results may differ significantly from those expressed or implied in theforward‑looking statements. See “Cautionary Note Concerning Forward‑Looking Statements” on page 3 of this Annual Report. Factors that might causefuture results to differ materially from those expressed or implied in the forward‑looking statements include, but are not limited to, those discussed in“Item 1A—Risk Factors” and elsewhere in this Annual Report.OverviewAlkermes plc is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to research,develop and commercialize, both with partners and on its own, pharmaceutical products that are designed to address unmet medical needs of patients inmajor therapeutic areas. Alkermes has a diversified portfolio of marketed drug products and a clinical pipeline of product candidates focused on centralnervous system (“CNS”) disorders such as schizophrenia, depression, addiction and multiple sclerosis (“MS”), and oncology. Headquartered in Dublin,Ireland, Alkermes has a research and development (“R&D”) center in Waltham, Massachusetts; an R&D and manufacturing facility in Athlone, Ireland; and amanufacturing facility in Wilmington, Ohio.Marketed ProductsThe key marketed products discussed below are expected to generate significant revenues for us. Refer to the “Patents and Proprietary Rights” sectionof this Annual Report for information with respect to the intellectual property protection for these marketed products.Summary information regarding our proprietary products: Product Indication(s) Licensee Territory Initiation or re-initiation ofARISTADA forthe treatment ofSchizophrenia None Commercialized byAlkermes in the U.S. Schizophrenia None Commercialized byAlkermes in the U.S. Alcoholdependence andOpioid dependence None Cilag GmbHInternational(“Cilag”) Commercialized byAlkermes in the U.S. Russia andCommonwealth ofIndependent States(“CIS”) 5Table of ContentsSummary information regarding products that use our proprietary technologies: Product Indication(s) Licensee Territory RISPERDAL CONSTA Schizophreniaand Bipolar Idisorder JanssenPharmaceutica Inc.(“Janssen, Inc.”) andJanssenPharmaceuticaInternational, adivision of CilagInternational AG (“JanssenInternational”) Worldwide INVEGA SUSTENNA Schizophreniaand Schizoaffectivedisorder JanssenPharmaceutica N.V.(together withJanssen, Inc., JanssenInternational andtheir affiliates“Janssen”) U.S. XEPLION Schizophrenia Janssen All countriesoutside of theU.S. (“ROW”) INVEGA TRINZA Schizophrenia Janssen U.S. TREVICTA Schizophrenia Janssen ROW AMPYRA FAMPYRA Treatment toimprove walkingin patients withMS, asdemonstrated byan increase inwalking speed Acorda Biogen, undersublicense fromAcorda U.S. ROW Proprietary ProductsWe develop and commercialize products designed to address the unmet needs of patients suffering from addiction and schizophrenia.6Table of ContentsARISTADAARISTADA (aripiprazole lauroxil) is an extended-release intramuscular injectable suspension approved in the U.S. for the treatment of schizophrenia.ARISTADA is the first of our products to utilize our proprietary LinkeRx technology. ARISTADA is a prodrug; once in the body, ARISTADA is likelyconverted by enzyme-mediated hydrolysis to N-hydroxymethyl aripiprazole, which is then hydrolyzed to aripiprazole. ARISTADA is the first atypicalantipsychotic with four dosing options—once-monthly (441 mg, 662 mg, 882 mg), once-every-six-weeks (882 mg) and once-every-two-months (1064 mg)—to deliver and maintain therapeutic levels of medication in the body. ARISTADA is packaged in a ready-to-use, pre-filled product format. We developedARISTADA and manufacture and commercialize it in the U.S.ARISTADA INITIOARISTADA INITIO (aripiprazole lauroxil), in combination with a single 30 mg dose of oral aripiprazole, is indicated for the initiation of ARISTADAwhen used for the treatment of schizophrenia in adults. ARISTADA INITIO leverages our proprietary NanoCrystal technology and provides an extended-release formulation of aripiprazole lauroxil in a smaller particle size compared to ARISTADA. This smaller particle size enables faster dissolution and leads tomore rapid achievement of relevant levels of aripiprazole. The ARISTADA INITIO regimen, consisting of a single injection of 675 mg ARISTADA INITIO incombination with a single 30 mg dose of oral aripiprazole, when used to initiate onto any dose of ARISTADA, provides patients with relevant levels ofaripiprazole within four days of treatment initiation. The first ARISTADA dose may be administered on the same day as the ARISTADA INITIO regimen or upto 10 days thereafter. We developed ARISTADA INITIO and exclusively manufacture and commercialize it in the U.S.What is schizophrenia?Schizophrenia is a chronic, severe and disabling brain disorder. The disease is marked by positive symptoms (hallucinations and delusions) andnegative symptoms (depression, blunted emotions and social withdrawal), as well as by disorganized thinking. Approximately 3.5 million people arediagnosed with schizophrenia in the U.S., with men and women affected equally. Worldwide, it is estimated that one person in every 100 developsschizophrenia. Studies have demonstrated that as many as 75% of patients with schizophrenia have difficulty taking their oral medication on a regular basis,which can lead to worsening of symptoms.VIVITROLVIVITROL (naltrexone for extended-release injectable suspension) is a once-monthly, non-narcotic, injectable medication approved in the U.S.,Russia and certain countries of the CIS for the treatment of alcohol dependence and for the prevention of relapse to opioid dependence, following opioiddetoxification. VIVITROL uses our polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levelsin the body through one intramuscular injection every four weeks. We developed and exclusively manufacture VIVITROL. We commercialize VIVITROL inthe U.S., and Cilag commercializes VIVITROL in Russia and certain countries of the CIS.For a discussion of legal proceedings related to the patents covering VIVITROL, see Note 16, Commitments and Contingent Liabilities in the “Notesto Consolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report, and for information about risks relating to such legalproceedings, see “Part I, Item 1A—Risk Factors” in this Annual Report and specifically the sections entitled “— Patent protection for our products isimportant and uncertain,” “— Uncertainty over intellectual property in the biopharmaceutical industry has been the source of litigation, which is inherentlycostly and unpredictable, could significantly delay or prevent approval or commercialization of our products, and could adversely affect our business” and““— Litigation, arbitration or regulatory action (such as citizens petitions) filed against regulatory agencies related to our product or Alkermes, includingsecurities litigation, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our products, orotherwise negatively impact our business.”What are opioid dependence and alcohol dependence?Opioid dependence is a serious and chronic brain disease characterized by compulsive, prolonged self-administration of opioid substances that are notused for a medical purpose. According to the 2017 U.S. National Survey on Drug Use and Health, an estimated 2.0 million people aged 18 or older in the U.S.had an opioid use disorder. In 2013, with the publication of the Diagnostic Statistical Manual (DSM) V, the DSM IV diagnoses of substance use disorders aseither dependence or abuse (i.e., opioid dependence), were combined into one diagnostic category of “substance use disorders” (i.e., opioid use disorder) withthree categories of disorder severity—either mild, moderate or severe. It is believed that the DSM IV diagnoses of opioid dependence corresponds to the DSMV diagnosis of either moderate or severe opioid use disorder.7Table of ContentsAlcohol dependence is a serious and chronic brain disease characterized by cravings for alcohol, loss of control over drinking, withdrawal symptomsand an increased tolerance for alcohol. According to the 2017 U.S. National Survey on Drug Use and Health, an estimated 7.8 million people had alcoholdependence. Adherence to medication is particularly challenging with this patient population.Products Using Our Proprietary TechnologiesWe have granted licenses under our proprietary technologies to enable third parties to develop, commercialize and, in some cases, manufactureproducts for which we receive royalties and/or manufacturing revenues. Such arrangements include the following:INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDAL CONSTAINVEGA SUSTENNA/XEPLION (paliperidone palmitate), INVEGA TRINZA/TREVICTA (paliperidone palmitate 3-month injection) and RISPERDALCONSTA (risperidone long-acting injection) are long-acting atypical antipsychotics owned and commercialized worldwide by Janssen that incorporate ourproprietary technologies.INVEGA SUSTENNA is approved in the U.S. for the treatment of schizophrenia and for the treatment of schizoaffective disorder as either amonotherapy or adjunctive therapy. Paliperidone palmitate extended-release injectable suspension is approved in the European Union (“EU”) and othercountries outside of the U.S. for the treatment of schizophrenia and is marketed and sold under the trade name XEPLION. INVEGA SUSTENNA/XEPLIONuses our nanoparticle injectable extended-release technology to increase the rate of dissolution and enable the formulation of an aqueous suspension foronce-monthly intramuscular administration. INVEGA SUSTENNA/XEPLION is manufactured by Janssen. For a discussion of legal proceedings related to thepatents covering INVEGA SUSTENNA, see Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Item3—Legal Proceedings” in this Annual Report and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in thisAnnual Report and specifically the section entitled “—We or our licensees may face claims against intellectual property rights covering our products andcompetition from generic drug manufacturers.”INVEGA TRINZA/TREVICTA is an atypical antipsychotic injection for the treatment of schizophrenia used in people who have been treated withINVEGA SUSTENNA for at least four months. INVEGA TRINZA/TREVICTA is the first schizophrenia treatment to be taken once every three months.TREVICTA is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically stable on XEPLION. INVEGATRINZA/TREVICTA uses our proprietary technology and is manufactured by Janssen.RISPERDAL CONSTA is approved in the U.S. for the treatment of schizophrenia and as both monotherapy and adjunctive therapy to lithium orvalproate in the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA is approved in numerous countries outside of the U.S. for the treatment ofschizophrenia and the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA uses our polymer-based microsphere injectable extended-releasetechnology to deliver and maintain therapeutic medication levels in the body through just one intramuscular injection every two weeks. RISPERDALCONSTA microspheres are exclusively manufactured by us. For a discussion of legal proceedings related to one of the patents covering RISPERDALCONSTA, see Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Item 3—Legal Proceedings” inthis Annual Report and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in this Annual Report andspecifically the section entitled “—We or our licensees may face claims against intellectual property rights covering our products and competition fromgeneric drug manufacturers.”Revenues from Janssen accounted for approximately 29%, 33% and 36% of our consolidated revenues for the years ended December 31, 2018, 2017and 2016, respectively. See “Collaborative Arrangements” in Part I of this Annual Report for information about our relationship with Janssen.What is bipolar I disorder?Bipolar I disorder is a brain disorder that causes unusual shifts in a person’s mood, energy and ability to function. It is often characterized bydebilitating mood swings, from extreme highs (mania) to extreme lows (depression). Bipolar I disorder is characterized based on the occurrence of at least onemanic episode, with or without the occurrence of a major depressive episode and affects approximately one percent of the American adult population in anygiven year. The median age of onset for bipolar I disorder is 25 years.What is schizoaffective disorder?Schizoaffective disorder is a condition in which a person experiences a combination of schizophrenia symptoms, such as delusions, hallucinations orother symptoms characteristic of schizophrenia, and mood disorder symptoms, such as mania or depression. Schizoaffective disorder is a serious mentalillness that affects about one in 100 people.8Table of ContentsAMPYRA/FAMPYRAAMPYRA (dalfampridine)/FAMPYRA (fampridine) is believed to be the first treatment approved in the U.S. and in over 50 countries across Europe,Asia and the Americas to improve walking in adults with MS who have walking disability, as demonstrated by an increase in walking speed. Extended-release dalfampridine tablets are marketed and sold by Acorda in the U.S. under the trade name AMPYRA and by Biogen outside the U.S. under the tradename FAMPYRA. FAMPYRA is approved in the EU for the improvement of walking in adults with MS. AMPYRA and FAMPYRA incorporate our oralcontrolled-release technology. AMPYRA (including the authorized generic version of AMPYRA) and FAMPYRA are manufactured by us.For a discussion of legal proceedings related to the patents covering AMPYRA, see Note 16, Commitments and Contingent Liabilities in the “Notes toConsolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report and for information about risks relating to such legalproceedings, see “Part I, Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “—We or our licensees may face claims againstintellectual property rights covering our products and competition from generic drug manufacturers.” The legal proceedings related to the patents coveringAMPYRA do not involve the patents covering FAMPYRA, and the latest of the patents covering FAMPYRA expires in April 2025 in the EU.Starting in September 2018, generic versions of AMPYRA, including the authorized generic version of AMPYRA, began to enter the U.S. market.What is multiple sclerosis?Multiple sclerosis, or MS, is a chronic, usually progressive, disease in which the immune system attacks and degrades the function of nerve fibers inthe brain and spinal cord. These nerve fibers consist of long, thin fibers, or axons, surrounded by a myelin sheath, which facilitates the transmission ofelectrical impulses. In MS, the myelin sheath is damaged by the body’s own immune system, causing areas of myelin sheath loss, also known asdemyelination. This damage, which can occur at multiple sites in the CNS, blocks or diminishes conduction of electrical impulses. People with MS maysuffer impairments in any number of neurological functions. These impairments vary from individual to individual and over the course of time, depending onwhich parts of the brain and spinal cord are affected, and often include difficulty walking. Individuals vary in the severity of the impairments they suffer on aday‑to‑day basis, with impairments becoming better or worse depending on the activity of the disease on a given day.Key Development ProgramsOur R&D is focused on leveraging our formulation expertise and proprietary product platforms to develop novel, competitively advantagedmedications designed to enhance patient outcomes in major CNS disorders, such as schizophrenia, addiction, depression and MS, and in oncology. As part ofour ongoing R&D efforts, we have devoted, and will continue to devote, significant resources to conducting pre-clinical work and clinical studies to advancethe development of new pharmaceutical products. The discussion below highlights our current key R&D programs. Drug development involves a high degreeof risk and investment, and the status, timing and scope of our development programs are subject to change. Important factors that could adversely affect ourdrug development efforts are discussed in “Part I, Item 1A—Risk Factors” of this Annual Report. Refer to the “Patents and Proprietary Rights” section in “PartI, Item 1— Business” of this Annual Report for information with respect to the intellectual property protection for our development candidates.Diroximel Fumarate (BIIB098)Diroximel fumarate (“BIIB098”), formerly referred to as ALKS 8700, is a novel, oral fumarate in development for the treatment of relapsing forms ofMS. Diroximel fumarate is designed to rapidly convert to monomethyl fumarate in the body and may have the potential to offer differentiated gastrointestinaltolerability due to its chemical structure as compared to the currently marketed dimethyl fumarate, TECFIDERA.The pivotal clinical program for diroximel fumarate consists of pharmacokinetic bridging studies comparing diroximel fumarate and TECFIDERA anda two-year, multicenter, open-label study designed to assess the safety of BIIB098, which we initiated in December 2015. We submitted a 505(b)(2) NDA fordiroximel fumarate in December 2018. For more information about 505(b)(2) NDAs, see “Part 1, Item 1—Business, Regulatory, Hatch-Waxman Act” of thisAnnual Report. In addition, EVOLVE-MS-2, an elective, randomized, head-to-head phase 3 study of the gastrointestinal tolerability of diroximel fumarateversus TECFIDERA is ongoing, with topline results expected in mid-2019.In November 2017, we entered into an exclusive license and collaboration agreement with Biogen relating to diroximel fumarate. Revenues fromBiogen related to this license and collaboration agreement accounted for approximately 10% and less than 10% of our consolidated revenues for the yearsended December 31, 2018 and 2017, respectively. For more information about the license and collaboration agreement with Biogen, see “Part 1, Item 1—Business, Collaborative Arrangements” of this Annual Report.9Table of ContentsALKS 3831ALKS 3831 is an investigational, novel, once-daily, oral atypical antipsychotic drug candidate for the treatment of schizophrenia. ALKS 3831 iscomposed of samidorphan, a novel, new molecular entity, co-formulated with the established antipsychotic agent, olanzapine, in a single bilayer tablet.ALKS 3831 is designed to provide the strong antipsychotic efficacy of olanzapine with a favorable weight profile.The ENLIGHTEN clinical development program for ALKS 3831 includes two key studies: ENLIGHTEN-1, a four-week study evaluating theantipsychotic efficacy of ALKS 3831 compared to placebo, and ENLIGHTEN-2, a six-month study assessing weight gain with ALKS 3831 compared toolanzapine in patients with schizophrenia. The program also includes supportive studies to evaluate the pharmacokinetic and metabolic profile and long-term safety of ALKS 3831.In June 2017, we announced positive topline results from ENLIGHTEN-1, a multinational, double-blind, randomized, phase 3 study that evaluated theantipsychotic efficacy, safety and tolerability of ALKS 3831 compared to placebo over a four-week period in patients experiencing an acute exacerbation ofschizophrenia. ALKS 3831 met the prespecified primary endpoint demonstrating statistically significant reductions from baseline in Positive and NegativeSyndrome Scale (“PANSS”) scores compared to placebo. The study also included an olanzapine arm but was not designed to provide comparative efficacy orsafety data between ALKS 3831 and olanzapine. Data from the study showed that olanzapine achieved similar improvements from baseline PANSS scores ascompared to placebo.In November 2018, we announced positive topline results from ENLIGHTEN-2, a multicenter, double-blind, randomized, phase 3 study that evaluatedthe weight gain profile of ALKS 3831 compared to olanzapine in patients with stable schizophrenia over a six-month period. ALKS 3831 met theprespecified co-primary endpoints, demonstrating both a lower mean percent weight gain from baseline at six months compared to the olanzapine group, anda lower proportion of patients who gained 10% or more of their baseline body weight at six months compared to the olanzapine group. We plan to presentENLIGHTEN-2 data at a medical meeting in the first half of 2019.We will request a pre-NDA meeting with the FDA to discuss its key requirements including the efficacy, safety, weight and metabolic profile of ALKS3831, and plan to submit an NDA for ALKS 3831 in mid-2019.ALKS 4230ALKS 4230 is a novel, engineered fusion protein designed to selectively activate tumor-killing immune cells while avoiding the expansion ofimmunosuppressive cells by preferentially binding to the intermediate affinity interleukin-2 (“IL-2”) receptor complex. The selectivity of ALKS 4230 isdesigned to leverage the proven anti-tumor effects of existing IL-2 therapy, while mitigating certain limitations. Our phase 1 study for ALKS 4230 isdesigned to evaluate ALKS 4230 as a monotherapy agent and in combination with the anti-PD-1 therapy, pembrolizumab.A dose-escalation stage designed to determine a maximum tolerated dose of ALKS 4230 in a monotherapy setting and to identify the optimal doserange of ALKS 4230 based on measures of immunological-pharmacodynamic effects is ongoing. Upon completion of the dose-escalation stage, we expect toinitiate a monotherapy dose-expansion stage of the phase 1 study in patients with renal cell carcinoma or melanoma. Initial data from the dose-escalationstage of the phase 1 study, demonstrating dose-dependent pharmacodynamic effects on circulating CD8+ T cells and natural killer cells with minimal andnon-dose dependent effect on immunosuppressive regulatory T cells, were presented at the 2018 Society for Immunotherapy of Cancer meeting.In September 2018, we initiated the combination therapy stage of the phase 1 study, designed to assess the safety profile and anti-tumor activity ofALKS 4230 with pembrolizumab in patients with select advanced solid tumors.ALKS 5461 UpdateALKS 5461 is a proprietary, once-daily, oral investigational medicine with a novel mechanism of action for the adjunctive treatment of majordepressive disorder (“MDD”) in patients with an inadequate response to standard antidepressant therapies. ALKS 5461 is a fixed-dose combination ofbuprenorphine, a partial mu-opioid receptor agonist and kappa-opioid receptor antagonist, and samidorphan, a mu-opioid receptor antagonist.The clinical development program for ALKS 5461 included three core phase 3 efficacy studies (FORWARD-3, FORWARD-4 and FORWARD-5), aswell as additional supportive studies to evaluate the long-term safety, dosing, pharmacokinetic profile and human abuse potential of ALKS 5461. Our NDAfor ALKS 5461, submitted to the FDA in January 2018, and accepted for review by the FDA in April 2018 after the issuance, and then rescission, of a refusalto file letter, was based on a comprehensive clinical efficacy and safety package with data from more than 30 clinical trials and more than 1,500 patients withMDD. 10Table of ContentsAs previously disclosed, on November 1, 2018, the FDA convened an advisory committee meeting for the ALKS 5461 NDA. ThePsychopharmacologic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee jointly voted that the benefit-risk profilewas not adequate to support approval of ALKS 5461. On February 1, 2019, we announced receipt of a complete response letter, or CRL, from the FDA for theALKS 5461 NDA. The CRL states that the FDA is unable to approve the ALKS 5461 NDA in its present form and requests additional clinical data to providesubstantial evidence of effectiveness of ALKS 5461 for the adjunctive treatment of MDD. We plan to meet with the FDA to discuss the contents of the CRLand potential next steps for ALKS 5461. This interaction with the Agency will inform whether there is a viable path forward for the ALKS 5461 program.Collaborative ArrangementsWe have entered into several collaborative arrangements to develop and commercialize products and, in connection with such arrangements, to accesstechnological, financial, marketing, manufacturing and other resources. Refer to the “Patents and Proprietary Rights” section in this “Part I, Item 1—Business” of this Annual Report for information with respect to the intellectual property protection for these products.JanssenINVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTAUnder our license agreement with Janssen Pharmaceutica N.V., we granted Janssen a worldwide exclusive license under our NanoCrystal technologyto develop, commercialize and manufacture INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA and related products.Under this license agreement, we received milestone payments upon the achievement of certain development goals from Janssen; there are no furthermilestones to be earned under this agreement. We receive tiered royalty payments between 5% and 9% of INVEGA SUSTENNA/XEPLION and INVEGATRINZA/TREVICTA end-market net sales in each country where the license is in effect, with the exact royalty percentage determined based on aggregateworldwide net sales. The tiered royalty payments consist of a patent royalty and a know‑how royalty, both of which are determined on a country‑by‑countrybasis. The patent royalty, which equals 1.5% of net sales, is payable in each country until the expiration of the last of the patents claiming the product in suchcountry. The know‑how royalty is a tiered royalty of 3.5%, 5.5% and 7.5% on aggregate worldwide net sales of below $250 million, between $250 millionand $500 million, and greater than $500 million, respectively. The know‑how royalty is payable for the later of 15 years from first commercial sale of aproduct in each individual country or March 31, 2019, subject in each case to the expiry of the license agreement. These royalty payments may be reduced inany country based on patent litigation or on competing products achieving certain minimum sales thresholds. The license agreement expires upon the later of(i) March 31, 2019 or (ii) the expiration of the last of the patents subject to the agreement. After expiration, Janssen retains a non‑exclusive, royalty‑freelicense to develop, manufacture and commercialize the products.Janssen may terminate the license agreement in whole or in part upon three months’ notice to us. We and Janssen have the right to terminate theagreement upon a material breach of the other party, which is not cured within a certain time period, or upon the other party’s bankruptcy or insolvency.RISPERDAL CONSTAUnder a product development agreement, we collaborated with Janssen on the development of RISPERDAL CONSTA. Under the developmentagreement, Janssen provided funding to us for the development of RISPERDAL CONSTA, and Janssen is responsible for securing all necessary regulatoryapprovals for the product.Under two license agreements, we granted Janssen and an affiliate of Janssen exclusive worldwide licenses to use and sell RISPERDAL CONSTA.Under our license agreements with Janssen, we receive royalty payments equal to 2.5% of Janssen’s end-market net sales of RISPERDAL CONSTA in eachcountry where the license is in effect based on the quarter when the product is sold by Janssen. This royalty may be reduced in any country based on lack ofpatent coverage and significant competition from generic versions of the product. Janssen can terminate the license agreements upon 30 days’ prior writtennotice to us. Either party may terminate the license agreements by written notice following a breach which continues for 90 days after the delivery of writtennotice thereof or upon the other party’s insolvency. The licenses granted to Janssen expire on a country‑by‑country basis upon the later of (i) the expirationof the last patent claiming the product in such country or (ii) 15 years after the date of the first commercial sale of the product in such country, provided thatin no event will the license granted to Janssen expire later than the twentieth anniversary of the first commercial sale of the product in each such country,with the exception of Canada, France, Germany, Italy, Japan, Spain and the United Kingdom, in each case, where the fifteen‑year minimum shall pertainregardless. After expiration, Janssen retains a non‑exclusive, royalty‑free license to manufacture, use and sell RISPERDAL CONSTA.11Table of ContentsWe exclusively manufacture RISPERDAL CONSTA for commercial sale. Under our manufacturing and supply agreement with Janssen, we recordmanufacturing revenues when product is shipped to Janssen, based on a percentage of Janssen’s net unit sales price for RISPERDAL CONSTA for theapplicable calendar year. This percentage is determined based on Janssen’s unit demand for such calendar year and varies based on the volume of unitsshipped, with a minimum manufacturing fee of 7.5%. Either party may terminate the manufacturing and supply agreement upon a material breach by theother party, which is not resolved within 60 days after receipt of a written notice specifying the material breach or upon written notice in the event of theother party’s insolvency or bankruptcy. Janssen may terminate the agreement upon six months’ written notice to us. In the event that Janssen terminates themanufacturing and supply agreement without terminating the license agreements, the royalty rate payable to us on Janssen’s net sales of RISPERDALCONSTA would increase from 2.5% to 5.0%.AcordaUnder an amended and restated license agreement, we granted Acorda an exclusive worldwide license to use and sell and, solely in accordance withour supply agreement, to make or have made, AMPYRA/FAMPYRA. We receive certain commercial and development milestone payments, license revenuesand a royalty of approximately 10% based on net sales of AMPYRA (including the authorized generic version of AMPYRA) and FAMPYRA by Acorda andits sub‑licensee, Biogen. This royalty payment may be reduced in any country based on lack of patent coverage, competing products achieving certainminimum sales thresholds, and whether we manufacture the product.In June 2009, we entered into an amendment of the amended and restated license agreement and the supply agreement with Acorda and, pursuant tosuch amendment, consented to the sublicense by Acorda to Biogen of Acorda’s rights to use and sell FAMPYRA in certain territories outside of the U.S. (tothe extent that such rights were to be sublicensed to Biogen pursuant to its separate collaboration and license agreement with Acorda). Under thisamendment, we agreed to modify certain terms and conditions of the amended and restated license agreement and the supply agreement with Acorda toreflect the sublicense by Acorda to Biogen.Acorda has the right to terminate the amended and restated license agreement upon 90 days’ written notice. We have the right to terminate theamended and restated license agreement for countries in which Acorda fails to launch a product within a specified time after obtaining the necessaryregulatory approval or fails to file regulatory approvals within a commercially reasonable time after completion of, and receipt of positive data from, all pre-clinical and clinical studies required for filing a marketing authorization application. Either party has the right to terminate the amended and restated licenseagreement by written notice following a material breach of the other party, which is not cured within a certain time period, or upon the other party’s entry intobankruptcy or dissolution proceedings. If we terminate Acorda’s license in any country, we are entitled to a license from Acorda of its patent rights andknow‑how relating to the product as well as the related data, information and regulatory files, and to market the product in the applicable country, subject toan initial payment equal to Acorda’s cost of developing such data, information and regulatory files and to ongoing royalty payments to Acorda. Subject tothe termination of the amended and restated license agreement, licenses granted under the license agreement terminate on a country‑by‑country basisupon the expiration of the last to expire of our patents or the existence of a threshold level of competition in the marketplace.Under our commercial manufacturing supply agreement with Acorda, we manufacture and supply AMPYRA/FAMPYRA for Acorda (and itssub‑licensee, Biogen). Under the terms of the agreement, Acorda may obtain up to 25% of its total annual requirements of product from a second‑sourcemanufacturer. We receive manufacturing royalties equal to 8% of net selling price for all product manufactured by us and a compensating payment forproduct manufactured and supplied by a third party. We may terminate the commercial manufacturing supply agreement upon 12 months’ prior writtennotice to Acorda, and either party may terminate the commercial manufacturing supply agreement following a material and uncured breach of the commercialmanufacturing supply agreement or amended and restated license agreement or the entry into bankruptcy or dissolution proceedings by the other party. Inaddition, subject to early termination of the commercial manufacturing supply agreement noted above, the commercial manufacturing supply agreementterminates upon the expiry or termination of the amended and restated license agreement.We are entitled to receive the following milestone payments under our amended and restated license agreement with Acorda for each of the third andfourth new indications of the product developed thereunder: •initiation of a phase 3 clinical trial: $1.0 million; •acceptance of an NDA by the FDA: $1.0 million; •approval of the NDA by the FDA: $1.5 million; and •the first commercial sale: $1.5 million.12Table of ContentsBiogenIn November 2017, we entered into a license and collaboration agreement with Biogen, under which we granted Biogen a worldwide, exclusive,sublicensable license to develop, manufacture and commercialize BIIB098 and other products covered by patents licensed to Biogen under the agreement.We amended the license and collaboration agreement in October 2018.Upon entering into this agreement in November 2017, we received an up-front cash payment of $28.0 million. In June 2018, we received an additionalcash payment of $50.0 million following Biogen’s review of preliminary gastrointestinal tolerability data from the ongoing clinical development program forBIIB098. We are also eligible to receive an additional cash payment of $150.0 million upon an approval by the FDA on or before December 31, 2021 of a505(b)(2) NDA (or, in certain circumstances, a 505(b)(1) NDA) for BIIB098. We are also eligible to receive additional payments upon achievement ofdevelopmental milestones with respect to the first two products, other than BIIB098, covered by patents licensed to Biogen under the agreement.In addition, we will receive a mid-teens percentage royalty on worldwide net sales of BIIB098, subject to, under certain circumstances, minimumannual payments for the first five years following FDA approval of BIIB098. We will also receive royalties on net sales of products, other than BIIB098,covered by patents licensed to Biogen under the agreement, at tiered royalty rates calculated as percentages of net sales ranging from high-single digits tosub-teen double digits. All royalties are payable on a product-by-product and country-by-country basis until the later of (i) the last-to-expire patent rightcovering the applicable product in the applicable country and (ii) a specified period of time from the first commercial sale of the applicable product in theapplicable country. Royalties for all such products and the minimum annual payments for BIIB098 are subject to reductions as set forth in the agreement.Except in certain limited circumstances, until FDA approval of an NDA for BIIB098, we are responsible for the development of BIIB098 for thetreatment of MS. Biogen paid a portion of the BIIB098 development costs we incurred in 2017 and, since January 1, 2018, Biogen is responsible for allBIIB098 development costs we incur, subject to annual budget limitations. After the date of FDA approval of an NDA for BIIB098 for the treatment of MS,Biogen will be responsible for all development and commercialization activities, as well as the costs of all such activities, for BIIB098 and all other productscovered by patents licensed to Biogen under the agreement. We have retained the right to manufacture clinical supplies and commercial supplies of BIIB098and all other products covered by patents licensed to Biogen under the agreement, subject to Biogen’s right to manufacture or have manufacturedcommercial supplies as a back-up manufacturer and subject to good faith agreement by the parties on the terms of such manufacturing arrangements.If BIIB098 discontinuations due to gastrointestinal adverse events in BIIB098’s long-term safety clinical trial exceed a certain pre-defined threshold,or, if in part B of the head-to-head phase 3 gastrointestinal tolerability clinical trial, BIIB098 demonstrates a greater rate of discontinuations as compared toTECFIDERA and TECFIDERA demonstrates statistical superiority to BIIB098 on the primary endpoint, then “GI Inferiority” shall be deemed to exist, and (i)Biogen shall have the right to recapture from us its $50.0 million option payment through certain temporary reductions in royalty rates, (ii) the minimumannual payments Biogen owes to us shall terminate and (iii) there shall be no reversion of BIIB098 to us in the event that Biogen terminates the agreementand does not commercialize BIIB098.Unless earlier terminated, the agreement will remain in effect until the expiry of all royalty obligations. Biogen has the right to terminate theagreement at will, on a product-by-product basis or in its entirety. Either party has the right to terminate the agreement following any governmentalprohibition of the transactions effected by the agreement, or in connection with an insolvency event involving the other party. Upon termination of theagreement by either party, if, prior to such termination (i) GI Inferiority was not deemed to exist or (ii) GI Inferiority was deemed to exist but Biogencommercialized BIIB098, then, at our request, the BIIB098 program will revert to us.Proprietary Product PlatformsOur proprietary product platforms, which include technologies owned and exclusively licensed to us, address several important developmentopportunities. We have used these technologies as platforms to establish drug development, clinical development and regulatory expertise.Injectable Extended‑Release Microsphere TechnologyOur injectable extended‑release microsphere technology allows us to encapsulate small‑molecule pharmaceuticals, peptides and proteins inmicrospheres made of common medical polymers. The technology is designed to enable novel formulations of pharmaceuticals by providing controlled,extended release of drugs over time. Drug release from the microsphere is controlled by diffusion of the drug through the microsphere and by biodegradationof the polymer. These processes can be modulated through a number of formulation and fabrication variables, including drug substance and microsphereparticle sizing and choice of polymers and excipients.13Table of ContentsLinkeRx TechnologyThe long‑acting LinkeRx technology platform is designed to enable the creation of extended‑release injectable versions of antipsychotic therapiesand may also be useful in other disease areas in which extended duration of action may provide therapeutic benefits. The technology uses proprietarylinker‑tail chemistry to create new molecular entities derived from known agents.NanoCrystal TechnologyOur NanoCrystal technology is applicable to poorly water‑soluble compounds and involves formulating and stabilizing drugs into particles that arenanometers in size. A drug in NanoCrystal form can be incorporated into a range of common dosage forms and administration routes, including tablets,capsules, inhalation devices and sterile forms for injection, with the potential for enhanced oral bioavailability, increased therapeutic effectiveness,reduced/eliminated fed/fasted variability and sustained duration of intravenous/intramuscular release.Oral Controlled Release TechnologyOur oral controlled release (“OCR”) technologies are used to formulate, develop and manufacture oral dosage forms of pharmaceutical products thatcontrol the release characteristics of standard dosage forms. Our OCR platform includes technologies for tailored pharmacokinetic profiles including SODAStechnology, CODAS technology, IPDAS technology and the MXDAS drug absorption system, each as described below: •SODAS Technology: SODAS (“Spheroidal Oral Drug Absorption System”) technology involves producing uniform spherical beads of 1 mm to2 mm in diameter containing drug plus excipients and coated with product‑specific modified‑release polymers. Varying the nature andcombination of polymers within a selectively permeable membrane enables varying degrees of modified release depending upon the requiredproduct profile. •CODAS Technology: CODAS (“Chronotherapeutic Oral Drug Absorption System”) technology enables the delayed onset of drug releaseincorporating the use of specific polymers, resulting in a drug release profile that more accurately complements circadian patterns. •IPDAS Technology: IPDAS (“Intestinal Protective Drug Absorption System”) technology conveys gastrointestinal protection by a widedispersion of drug in a controlled and gradual manner, through the use of numerous high‑density controlled‑release beads compressed into atablet form. Release characteristics are modified by the application of polymers to the micro matrix and subsequent coatings, which form arate‑limiting semi‑permeable membrane. •MXDAS Technology: MXDAS (“Matrix Drug Absorption System”) technology formulates the drug in a hydrophilic matrix and incorporatesone or more hydrophilic matrix‑forming polymers into a solid oral dosage form, which controls the release of drug through a process ofdiffusion and erosion in the gastrointestinal tract.Manufacturing and Product SupplyWe own and occupy an R&D and manufacturing facility in Athlone, Ireland and a manufacturing facility in Wilmington, Ohio. We either purchaseactive drug product from third parties or receive it from our third‑party licensees to formulate product using our technologies. The manufacture of ourproducts for clinical trials and commercial use is subject to Current Good Manufacturing Practices (“cGMP”) regulations and other regulations. Ourmanufacturing and development capabilities include formulation through process development, scale‑up and full‑scale commercial manufacturing andspecialized capabilities for the development and manufacturing of controlled substances.Although some materials and services for our products are currently available from a single source or a limited number of qualified sources, we attemptto acquire an adequate inventory of such materials, establish alternative sources and/or negotiate long‑term supply arrangements. We believe we do not haveany significant issues in finding suppliers. However, we cannot be certain that we will continue to be able to obtain long‑term supplies of our manufacturingmaterials.Our supply chain is growing with an expanding external network of third‑party service providers involved in the manufacture of our products who aresubject to inspection by the FDA or comparable agencies in other jurisdictions. Any delay, interruption or other issues that arise in the acquisition of activepharmaceutical ingredients (“API”), raw materials, or components, or in the manufacture, fill‑finish, packaging, or storage of our marketed or developmentproducts, including as a result of a failure of our facilities or the facilities or operations of third parties to pass any regulatory agency inspection, couldsignificantly impair our ability to sell our products or advance our development efforts, as the case may be. For information about risks relating to themanufacture of our marketed products and product candidates, see “Item 1A—Risk Factors” and specifically those sections entitled “—We rely on thirdparties to provide services in connection with the manufacture and distribution of our products” and “—We are subject to risks related to the manufacture ofour products.”14Table of ContentsProprietary Products and Products using our Proprietary TechnologiesWe manufacture ARISTADA and ARISTADA INITIO, and microspheres for RISPERDAL CONSTA and VIVITROL, in our Wilmington, Ohio facility.We are currently operating one RISPERDAL CONSTA line, two VIVITROL lines and two ARISTADA lines at commercial scale. We source our packagingoperations for VIVITROL, ARISTADA and ARISTADA INITIO to third‑party contractors. Janssen is responsible for packaging operations for RISPERDALCONSTA and, in Russia and certain countries of the CIS, VIVITROL. Our Wilmington, Ohio facility has been inspected by U.S., European (including theMedicines and Healthcare Products Regulatory Agency), Chinese, Japanese, Brazilian, Turkish and Saudi Arabian regulatory authorities for compliance withrequired cGMP standards for continued commercial manufacturing.We manufacture AMPYRA (including the authorized generic version of AMPYRA)/FAMPYRA and other products in our Athlone, Ireland facility.This facility has been inspected by U.S., Irish, Brazilian, Turkish, Saudi Arabian, Korean, Belarusian and Chinese regulatory authorities for compliance withrequired cGMP standards for continued commercial manufacturing. In 2018, the FDA completed a pre-approval inspection and recommended the Athlone,Ireland facility for approval to manufacture commercial supplies of bulk intermediate NanoCrystal dispersion of Meloxicam.For more information about our manufacturing facilities, see “Item 2—Properties.”Clinical ProductsWe have established, and are operating, facilities with the capability to produce clinical supplies of injectable extended‑release products as well assolid dosage and biologics products at our Wilmington, Ohio facility and NanoCrystal and OCR technology products at our Athlone, Ireland facility. Wehave also contracted with third‑party manufacturers to formulate certain products for clinical use. We require that our contract manufacturers adhere to cGMPin the manufacture of products for clinical use.Research & DevelopmentWe devote significant resources to R&D programs. We focus our R&D efforts on developing novel therapeutics in areas of high unmet medical need.Our R&D efforts include, but are not limited to, areas such as pharmaceutical formulation, analytical chemistry, process development, engineering, scale‑upand drug optimization/delivery. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for our R&Dexpenditures for our years ended December 31, 2018, 2017 and 2016.Permits and Regulatory ApprovalsWe hold various licenses in respect of our manufacturing activities conducted in Wilmington, Ohio and Athlone, Ireland. The primary licenses held inthis regard are FDA Registrations of Drug Establishment; and Drug Enforcement Administration of the U.S. Department of Justice (“DEA”). We also hold aManufacturers Authorization (No. M1067), an Investigational Medicinal Products Manufacturers Authorization (No. IMP074) and Certificates of GoodManufacturing Practice Compliance of a Manufacturer (Ref. 2014/7828/IMP074 and 2014/7828/M1067) from the Health Products Regulatory Authority inIreland (“HPRA”) in respect of our Athlone, Ireland facility, and a number of Controlled Substance Licenses granted by the HPRA. Due to certain U.S. statelaw requirements, we also hold state licenses to cover distribution activities through certain states and not in respect of any manufacturing activitiesconducted in those states.We do not generally act as the product authorization holder for products incorporating our drug delivery technologies that have been developed onbehalf of a licensee of such technologies. In such cases, our licensee usually holds the relevant authorization from the FDA or other national regulator, and wewould support this authorization by furnishing a copy of the Drug Master File, or the chemistry, manufacturing and controls data to the relevant regulator toprove adequate manufacturing data in respect of the product. We would generally update this information annually with the relevant regulator. In other caseswhere we have developed proprietary products, such as VIVITROL, ARISTADA and ARISTADA INITIO, we hold the appropriate regulatory documentationourselves.Marketing, Sales and DistributionWe are responsible for the marketing of VIVITROL, ARISTADA and ARISTADA INITIO in the U.S. We focus our sales and marketing efforts onphysicians in private practice and in public treatment systems. We believe that we use customary pharmaceutical company practices to market our productsand to educate physicians, including through advertisements, professional symposia, selling initiatives and other methods. Our education initiatives extendto individual physicians, nurses, social workers, counselors and other stakeholders involved in the treatment of opioid dependence, alcohol dependence andschizophrenia. We provide, and contract with third‑party vendors to provide, customer service and other related programs for our products, such asproduct‑specific websites, insurance research services and order, delivery and fulfillment services.15Table of ContentsOur sales force for VIVITROL in the U.S. consists of approximately 100 individuals. VIVITROL is primarily sold to pharmaceutical wholesalers,pharmacies, specialty distributors and treatment providers. Product sales of VIVITROL during the year ended December 31, 2018 to Cardinal Health,AmerisourceBergen Corporation (“AmerisourceBergen”) and McKesson Corporation represented approximately 23%, 20% and 19%, respectively, of totalVIVITROL gross sales.Our sales force for ARISTADA in the U.S. consists of approximately 300 individuals. ARISTADA is primarily sold to pharmaceutical wholesalers.Product sales of ARISTADA and ARISTADA INITIO during the year ended December 31, 2018 to Cardinal Health, McKesson Corporation andAmerisourceBergen represented approximately 47%, 23% and 19%, respectively, of total ARISTADA gross sales.ICS, a division of AmerisourceBergen, provides warehousing, shipping and administrative services for VIVITROL, ARISTADA and ARISTADAINITIO.Under our license agreements with Janssen, Acorda and other licensees and sublicensees, they are each responsible for the commercialization of anyproducts developed under their respective agreement if and when regulatory approval is obtained.CompetitionWe face intense competition in the development, manufacture, marketing and commercialization of our products from many and varied sources, suchas research institutions and biopharmaceutical companies, including other companies with similar technologies. Some of these competitors are also ourlicensees, who control the commercialization of products from which we receive manufacturing and royalty revenues. These competitors are working todevelop and market other systems, products and other methods of preventing or reducing disease, and new small‑molecule and other classes of drugs that canbe used with or without a drug delivery system.The biopharmaceutical industry is characterized by intensive research, development and commercialization efforts and rapid and significanttechnological change. Many of our competitors are larger and have significantly greater financial and other resources than we do. We expect our competitorsto develop new technologies, products and processes that may be more effective than those we develop. The development of technologically improved ordifferent products or technologies may make our products or product platforms obsolete or noncompetitive before we recover expenses incurred inconnection with their development or realize any revenues from any marketed product.There are other companies developing extended‑release product platforms. In many cases, there are products on the market or in development that maybe in direct competition with our products. In addition, we know of new chemical entities that are being developed that, if successful, could compete againstour products. These chemical entities are being designed to work differently than our products and may turn out to be safer or to be more effective than ourproducts. Among the many experimental therapies being tested around the world, there may be some that we do not now know of that may compete with ourproprietary product platforms or products. Our licensees could choose a competing technology to use with their drugs instead of one of our product platformsand could develop products that compete with our products.With respect to our products, we believe that our ability to successfully compete will depend on, among other things, the existence of competing oralternative products in the marketplace, including generic competition, and the relative price of those products; the efficacy, safety and reliability of ourproducts compared to competing or alternative products; product acceptance by physicians, other health care providers and patients; our ability to complywith applicable laws, regulations and regulatory requirements with respect to the commercialization of our products, including any changes or increases toregulatory restrictions; protection of our proprietary rights; obtaining reimbursement for our products in approved indications; our ability to completeclinical development and obtain regulatory approvals for our products, and the timing and scope of regulatory approvals; our ability to provide a reliablesupply of commercial quantities of a product to the market; and our ability to recruit, retain and develop skilled employees.With respect to our proprietary injectable product platform, we are aware that there are other companies developing extended-release delivery systemsfor pharmaceutical products, including, but not limited to Luye Pharma Group Ltd. (“Luye Pharma”), which is developing risperidone formulated as extendedrelease microspheres for intramuscular injection for the treatment of schizophrenia and/or schizoaffective disorders. In the treatment of schizophrenia,ARISTADA, INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDAL CONSTA compete with each other and a number of otherinjectable products including ZYPREXA RELPREVV ((olanzapine) For Extended Release Injectable Suspension), which is marketed and sold by Lilly;ABILIFY MAINTENA (aripiprazole for extended release injectable suspension), a once-monthly injectable formulation of ABILIFY (aripiprazole) developedby Otsuka Pharm. Co.; PERSERIS (risperidone for extended release injectable suspension), a once-monthly formulation of risperidone marketed by Indiviorplc; oral compounds currently on the market; and generic versions of branded oral and injectable products. In the treatment of bipolar disorder, RISPERDALCONSTA competes with antipsychotics such as oral aripiprazole, REXULTI, LATUDA, VRAYLAR, ABILIFY MAINTENA, risperidone, quetiapine,olanzapine, ziprasidone and clozapine.16Table of ContentsIn the treatment of alcohol dependence, VIVITROL competes with generic acamprosate calcium (also known as CAMPRAL) and generic disulfiram(also known as ANTABUSE) as well as currently marketed drugs, including generic drugs, also formulated from naltrexone. Other pharmaceutical companiesare developing products that have shown some promise in treating alcohol dependence that, if approved by the FDA, would compete with VIVITROL.In the treatment of opioid dependence, VIVITROL competes with SUBOXONE (buprenorphine HCl/naloxone HCl dehydrate sublingual tablets),SUBOXONE (buprenorphine/naloxone) Sublingual Film, SUBUTEX (buprenorphine HCl sublingual tablets) and SUBLOCADE (once-monthlybuprenorphine extended-release injection), each of which is marketed and sold by Indivior plc, and BUNAVAIL buccal film (buprenorphine and naloxone)marketed by BioDelivery Sciences, PROBUPHINE (buprenorphine) from Titan Pharmaceuticals, Inc., ZUBSOLV (buprenorphine and naloxone) marketed byOrexo US, Inc., and once launched, will compete with BRIXADI, which will be marketed by Braeburn, Inc. VIVITROL also competes with methadone, oralnaltrexone and generic versions of SUBUTEX and SUBOXONE sublingual tablets. Other pharmaceutical companies are developing products that haveshown promise in treating opioid dependence that, if approved by the FDA, would compete with VIVITROL.While AMPYRA/FAMPYRA is approved as a treatment to improve walking in patients with MS, there are a number of FDA‑approved therapies for MSdisease management that seek to reduce the frequency and severity of exacerbations or slow the accumulation of physical disability for people with certaintypes of MS. These products include AVONEX, TYSABRI, TECFIDERA, and PLEGRIDY from Biogen; OCREVUS from Genentech; BETASERON fromBayer HealthCare Pharmaceuticals; COPAXONE from Teva Pharmaceutical Industries Ltd.; REBIF and NOVANTRONE from EMD Serono, Inc.; GILENYAand EXTAVIA from Novartis AG; AUBAGIO and LEMTRADA from Sanofi‑Aventis; and generic products, including generic versions of AMPYRA.With respect to our NanoCrystal technology, we are aware that other technology approaches similarly address poorly water‑soluble drugs. Theseapproaches include nanoparticles, cyclodextrins, lipid‑based self‑emulsifying drug delivery systems, dendrimers and micelles, among others, any of whichcould limit the potential success and growth prospects of products incorporating our NanoCrystal technology. In addition, there are many competingtechnologies to our OCR technology, some of which are owned by large pharmaceutical companies with drug delivery divisions and other, smallerdrug‑delivery‑specific companies.Patents and Proprietary RightsOur success will be dependent, in part, on our ability to obtain and maintain patent protection for our products, including those marketed and sold byour licensees, to maintain trade secret protection and to operate without infringing upon the proprietary rights of others. We have a proprietary portfolio ofpatent rights and exclusive licenses to patents and patent applications, which includes numerous patents in the U.S. and in other countries directed tocompositions of matter, methods of treatment and formulations, as well as processes of preparation. In the future, we plan to file additional patent applicationsin the U.S. and in other countries directed to new or improved products and processes, and we intend to vigorously defend our patent positions. In addition,our licensees may own additional patents that cover those products owned by such licensees that incorporate our proprietary technologies and for which wereceive royalties.ARISTADA and ARISTADA INITIOWe have several U.S. patents and patent applications, and a number of corresponding foreign counterparts, that cover ARISTADA and/or ARISTADAINITIO. Our principal U.S. patents for ARISTADA and/or ARISTADA INITIO and their expirations dates are as follows: U.S. Patent No. Product(s) Covered Expiration Date 8,431,576 ARISTADA;ARISTADA INITIO 2030 8,796,276 ARISTADA;ARISTADA INITIO 2030 10,112,903 ARISTADA;ARISTADA INITIO 2030 10,023,537 ARISTADA 2030 9,034,867 ARISTADA 2032 9,193,685 ARISTADA 2033 9,861,699 ARISTADA 2033 9,452,131 ARISTADA 2035 9,526,726 ARISTADA 2035 10,064,859 ARISTADA 2035 10,016,415 ARISTADA INITIO 2035In the U.S., in addition to patent protection, ARISTADA is entitled to regulatory exclusivity until October 2020, a benefit afforded to new chemicalentities.17Table of ContentsVIVITROL and RISPERDAL CONSTAWe have a significant number of patents and certain pending patent applications covering our microsphere technology throughout the world, which,to some extent, cover VIVITROL and RISPERDAL CONSTA. The latest to expire of our patents covering VIVITROL and RISPERDAL CONSTA, expire inthe U.S. in 2029 and 2023, respectively, and in the EU in 2021, and we own 13 and 4 unexpired Orange-Book listed U.S. patents covering VIVITROL andRISPERDAL CONSTA, respectively. For a discussion of legal proceedings related to certain of the patents covering VIVITROL and RISPERDAL CONSTA,see Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Item 3—Legal Proceedings” in this AnnualReport.INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTAOur NanoCrystal technology patent portfolio, licensed to Janssen in relation to INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA,contains a number of granted patents and pending patent applications throughout the world, including in the U.S. and in countries outside of the U.S. Thelatest of the patents subject to our license agreement with Janssen covering INVEGA SUSTENNA/XEPLION expires in 2030 in the U.S. and certain othercountries and in 2022 in the EU. The latest to expire of the licensed patents covering INVEGA TRINZA/TREVICTA in the U.S. expired in 2017 and in theEU will expire in 2022. In addition, Janssen has other patents not subject to our license agreement, including one that covers INVEGA SUSTENNA in theU.S. and expires in 2031 and one that covers INVEGA TRINZA in the U.S. and expires in 2036. For a discussion of legal proceedings related to the patentscovering INVEGA SUSTENNA, see Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report.AMPYRA/FAMPYRAOur OCR technology is protected by a patent estate including patents and patent applications filed worldwide. Some OCR patent families are product-specific (including some which are owned by our licensees), whereas others cover generic delivery platforms (e.g., different release profiles, taste masking,etc.). AMPYRA/FAMPYRA incorporates our matrix drug absorption system technology. All of the U.S. patents covering AMPYRA have expired or havebeen revoked. Acorda has a number of European patents covering FAMPYRA (with regulatory exclusivity in the EU until 2021), the latest of which expiresin 2025. For a discussion of legal proceedings related to the patents covering AMPYRA, see Note 16, Commitments and Contingent Liabilities in the “Notesto Consolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report.We also have worldwide patent protection for our Key Development Programs:ALKS 3831We own or have a license to U.S. and worldwide patents and patent applications that cover a class of compounds that includes the opioid modulatorsin ALKS 3831. In addition, we own U.S. and worldwide patents and patent applications that claim formulations and methods of treatment that cover ALKS3831. The principal owned or licensed U.S. patents for ALKS 3831 and their expiration dates are as follows: U.S. Patent No. Product(s) Covered Expiration Date 7,956,187 ALKS 3831 2021 8,252,929 ALKS 3831 2021 7,262,298 ALKS 3831 2025 8,680,112 ALKS 3831 2030 9,119,848 ALKS 3831 2031 10,005,790 ALKS 3831 2031 8,778,960 ALKS 3831 2031 9,126,977 ALKS 3831 2031 9,517,235 ALKS 3831 2031Diroximel Fumarate (BIIB098)We have U.S. patents and patent applications, and a number of corresponding foreign counterparts, that cover BIIB098. U.S. Patent Nos. 8,669,281and 9,090,558, each expiring in 2033, cover compositions of or methods for BIIB098.ALKS 4230We have U.S. patents and patent applications, and a number of corresponding foreign counterparts, that cover ALKS 4230. U.S. Patent No. 9,359,415,expiring in 2033, covers compositions of ALKS 4230.18Table of ContentsProtection of Proprietary Rights and Competitive PositionWe have exclusive rights through licensing agreements with third parties to issued U.S. patents, pending patent applications and correspondingpatents or patent applications in countries outside the U.S, subject in certain instances to the rights of the U.S. government to use the technology covered bysuch patents and patent applications. Under certain licensing agreements, we are responsible for patent expenses, and we pay annual license fees and/orminimum annual royalties. In addition, under these licensing agreements, we are obligated to pay royalties on future sales of products, if any, covered by thelicensed patents.There may be patents issued to third parties that relate to our products. The manufacture, use, offer for sale, sale or import of some of our productsmight be found to infringe on the claims of these patents. A third party might file an infringement action against us. The cost of defending such an action islikely to be high, and we might not receive a favorable ruling. There may also be patent applications filed by third parties that relate to some of our productsif issued in their present form. The patent laws of the U.S. and other countries are distinct, and decisions as to patenting, validity of patents and infringementof patents may be resolved differently in different countries.If patents exist or are issued that cover our products, we or our licensees may not be able to manufacture, use, offer for sale, sell or import some of ourproducts without first getting a license from the patent holder. The patent holder may not grant us a license on reasonable terms, or it may refuse to grant us alicense at all. This could delay or prevent us from developing, manufacturing, selling or importing those of our products that would require the license.We try to protect our proprietary position by filing patent applications in the U.S. and in other countries related to our proprietary technology,inventions and improvements that are important to the development of our business. Because the patent position of biopharmaceutical companies involvescomplex legal and factual questions, enforceability of patents cannot be predicted with certainty. The ultimate degree of patent protection that will beafforded to products and processes, including ours, in the U.S. and in other important markets, remains uncertain and is dependent upon the scope ofprotection decided upon by the patent offices, courts and lawmakers in these countries. Patents, if issued, may be challenged, invalidated or circumvented.Thus, any patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may filein the future, or those we may license from third parties, may not result in patents being issued. If issued, they may not provide us with proprietary protectionor competitive advantages against competitors with similar technology. Furthermore, others may independently develop similar technologies or duplicateany technology that we have developed outside the scope of our patents. The laws of certain countries do not protect our intellectual property rights to thesame extent as do the laws of the U.S.We also rely on trade secrets, know‑how and technology, which are not protected by patents, to maintain our competitive position. We try to protectthis information by entering into confidentiality agreements with parties that have access to it, such as our corporate partners, collaborators, licensees,employees and consultants. Any of these parties may breach the agreements and disclose our confidential information or our competitors might learn of theinformation in some other way. If any trade secret, know‑how or other technology not protected by a patent were to be disclosed to, or independentlydeveloped by, a competitor, such event could materially adversely affect our business, results of operations, cash flows and financial condition. For moreinformation, see “Item 1A—Risk Factors.”Our trademarks, including VIVITROL, ARISTADA and ARISTADA INITIO, are important to us and are generally covered by trademark applications orregistrations in the U.S. Patent and Trademark Office and the patent or trademark offices of other countries. Products using our proprietary technologies alsouse trademarks that are owned by our licensees, such as the trademarks INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDALCONSTA, which are registered trademarks of Johnson & Johnson and AMPYRA and FAMPYRA, which are registered trademarks of Acorda. Trademarkprotection varies in accordance with local law and continues in some countries as long as the trademark is used and in other countries as long as thetrademark is registered. Trademark registrations generally are for fixed but renewable terms.RegulatoryRegulation of Pharmaceutical ProductsUnited StatesOur current and contemplated activities, and the products and processes that result from such activities, are subject to substantial governmentregulation. Before new pharmaceutical products may be sold in the U.S., pre‑clinical studies and clinical trials of the products must be conducted and theresults submitted to the FDA for approval. Clinical trial programs must determine an appropriate dose and regimen, establish substantial evidence ofeffectiveness and define the conditions for safe use. This is a high‑risk process that requires stepwise clinical studies in which the product must successfullymeet pre‑specified endpoints.19Table of ContentsPre‑Clinical Testing: Before beginning testing of any compounds with potential therapeutic value in human subjects in the U.S., stringentgovernment requirements for pre‑clinical data must be satisfied. Pre‑clinical testing includes both in vitro, or in an artificial environment outside of a livingorganism, and in vivo, or within a living organism, laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation.Investigational New Drug Exemption: Pre‑clinical testing results obtained from in vivo studies in several animal species, as well as from in vitrostudies, are submitted to the FDA, as part of an IND, and are reviewed by the FDA prior to the commencement of human clinical trials. The pre‑clinical datamust provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical studies in human volunteers.Clinical Trials: Clinical trials involve the administration of the drug to healthy human volunteers or to patients under the supervision of a qualifiedinvestigator pursuant to an FDA‑reviewed protocol. Human clinical trials are typically conducted in three sequential phases, although the phases mayoverlap with one another and, depending upon the nature of the clinical program, a specific phase or phases may be skipped altogether. Clinical trials mustbe conducted under protocols that detail the objectives of the study, the parameters to be used to monitor safety, and the efficacy criteria, if any, to beevaluated. Each protocol must be submitted to the FDA as part of the IND. •Phase 1 clinical trials—test for safety, dose tolerability, absorption, bio‑distribution, metabolism, excretion and clinical pharmacology and, ifpossible, to gain early evidence regarding efficacy. •Phase 2 clinical trials—involve a relatively small sample of the actual intended patient population and seek to assess the efficacy of the drugfor specific targeted indications, to determine dose‑response and the optimal dose range and to gather additional information relating to safetyand potential adverse effects. •Phase 3 clinical trials—consist of expanded, large‑scale studies of patients with the target disease or disorder to obtain definitive statisticalevidence of the efficacy and safety of the proposed product and dosing regimen.In the U.S., the results of the pre‑clinical and clinical testing of a product are then submitted to the FDA in the form of a Biologics License Application(“BLA”), or an NDA. The NDA or BLA also includes information pertaining to the preparation of the product, analytical methods, details of the manufactureof finished products and proposed product packaging and labeling. The submission of an application is not a guarantee that the FDA will find the applicationcomplete and accept it for filing. The FDA may refuse to file the application if it is not considered sufficiently complete to permit a review and will inform theapplicant of the reason for the refusal. The applicant may then resubmit the application and include supplemental information.Once an NDA or BLA is accepted for filing, the FDA has 10 months, under its standard review process, within which to review the application (forsome applications, the review process is longer than 10 months). For drugs that, if approved, would represent a significant improvement in the safety oreffectiveness of the treatment, diagnosis, or prevention of serious conditions when compared to standard applications, the FDA may assign “priority review”designation and review the application within 6 months. The FDA has additional review pathways to expedite development and review of new drugs that areintended to treat serious or life‑threatening conditions and demonstrate the potential to address unmet medical needs, including: “Fast Track,”“Breakthrough Therapy,” and “Accelerated Approval.” However, none of these expedited pathways ensure that a product will receive FDA approval.As part of its review, the FDA may refer the application to an advisory committee for independent advice on questions related to the development ofthe drug and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee;however, historically, it has typically followed such recommendations. The FDA may determine that a Risk Evaluation and Mitigation Strategy (“REMS”) isnecessary to ensure that the benefits of a new product outweigh its risks. If required, a REMS may include various elements, such as publication of amedication guide, a patient package insert, a communication plan to educate health care providers of the drug’s risks, limitations on who may prescribe ordispense the drug, or other measures that the FDA deems necessary to assure the safe use of the drug.In reviewing a BLA or NDA, the FDA may grant marketing approval, or issue a complete response letter to communicate to the applicant the reasonsthe application cannot be approved in its then-current form and provide input on the changes that must be made before an application can be approved. Evenif such additional information and data are submitted to the FDA, the FDA may ultimately decide that the BLA or NDA still does not satisfy the criteria forapproval. The receipt of regulatory approval often takes a number of years, involves the expenditure of substantial resources and depends on a number offactors, including the severity of the disease in question, the availability of alternative treatments, efficacy and potential safety signals observed inpre‑clinical tests or clinical trials, and the risks and benefits demonstrated in clinical trials. It is impossible to predict with any certainty whether and when theFDA will grant marketing approval. Even if a product is approved, the approval may be subject to limitations based on the FDA’s interpretation of the data.For example, the FDA may require, as a condition of approval, restricted distribution and use, enhanced labeling, special packaging or labeling, expeditedreporting of certain adverse events, pre‑approval of promotional materials or restrictions on direct‑to‑consumer advertising, any of which could negativelyimpact the commercial success of a drug. The FDA may require a sponsor to conduct additional post‑marketing studies as a condition of approval to providedata on safety and effectiveness. In addition, prior to commercialization, controlled substances are subject to review and scheduling by the DEA.20Table of ContentsThe FDA tracks information on side effects and adverse events reported during clinical studies and after marketing approval. Non‑compliance withsafety reporting requirements may result in civil or criminal penalties. Side effects or adverse events that are identified during clinical trials can delay, impedeor prevent marketing approval. Based on new safety information that emerges after approval, the FDA can mandate product labeling changes, impose aREMS or the addition of elements to an existing REMS, require new post‑marketing studies (including additional clinical trials), or suspend or withdrawapproval of the product.If we seek to make certain types of changes to an approved product, such as adding a new indication, making certain manufacturing changes, orchanging manufacturers or suppliers of certain ingredients or components, the FDA will need to review and approve such changes in advance. In the case of anew indication, we are required to demonstrate with additional clinical data that the product is safe and effective for the new intended use. Such regulatoryreviews can result in denial or modification of the planned changes, or requirements to conduct additional tests or evaluations that can substantially delay orincrease the cost of the planned changes.In addition, the FDA regulates all advertising and promotional activities for products under its jurisdiction. A company can make only those claimsrelating to safety and efficacy that are consistent with FDA regulation and guidance. However, physicians may prescribe legally available drugs for uses thatare not described in the drug’s labeling. Such off‑label uses are common across certain medical specialties and often reflect a physician’s belief that theoff‑label use is the best treatment for a particular patient. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDAregulations do impose stringent restrictions on manufacturers’ communications regarding off‑label uses. Failure to comply with applicable FDA requirementsmay subject a company to adverse publicity, enforcement action by the FDA and the U.S. Department of Justice, corrective advertising and the full range ofcivil and criminal penalties available to the FDA and the U.S. Department of Justice.Controlled Substances Act: The DEA regulates pharmaceutical products that are controlled substances. Controlled substances are those drugs thatappear on one of the five schedules promulgated and administered by the DEA under the Controlled Substances Act (the “CSA”). The CSA governs, amongother things, the inventory, distribution, recordkeeping, handling, security and disposal of controlled substances. Pharmaceutical products that act on theCNS are often evaluated for abuse potential; a product that is then classified as a controlled substance must undergo scheduling by the DEA, which is aseparate process that may delay the commercial launch of a pharmaceutical product even after FDA approval of the NDA for such product. Companies with ascheduled pharmaceutical product are subject to periodic and ongoing inspections by the DEA and similar state drug enforcement authorities to assessongoing compliance with the DEA’s regulations. Any failure to comply with these regulations could lead to a variety of sanctions, including the revocation,or a denial of renewal, of any DEA registration and injunctions, or civil or criminal penalties.Outside the United StatesCertain of our products are commercialized by our licensees in numerous jurisdictions outside the U.S. Most of these jurisdictions have productapproval and post‑approval regulatory processes that are similar in principle to those in the U.S. In Europe, there are several tracks for marketing approval,depending on the type of product for which approval is sought. Under the centralized procedure, a company submits a single application to the EMA. Themarketing application is similar to the NDA in the U.S. and is evaluated by the Committee for Medicinal Products for Human Use (“CHMP”), the expertscientific committee of the EMA. If the CHMP determines that the marketing application fulfills the requirements for quality, safety, and efficacy, it willsubmit a favorable opinion to the European Commission (“EC”). The CHMP opinion is not binding, but is typically adopted by the EC. A marketingapplication approved by the EC is valid in all member states.In addition to the centralized procedure, Europe also has: (i) a nationalized procedure, which requires a separate application to, and approvaldetermination by, each country; (ii) a decentralized procedure, whereby applicants submit identical applications to several countries and receivesimultaneous approval; and (iii) a mutual recognition procedure, where applicants submit an application to one country for review and other countries mayaccept or reject the initial decision. Regardless of the approval process employed, various parties share responsibilities for the monitoring, detection andevaluation of adverse events post‑approval, including national authorities, the EMA, the EC and the marketing authorization holder.Good Manufacturing ProcessesThe FDA, the EMA, the competent authorities of the EU member states and other regulatory agencies regulate and inspect equipment, facilities andprocesses used in the manufacturing of pharmaceutical and biologic products prior to approving a product. If, after receiving clearance from regulatoryagencies, a company makes a material change in manufacturing equipment, location or process, additional regulatory review and approval may be required.Companies also must adhere to cGMP and product‑specific regulations enforced by the FDA following product approval. The FDA, the EMA and otherregulatory agencies also conduct regular, periodic visits to re‑inspect equipment, facilities and processes following the initial approval of a product. If, as aresult of these inspections, it is determined that our equipment, facilities or processes do not comply with applicable regulations and conditions of productapproval, regulatory agencies may seek civil, criminal or administrative sanctions and/or remedies against us, including the suspension of our manufacturingoperations.21Table of ContentsGood Clinical PracticesThe FDA, the EMA and other regulatory agencies promulgate regulations and standards, commonly referred to as Good Clinical Practices (“GCP”), fordesigning, conducting, monitoring, auditing and reporting the results of clinical trials to ensure that the data and results are accurate and that the trialparticipants are adequately protected. The FDA, the EMA and other regulatory agencies enforce GCP through periodic inspections of trial sponsors, principalinvestigators, trial sites, contract research organizations (“CROs”) and institutional review boards. If our studies fail to comply with applicable GCP, patientsafety and well-being could be impacted, the clinical data generated in our clinical trials may be deemed unreliable, and relevant regulatory agencies mayrequire us to perform additional clinical trials before approving our marketing applications. Noncompliance can also result in civil or criminal sanctions. Werely on third parties, including CROs, to carry out many of our clinical trial‑related activities. Failure of such third parties to comply with GCP can likewiseresult in rejection of our clinical trial data or other sanctions.Hatch‑Waxman ActUnder the U.S. Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch‑Waxman Act”), Congress created an abbreviated FDAreview process for generic versions of pioneer, or brand‑name, drug products. The law also provides incentives by awarding, in certain circumstances,non‑patent related marketing exclusivities to pioneer drug manufacturers. Newly approved drug products and changes to the conditions of use of approvedproducts may benefit from periods of non‑patent‑related marketing exclusivity in addition to any patent protection the drug product may have. TheHatch‑Waxman Act provides five years of new chemical entity (“NCE”) marketing exclusivity to the first applicant to gain approval of an NDA for a productthat contains an active ingredient, known as the active drug moiety, not found in any other approved product. The FDA is prohibited from accepting anyabbreviated NDA (“ANDA”) for a generic drug or 505(b)(2) application referencing the NCE for five years from the date of approval of the NCE, or four yearsin the case of an ANDA or 505(b)(2) application containing a patent challenge. A 505(b)(2) application is an NDA wherein the applicant relies, in part, ondata and the FDA’s findings of safety and efficacy from studies not conducted by or for it and for which the applicant has not obtained a right of reference.Hatch-Waxman Act exclusivities will not prevent the submission or approval of a full NDA (e.g., under 505(b)(1)), as opposed to an ANDA or 505(b)(2)application, for any drug, including, for example, a drug with the same active ingredient, dosage form, route of administration, strength and conditions of use.The Hatch‑Waxman Act also provides three years of exclusivity for applications containing the results of new clinical investigations, other thanbioavailability studies, essential to the FDA’s approval of new uses of approved products, such as new indications, dosage forms, strengths, or conditions ofuse. However, this exclusivity only protects against the approval of ANDAs and 505(b)(2) applications for the protected use and will not prohibit the FDAfrom accepting or approving ANDAs or 505(b)(2) applications for other products containing the same active ingredient.The Hatch‑Waxman Act requires NDA applicants and NDA holders to provide certain information about patents related to the drug for listing in theFDA’s Approved Drugs Product List, commonly referred to as the Orange Book. ANDA and 505(b)(2) applicants must then certify regarding each of thepatents listed with the FDA for the reference product. A certification that a listed patent is invalid or will not be infringed by the marketing of the applicant’sproduct is called a “Paragraph IV certification.” If the ANDA or 505(b)(2) applicant provides such a notification of patent invalidity or noninfringement, thenthe FDA may accept the ANDA or 505(b)(2) application four years after approval of the NDA for an NCE. If a Paragraph IV certification is filed and the ANDAor 505(b)(2) application has been accepted as a reviewable filing by the FDA, the ANDA or 505(b)(2) applicant must then, within 20 days, provide notice tothe NDA holder and patent owner stating that the application has been submitted and providing the factual and legal basis for the applicant’s opinion thatthe patent is invalid or not infringed. The NDA holder or patent owner may file suit against the ANDA or 505(b)(2) applicant for patent infringement. If this isdone within 45 days of receiving notice of the Paragraph IV certification, a one‑time, 30‑month stay of the FDA’s ability to approve the ANDA or 505(b)(2)application is triggered. The 30‑month stay begins at the end of the NDA holder’s data exclusivity period, or, if data exclusivity has expired, on the date thatthe patent holder is notified. The FDA may approve the proposed product before the expiration of the 30‑month stay if a court finds the patent invalid or notinfringed, or if the court shortens the period because the parties have failed to cooperate in expediting the litigation.Sales and MarketingWe are subject to various U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti‑kickback laws and false claims laws.Anti‑kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, thereferral of business, including the purchase or prescription of a particular drug. Due to the broad scope of the U.S. statutory provisions, the general absence ofguidance in the form of regulations, and few court decisions addressing industry practices, it is possible that our practices might be challenged underanti‑kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment tothird‑party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services notprovided as claimed or claims for medically unnecessary items or services. Activities relating to the sale and marketing of our products may be subject toscrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil22Table of Contentssanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal healthcare programs (including Medicare andMedicaid). In addition, federal and state authorities are paying increased attention to enforcement of these laws within the pharmaceutical industry andprivate individuals have been active in alleging violations of the laws and bringing suits on behalf of the government under the federal civil False ClaimsAct. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed. See “Item 1A—Risk Factors” andspecifically those sections entitled “—If we fail to comply with the extensive legal and regulatory requirements affecting the healthcare industry, we couldface increased costs, penalties and a loss of business,” “—Revenues generated by sales of our products depend on the availability of reimbursement fromthird‑party payers, and a reduction in payment rate or reimbursement or an increase in our financial obligation to governmental payers could result indecreased sales of our products and decreased revenues” and “—The commercial use of our products may cause unintended side effects or adverse reactions,or incidents of misuse may occur, which could adversely affect our business and share price.”Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceuticalmanufacturers. The laws and regulations generally limit financial interactions between manufacturers and healthcare providers and require disclosure to thegovernment and public of such interactions. The laws include federal “sunshine”, or open payments, provisions enacted in 2010 as part of the comprehensivefederal healthcare reform legislation and supplemented as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment forPatients and Communities Act. Such provisions apply to pharmaceutical manufacturers with products reimbursed under certain government programs andrequire those manufacturers to disclose annually to the federal government (for re‑disclosure to the public) certain payments made to, or at the request of, oron behalf of, physicians or to teaching hospitals and, commencing for information to be submitted as of January 1, 2022, certain payments made tophysicians assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-midwives. Certain state laws alsorequire disclosure of pharmaceutical pricing information and marketing expenditures. Given the ambiguity found in many of these laws and theirimplementation, our reporting actions could be subject to the penalty provisions of the pertinent federal and state laws and regulations.Pricing and ReimbursementUnited StatesIn the U.S., sales of our products, including those sold by our licensees, and our ability to generate revenues on such sales are dependent, in significantpart, on the availability and level of reimbursement from third‑party payers such as state and federal governments, including Medicare and Medicaid,managed care providers and private insurance plans. Third‑party payers are increasingly challenging the prices charged for medical products and examiningthe medical necessity and cost‑effectiveness of medical products, in addition to their safety and efficacy.Medicaid is a joint federal and state program that is administered by the states for low‑income and disabled beneficiaries. Under the Medicaid rebateprogram, we are required to pay a rebate for each unit of product reimbursed by the state Medicaid programs. The amount of the rebate for each product is setby law as the greater of 23.1% of average manufacturer price (“AMP”) or the difference between AMP and the best price available from us to any commercialor non‑federal governmental customer. The rebate amount must be adjusted upward where the AMP for a product’s first full quarter of sales, when adjusted forincreases in the Consumer Price Index—Urban, is less than the AMP for the current quarter, with this difference being the amount by which the rebate isadjusted upwards. The rebate amount is required to be recomputed each quarter based on our report of current AMP and best price for each of our products tothe Centers for Medicare & Medicaid Services (“CMS”). The terms of our participation in the rebate program imposes a requirement for us to report revisionsto AMP or best price within a period not to exceed 12 quarters from the quarter in which the data was originally due. Any such revisions could have theimpact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. In addition, if we were found to haveknowingly submitted false information to the government, the statute provides for civil monetary penalties per item of false information in addition to otherpenalties available to the government. Medicare is a federal program that is administered by the federal government that covers individuals age 65 and overas well as those with certain disabilities. Medicare Part B pays physicians who administer our products under a payment methodology using average salesprice (“ASP”) information. Manufacturers, including us, are required to provide ASP information to the CMS on a quarterly basis. This information is used tocompute Medicare payment rates, with rates for Medicare Part B drugs outside the hospital outpatient setting and in the hospital outpatient setting consistingof ASP plus a specified percentage. These rates are adjusted periodically. If a manufacturer is found to have made a misrepresentation in the reporting of ASP,the statute provides for civil monetary penalties for each misrepresentation and for each day in which the misrepresentation was applied.23Table of ContentsMedicare Part D provides coverage to enrolled Medicare patients for self‑administered drugs (i.e. drugs that do not need to be injected or otherwiseadministered by a physician) and certain physician-administered drugs reimbursed under a pharmacy benefit. Medicare Part D also covers the prescriptiondrug benefit for dual eligible beneficiaries. Medicare Part D is administered by private prescription drug plans approved by the U.S. government and eachdrug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time‑to‑time. Theprescription drug plans negotiate pricing with manufacturers and may condition formulary placement on the availability of manufacturer discounts. Exceptfor dual eligible Medicare Part D beneficiaries who qualify for low income subsidies, manufacturers, including us, are required to provide a fifty percent(50%) discount on our brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries reach the coverage gap in their drugbenefits; the Bipartisan Budget Act of 2018, signed into law on February 9, 2018, increased this discount percentage on brand name prescription drugs toseventy percent (70%) starting in 2019.The availability of federal funds to pay for our products under the Medicaid Drug Rebate Program and Medicare Part B requires that we extenddiscounts to certain purchasers under the Public Health Services (“PHS”) pharmaceutical pricing program. Purchasers eligible for discounts include a varietyof community health clinics, other entities that receive health services grants from PHS, and hospitals that serve a disproportionate share of financially needypatients.We also make our products available for purchase by authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administrationpursuant to our FSS contract with the Department of Veterans Affairs. Under the Veterans Health Care Act of 1992 (the “VHC Act”), we are required to offerdeeply discounted FSS contract pricing to four federal agencies: the Department of Veterans Affairs; the Department of Defense; the Coast Guard; and thePHS (including the Indian Health Service), in order for federal funding to be made available for reimbursement of any of our products by such federalagencies and certain federal grantees. Coverage under Medicaid, the Medicare Part B program and the PHS pharmaceutical pricing program is alsoconditioned upon FSS participation. FSS pricing is negotiated periodically with the Department of Veterans Affairs. FSS pricing is intended not to exceed theprice that we charge our most‑favored non‑federal customer for a product. In addition, prices for drugs purchased by the Department of Veterans Affairs,Department of Defense (including drugs purchased by military personnel and dependents through the TriCare retail pharmacy program), Coast Guard andPHS are subject to a cap on pricing equal to 76% of the non‑federal average manufacturer price (“non‑FAMP”). An additional discount applies if non‑FAMPincreases more than inflation (measured by the Consumer Price Index—Urban). In addition, if we are found to have knowingly submitted false information tothe government, the VHC Act provides for civil monetary penalties per false item of information in addition to other penalties available to the government.In addition, on January 21, 2016, CMS released the final Medicaid covered outpatient drug regulation, which became effective on April 1, 2016. Thisregulation implements those changes made by the Patient Protection and Affordable Care Act (the “PPACA”) to the Medicaid drug rebate statute in 2010 andaddresses a number of other issues with respect to the Medicaid program, including, but not limited to, the eligibility and calculation methodologies for AMPand best price, and the expansion of Medicaid rebate liability to include Medicaid managed care organizations. The final Medicaid covered outpatient drugregulation established two calculation methodologies for AMP: one for drugs generally dispensed through retail community pharmacies (“RCP”) and one forso-called “5i drugs” (inhaled, infused, instilled, implanted or injectable drugs) “not generally dispensed” through RCPs. The regulation further made clearthat 5i drugs would qualify as “not generally dispensed” and, therefore, able to use the alternative AMP calculation, if not more than thirty percent (30%) oftheir sales were to RCPs or to wholesalers for RCPs. The primary difference between the two AMP calculations is the requirement to exclude from AMP, forthose qualifying 5i drugs not generally dispensed through RCPs, certain payments, rebates and discounts related to sales to non-RCPs; such exclusion oftenleads to a lower AMP. The decision of which AMP calculation a product is eligible to use must be made and applied on a monthly basis based on thepercentage of sales of such product to RCPs or to wholesalers for RCPs.The U.S. federal and state governments regularly consider reforming healthcare coverage and lessening healthcare costs. Such reforms may includeprice controls, value-based pricing and changes to the coverage and reimbursement of our products, which may have a significant impact on our business. Forexample, on January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking as part of ongoingadministration drug pricing reform efforts that would modify a regulatory provision that had previously protected certain pharmaceutical manufacturerrebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute and that would add new regulatory safe harbors for certainprice reductions passed through to dispensing pharmacies and payments to pharmacy benefit managers. In addition, emphasis on managed care in the U.S.has increased and we expect will continue to increase the pressure on drug pricing. Private insurers regularly seek to manage drug cost and utilization byimplementing coverage and reimbursement limitations through means including, but not limited to, formularies, increased out‑of‑pocket obligations andvarious prior authorization requirements. Even if favorable coverage and reimbursement status is attained for one or more products for which we havereceived regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.24Table of ContentsOutside the United StatesWithin the EU, products are paid for by a variety of payers, with governments being the primary source of payment. Governments may determine orinfluence reimbursement of products. Governments may also set prices or otherwise regulate pricing. Negotiating prices with governmental authorities candelay commercialization of products. Governments may use a variety of cost‑containment measures to control the cost of products, including price cuts,mandatory rebates, value‑based pricing and reference pricing (i.e. referencing prices in other countries and using those reference prices to set a price). Recentbudgetary pressures in many EU countries are causing governments to consider or implement various cost‑containment measures, such as price freezes,increased price cuts and rebates, and expanded generic substitution and patient cost‑sharing. If budget pressures continue, governments may implementadditional cost‑containment measures.Other RegulationsForeign Corrupt Practices Act: We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), which prohibits U.S. corporations and theirrepresentatives from paying, offering to pay, promising, authorizing, or making payments of anything of value to any foreign government official,government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in anofficial capacity. In many countries, the healthcare professionals with whom we regularly interact may meet the FCPA’s definition of a foreign governmentofficial. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise andmaintain an adequate system of internal accounting controls.Environmental, Health and Safety Laws: Our operations are subject to complex and increasingly stringent environmental, health and safety laws andregulations in the countries where we operate and, in particular, where we have manufacturing facilities, namely the U.S. and Ireland. Environmental andhealth and safety authorities in the relevant jurisdictions, including the Environmental Protection Agency and the Occupational Safety and HealthAdministration in the U.S. and the Environmental Protection Agency and the Health and Safety Authority in Ireland, administer laws which regulate, amongother matters, the emission of pollutants into the air (including the workplace), the discharge of pollutants into bodies of water, the storage, use, handling anddisposal of hazardous substances, the exposure of persons to hazardous substances, and the general health, safety and welfare of employees and members ofthe public. In certain cases, these laws and regulations may impose strict liability for pollution of the environment and contamination resulting from spills,disposals or other releases of hazardous substances or waste and/or any migration of such hazardous substances or waste. Costs, damages and/or fines mayresult from the presence, investigation and remediation of contamination at properties currently or formerly owned, leased or operated by us and/or off‑sitelocations, including where we have arranged for the disposal of hazardous substances or waste. In addition, we may be subject to third‑party claims, includingfor natural resource damages, personal injury and property damage, in connection with such contamination.The General Data Protection Regulation (“GDPR”): The GDPR came into force on May 25, 2018 and replaced the previous European Union (“EU”)Data Protection Directive (95/46). The GDPR, which governs the processing of personal data (including personal health data), applies to the Company andany of its subsidiaries that are established in the EU as well as any of its subsidiaries that are established outside the EU to the extent that they processpersonal data relating to clinical trial participants in the EU. The GDPR imposes significant obligations on controllers and processors of personal data,including, as compared to the prior directive, higher standards for obtaining consent from individuals to process their personal data, more robust notificationrequirements to individuals about the processing of their personal data, a strengthened individual data rights regime, mandatory data breach notifications,limitations on the retention of personal data, increased requirements pertaining to health data, and strict rules and restrictions on the transfer of personal dataoutside of the EU, including to the U.S. The GDPR also imposes additional obligations on, and required contractual provisions to be included in, contractsbetween companies subject to the GDPR and their third-party processors that relate to the processing of personal data. The GDPR allows EU member states tomake additional laws and regulations further limiting the processing of genetic, biometric or health data..Other Laws: We are subject to a variety of financial disclosure, securities trading regulations and governmental regulations as an Irish-incorporatedpublic company in the U.S., including laws relating to the oversight activities of the Securities and Exchange Commission (“SEC”), the Irish Companies Act2014, and the regulations of the Nasdaq, on which our shares are traded. We are also subject to various laws, regulations and recommendations relating to safeworking conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal ofhazardous or potentially hazardous substances used in connection with our research work.EmployeesAs of February 4, 2019, we had approximately 2,300 full‑time employees. A significant number of our management and professional employees haveprior experience with pharmaceutical, biopharmaceutical or medical product companies. We believe that we have been successful in attracting skilled andexperienced scientific and senior management personnel; however, competition for such personnel is intense. None of our employees is covered by acollective bargaining agreement. We consider our relations with our employees to be good.25Table of ContentsAvailable Information and Website DisclosureOur principal executive offices are located at Connaught House, 1 Burlington Road, Dublin 4, Ireland. Our telephone number is +353‑1‑772‑8000 andour website address is www.alkermes.com. Information that is contained in and can be accessed through, our website is not incorporated into, and does notform a part of, this Annual Report. We make available free of charge through the Investors section of our website our Annual Reports on Form 10‑K, QuarterlyReports on Form 10‑Q, Current Reports on Form 8‑K and all amendments to those reports as soon as reasonably practicable after such material iselectronically filed with, or furnished to, the SEC. We also make available on our website (i) the charters for the standing committees of our board of directors,including the Audit and Risk Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and (ii) our Code of BusinessConduct and Ethics governing our directors, officers and employees. We intend to disclose on our website any amendments to, or waivers from, our Code ofBusiness Conduct and Ethics that are required to be disclosed pursuant to the rules of the SEC.From time to time, we may use our website to distribute material information. Our financial and other material information is routinely posted to andaccessible on the Investors section of our website, available at www.alkermes.com. Investors are encouraged to review the Investors section of our websitebecause we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed throughour website is not incorporated into, and does not form a part of, this Annual Report.Item 1A. Risk FactorsYou should consider carefully the risks described below in addition to the financial and other information contained in this Annual Report,including the matters addressed under the caption “Cautionary Note Concerning Forward-Looking Statements.” If any events described by the followingrisks actually occur, they could materially adversely affect our business, financial condition, cash flows or results of operations. This could cause themarket price of our ordinary shares to decline.We rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue; and if our licensees arenot effective, our revenues could be materially adversely affected.Our arrangements with licensees are critical to bringing products using our proprietary technologies and from which we receive manufacturing and/orroyalty revenue to the market and successfully commercializing them. We rely on these licensees in various respects, including commercializing suchproducts; providing funding for development programs and conducting pre-clinical testing and clinical trials with respect to new formulations or otherdevelopment activities for such products; and managing the regulatory approval process.The revenues that we receive from manufacturing fees and royalties depend primarily upon the success of our licensees, and particularly Janssen,Acorda and Biogen, in commercializing certain products. Janssen is responsible for the commercialization of RISPERDAL CONSTA, INVEGASUSTENNA/XEPLION, and INVEGA TRINZA/TREVICTA, and, in Russia and the CIS, VIVITROL. Acorda and Biogen are responsible for commercializingAMPYRA and FAMPYRA, respectively. We have no involvement in the commercialization efforts for these and other products sold by third parties to whichwe have licensed our proprietary technology. Our revenues may fall below our expectations, the expectations of our licensees or those of investors, whichcould have a material adverse effect on our results of operations and the market price of our ordinary shares. Such revenues will depend on numerous factors,many of which are outside our control.Our licensees may also choose to use their own or other technology to develop an alternative product and withdraw their support of our product, or tocompete with our jointly developed product. In addition, ARISTADA competes directly with RISPERDAL CONSTA, INVEGA SUSTENNA/XEPLION andINVEGA TRINZA/TREVICTA, products from which we receive manufacturing and/or royalty revenue. Disputes may also arise between us and a licensee andmay involve the ownership of technology developed under a license or other issues arising out of collaborative agreements. Such a dispute could delay therelated program or result in expensive arbitration or litigation, which may not be resolved in our favor.In addition, most of our licensees can terminate their agreements with us without cause, and we cannot guarantee that any of these relationships willcontinue. Failure to make or maintain these arrangements or a delay in, or failure of, a licensee’s performance, or factors that may affect a licensee’s sales, maymaterially adversely affect our business, financial condition, cash flows and results of operations.We receive substantial revenues from our key products.We depend substantially upon continued sales of INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDAL CONSTA byJanssen, upon continued sales of FAMPYRA by Biogen, and upon our continued sales of VIVITROL and ARISTADA. Any significant negativedevelopments relating to these products, or to our licensee relationships, could have a material adverse effect on our business, results of operations, cashflows and financial condition.26Table of ContentsOur revenues may be lower than expected as a result of failure by the marketplace to accept our products or for other factors.We cannot be assured that our products will be, or will continue to be, accepted in the U.S. or in any markets outside the U.S. or that sales of ourproducts will not decline or cease in the future. A number of factors may cause revenues from sales of our products to grow at a slower than expected rate, oreven to decrease or cease, including: •the perception of physicians and other members of the healthcare community as to our products’ safety and efficacy relative to that ofcompeting products and the willingness or ability of physicians and other members of the healthcare community to prescribe or dispense, andpatients to use, our products, including those that may be scheduled by the DEA (if and when approved); •unfavorable publicity concerning us or our products, similar classes of drugs or the industry generally; •the cost-effectiveness of our products; •patient and physician satisfaction with our products; •the successful manufacture of our products on a timely and cost-effective basis; •the cost and availability of raw materials necessary for the manufacture of our products; •the size of the markets for our products; •reimbursement policies of government and third-party payers; •the introduction, availability and acceptance of competing treatments, including treatments marketed and sold by our licensees; •the reaction of companies that market competitive products; •adverse event information relating to our products or to similar classes of drugs; •changes to the product labels of our products, or of products within the same drug classes, to add significant warnings or restrictions on use; •our continued ability to access third parties to vial, package and/or distribute our products on acceptable terms; •the unfavorable outcome of investigations, litigation or other legal proceedings, including government investigations regarding VIVITROL,securities litigation relating to VIVITROL and ALKS 5461, and litigation or other proceedings before the U.S. Patent and Trademark Office’s(the “USPTO”) Patent Trial and Appeal Board (the “PTAB”), including so-called “Paragraph IV” litigation relating to INVEGA SUSTENNAand AMPYRA, inter partes reviews (“IPR”) relating to VIVITROL, opposition proceedings in the EU relating to RISPERDAL CONSTA and anyother litigation related to any of our products; •regulatory developments related to the manufacture or continued use of our products, including the issuance of a REMS by the FDA; •the extent and effectiveness of the sales and marketing and distribution support our products receive, including from our licensees; •our licensees’ decisions as to the timing and volume of product orders and product shipments, the timing of product launches, and productpricing and discounting; •disputes with our licensees relating to the marketing and sale of products from which we receive revenue; •exchange rate valuations and fluctuations; •global political changes and/or instability, including the expected exit of the United Kingdom from the European Union (commonly referred toas “Brexit”), and any related changes in applicable laws and regulations, that may impact resources and markets for our products outside of theU.S.; and •any other material adverse developments with respect to the commercialization of our products.These and other factors could materially adversely affect our revenues, financial condition, cash flows and results of operations.27Table of ContentsThe FDA or other regulatory agencies may not approve our products or may delay approval.We must obtain government approvals before marketing or selling our products in the U.S. and in jurisdictions outside the U.S. The FDA, DEA (to theextent a product is a controlled substance), and comparable regulatory agencies in other countries, impose substantial and rigorous requirements for thedevelopment, production and commercial introduction of drug products. These include pre-clinical, laboratory and clinical testing procedures, samplingactivities, clinical trials and other costly and time-consuming procedures. Satisfaction of the requirements of the FDA and of other regulatory agenciestypically takes a significant number of years and can vary substantially based upon the type, complexity and novelty of the product.In addition, regulation is not static, and regulatory agencies, including the FDA, evolve in their staff, interpretations and practices and may imposemore stringent requirements than currently in effect, which may adversely affect our planned drug development and/or our commercialization efforts. Theapproval procedure and the time required to obtain approval also varies among countries. Regulatory agencies may have varying interpretations of the samedata, and approval by one regulatory agency does not ensure approval by regulatory agencies in other jurisdictions. In addition, the FDA or regulatoryagencies outside the U.S. may choose not to communicate with or update us during clinical testing and regulatory review periods. The ultimate decision bythe FDA or other regulatory agencies regarding drug approval may not be consistent with prior communications.This product approval process can last many years, be very costly and still be unsuccessful. Regulatory approval by the FDA or regulatory agenciesoutside the U.S. can be delayed, limited or not granted at all for many reasons, including: •a product may not demonstrate safety and efficacy for each target indication in accordance with the FDA’s or other regulatory agencies’standards; •data from pre-clinical testing and clinical trials may be interpreted by the FDA or other regulatory agencies in different ways than we or ourlicensees interpret it; •the FDA or other regulatory agencies may not agree with our or our licensees’ regulatory approval strategies, components of our or ourlicensees’ filings, such as clinical trial designs, conduct and methodologies, or the sufficiency of our or our licensees’ submitted data; •the FDA or other regulatory agencies might not approve our or our licensees’ manufacturing processes or facilities; •the FDA or other regulatory agencies may not approve accelerated development timelines for our products; •the failure of our clinical investigational sites and the records kept at such sites, including the clinical trial data, to be in compliance with theFDA’s GCP, or EU legislation governing GCP, including the failure to pass FDA, EMA or EU member state inspections of clinical trials; •the FDA or other regulatory agencies may change their approval policies or adopt new regulations; and •adverse medical events during the trials could lead to requirements that trials be repeated or extended, or that a program be terminated orplaced on clinical hold, even if other studies or trials relating to the program are successful.In addition, disruptions at the FDA and other regulatory agencies that are unrelated to our company or our products could also cause delays to theregulatory approval process for our products. For example, over the last several years, including in December 2018 and January 2019, the U.S. governmenthas shut down several times and certain regulatory agencies, including the FDA, have had to furlough critical employees and stop critical activities. If aprolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions.Failure to obtain regulatory approval for products will prevent their commercialization. Any delay in obtaining regulatory approval for products couldadversely affect our ability to successfully commercialize such products. In addition, share prices have declined significantly in certain instances wherecompanies have failed to obtain FDA approval of a product or where the timing of FDA approval is delayed. If the FDA’s or any other regulatory agency’sresponse to any application for approval is delayed or not favorable for any of our products, our share price could decline significantly and could materiallyadversely affect our business, financial condition, cash flows and results of operations.Clinical trials for our products are expensive, may take several years to complete, and their outcomes are uncertain.Before obtaining regulatory approvals for the commercial sale of any products, we or our licensees must demonstrate, through pre-clinical testing andclinical trials, that our products are safe and effective for use in humans. Conducting clinical trials is a lengthy, time-consuming and expensive process. Wehave incurred, and we will continue to incur, substantial expense for pre-clinical testing and clinical trials.28Table of ContentsOur pre-clinical and clinical development efforts may not be successfully completed. Completion of clinical trials may take several years or more. Thelength of time can vary substantially with the type, complexity, novelty and intended use of the product. The commencement and rate of completion ofclinical trials may be delayed by many factors, including: •the potential delay by a partner in beginning a clinical trial; •the failure of third-party contract research organizations (“CROs”) and other third-party service providers and independent clinicalinvestigators to manage and conduct the trials, to perform their oversight of the trials or to meet expected deadlines; •the inability to recruit clinical trial participants at the expected rate; •the inability to follow patients adequately after treatment; •unforeseen safety issues; •the inability to manufacture or obtain sufficient quantities of materials used for clinical trials; and •unforeseen governmental or regulatory issues or concerns, including those of the FDA, DEA and other regulatory agencies.In addition, we are currently conducting and enrolling patients in clinical studies in a number of countries where our experience is more limited. Wedepend on independent clinical investigators, CROs and other third-party service providers and our collaborators in the conduct of clinical trials for ourproducts and in the accurate reporting of results from such clinical trials. We rely heavily on these parties for successful execution of our clinical trials but donot control many aspects of their activities. For example, while the investigators are not our employees, we are responsible for ensuring that each of ourclinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Third parties may not complete activities onschedule or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols.The outcome of our clinical trials is uncertain. The results from pre-clinical testing and early clinical trials often have not predicted results of laterclinical trials. A number of products have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacydata in later clinical trials to obtain necessary regulatory approvals.If a product fails to demonstrate safety and efficacy in clinical trials, or if third parties fail to conduct clinical trials in accordance with theirobligations, the development, approval and commercialization of our products may be delayed or prevented, and such events could materially adverselyaffect our business, financial condition, cash flows and results of operations.We are subject to risks related to the manufacture of our products.The manufacture of pharmaceutical products is a highly complex process in which a variety of difficulties may arise from time to time including, butnot limited to, product loss due to material failure, equipment failure, vendor error, operator error, labor shortages, inability to obtain material, equipment ortransportation, physical or electronic security breaches, natural disasters and many other factors. Problems with manufacturing processes could result inproduct defects or manufacturing failures, which could require us to delay shipment of products or recall products previously shipped, or could impair ourability to expand into new markets or supply products in existing markets. We may not be able to resolve any such problems in a timely fashion, if at all.We rely solely on our manufacturing facility in Wilmington, Ohio for the manufacture of RISPERDAL CONSTA, VIVITROL, ARISTADA, ARISTADAINITIO and certain of our other development products. We rely on our manufacturing facility in Athlone, Ireland for the manufacture of AMPYRA (includingthe authorized generic version of AMPYRA), FAMPYRA and some of our other products using our NanoCrystal and OCR technologies.Due to regulatory and technical requirements, we have limited ability to shift production among our facilities or to outsource any part of ourmanufacturing to third parties. Any such shift of production among our facilities or transition of our manufacturing processes to a third party could take asignificant amount of time and money and may not be successful.Our manufacturing facilities also require specialized personnel and are expensive to operate and maintain. Any delay in the regulatory approval ormarket launch of products, or suspension of the sale of our products, manufactured in our facilities, may cause operating losses as we continue to operatethese facilities and retain specialized personnel. In addition, any interruption in manufacturing could result in delays in meeting contractual obligations andcould damage our relationships with our licensees, including the loss of manufacturing and supply rights.29Table of ContentsWe rely on third parties to provide services in connection with the manufacture and distribution of our products.We rely on third parties for the timely supply of specified raw materials, equipment, contract manufacturing, formulation and packaging services,storage and product distribution services, customer service activities and product returns processing. These third parties must comply with federal, state andlocal regulations applicable to their business, including FDA and, as applicable, DEA regulations. Although we actively manage these third-partyrelationships to ensure continuity, quality and compliance with regulations, some events beyond our control could result in the complete or partial failure ofthese goods and services. Any such failure could materially adversely affect our business, financial condition, cash flows and results of operations.The manufacture of products and product components, including the procurement of bulk drug product and other materials used in the manufacture ofproducts, and packaging, storage and distribution of our products, requires successful coordination among us and multiple third-party providers. Forexample, we are responsible for the entire supply chain for ARISTADA, ARISTADA INITIO and VIVITROL, up to the sale of final product and including thesourcing of key raw materials and active pharmaceutical agents from third parties. Issues with our third-party providers, including our inability to coordinatethese efforts, lack of capacity available at such third-party providers or any other problems with the operations of these third-party providers, could require usto delay shipment of saleable products, recall products previously shipped or could impair our ability to supply products at all. This could increase our costs,cause us to lose revenue or market share and damage our reputation and have a material adverse effect on our business, financial condition, cash flows andresults of operations.We endeavor to qualify and register new vendors and to develop contingency plans so that production is not impacted by issues associated with third-party providers. Nonetheless, our business could be materially and adversely affected by issues associated with third-party providers.We are also dependent in certain cases on third parties to manufacture products. Where the manufacturing rights to the products using ourtechnologies are granted to, or retained by, our third-party licensee (for example, in the cases of INVEGA SUSTENNA/XEPLION and INVEGATRINZA/TREVICTA) or approved sub-licensee, we have no control over the manufacturing, supply or distribution of the product. Supply or manufacturingissues encountered by such licensees or sublicenses could materially and adversely affect sales of such products from which we receive revenue, and ourbusiness, financial condition, cash flows and results of operations.If we or our third-party providers fail to meet the stringent requirements of governmental regulation in the manufacture of our products, we could incursubstantial remedial costs and a reduction in sales and/or revenues.We and our third-party providers are generally required to comply with cGMP regulations and other applicable foreign standards in the manufacture ofour products. In addition, in the U.S., the DEA and state-level agencies heavily regulate the manufacturing, holding, processing, security, recordkeeping anddistribution of substances, including controlled substances. Our products that are scheduled by the DEA as controlled substances make us subject to theDEA’s regulations. We are subject to unannounced inspections by the FDA, the DEA and comparable state and foreign agencies in other jurisdictions toconfirm compliance with all applicable laws. Any changes of suppliers or modifications of methods of manufacturing require amending our application to theFDA or other regulatory agencies, and ultimate amendment acceptance by such agencies, prior to release of product to the applicable marketplace. Ourinability or the inability of our third-party providers to demonstrate ongoing cGMP or other regulatory compliance could require us to withdraw or recallproducts and interrupt clinical and commercial supply of our products. Any delay, interruption or other issues that may arise in the manufacture, formulation,packaging or storage of our products as a result of a failure of our facilities or the facilities or operations of third-party providers to pass any regulatoryagency inspection could significantly impair our ability to develop and commercialize our products. This could increase our costs, cause us to lose revenueor market share and damage our reputation.The FDA and various regulatory agencies outside the U.S. have inspected and approved our commercial manufacturing facilities. We cannot guaranteethat the FDA or any other regulatory agencies will approve any other facility we or our third-party providers may operate or, once approved, that any of thesefacilities will remain in compliance with cGMP and other regulations. Any third party we use to manufacture bulk drug product must be licensed by the FDAand, for controlled substances, the DEA. Failure by us or our third-party providers to gain or maintain regulatory compliance with the FDA or other regulatoryagencies could materially adversely affect our business, financial condition, cash flows and results of operations.30Table of ContentsRevenues generated by sales of our products depend on the availability from third-party payers of reimbursement for our products and the extent of cost-sharing arrangements for patients (e.g., patient co-payment, co-insurance, deductible obligations), and any cost-control measures imposed, reductions inpayment rate or reimbursement or increases in our financial obligation to payers could result in decreased sales of our products and decreased revenues.In both U.S. and non-U.S. markets, sales of our products depend, in part, on the availability of reimbursement from third-party payers such as state andfederal governments, including Medicare and Medicaid in the U.S. and similar programs in other countries, managed care providers and private insuranceplans. Deterioration in the timeliness, certainty and amount of reimbursement for our products, the existence of barriers to coverage of our products (such asprior authorization, criteria for use or other requirements), increases in our financial obligation to payers, including government payers (including due tochanges in our AMP calculation), limitations by healthcare providers on how much, or under what circumstances, they will prescribe or administer ourproducts or unwillingness by patients to pay any required co-payments, or deductible amounts, could reduce the use of, and revenues generated from, ourproducts and could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, when a new productis approved, the availability of government and private reimbursement for that product is uncertain, as is the amount for which that product will bereimbursed. We cannot predict the availability or amount of reimbursement for our products.In the U.S., federal and state legislatures, health agencies and third-party payers continue to focus on containing the cost of healthcare, including bycomparing the effectiveness, benefits and costs of similar treatments. Any adverse findings for our products from such comparisons may reduce the extent ofreimbursement for our products. Economic pressure on state budgets may result in states increasingly seeking to achieve budget savings through mechanismsthat limit coverage or payment for drugs, including but not limited to price control initiatives, discounts and other pricing-related actions. For example, in2017, the State of California enacted as law SB-17, a drug pricing transparency bill that requires, among other things, that manufacturers notify the state andhealth insurers, and justify, any time such manufacturers plan to increase the price of a medication by sixteen percent (16%) or more over a two-year period.Similar state drug pricing initiatives were enacted in 2018 (e.g., Oregon HB 4005 with reporting requirements commencing in 2019) and we expectadditional state drug pricing initiatives to be proposed and enacted in 2019. In addition, State Medicaid programs are increasingly requesting manufacturersto pay supplemental rebates and requiring prior authorization by the state program for use of any drug. Managed care organizations continue to seek pricediscounts and, in some cases, to impose restrictions on the coverage of particular drugs. Government efforts to reduce Medicaid expenses may lead toincreased use of managed care organizations by Medicaid programs. This may result in managed care organizations influencing prescription decisions for alarger segment of the population and a corresponding constraint on prices and reimbursement for our products.In 2019, we may face uncertainties as a result of likely continued federal and administrative efforts to repeal, substantially modify or invalidate someor all of the provisions of the PPACA and potential reforms and changes to government negotiation or regulation of drug pricing. For example, on January31, 2019, HHS released a notice of proposed rulemaking as part of ongoing administration drug pricing reform efforts that would modify a regulatoryprovision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute and that would add new regulatory safe harbors for certain price reductions passed through to dispensing pharmacies and payments topharmacy benefit managers. There is no assurance that such efforts and proposed legislation will not adversely affect our business and financial results, andwe cannot predict how future federal or state legislative or administrative changes relating to healthcare reform and drug pricing will affect our business.The government-sponsored healthcare systems in Europe and many other countries are the primary payers for healthcare expenditures, includingpayment for drugs and biologics. We expect that countries may take actions to reduce expenditure on drugs and biologics, including mandatory pricereductions, patient access restrictions, suspensions of price increases, increased mandatory discounts or rebates, preference for generic products, reduction inthe amount of reimbursement and greater importation of drugs from lower-cost countries. These cost-control measures likely would reduce our revenues. Inaddition, certain countries set prices by reference to the prices in other countries where our products are marketed. Thus, the inability to secure adequateprices in a particular country may not only limit the marketing of products within that country, but may also adversely affect the ability to obtain acceptableprices in other markets.Patent protection for our products is important and uncertain.The following factors are important to our success: •receiving and maintaining patent and/or trademark protection for our products, technologies and developing technologies, including thosethat are subject to our licensing arrangements; •maintaining our trade secrets; •not infringing the proprietary rights of others; and •preventing others from infringing our proprietary rights.31Table of ContentsPatent protection only provides rights of exclusivity for the term of the patent. We are able to protect our proprietary rights from unauthorized use bythird parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. In thisregard, we try to protect our proprietary position by filing patent applications in the U.S. and elsewhere related to our proprietary product inventions andimprovements that are important to our business and products. Our pending patent applications, together with those we may file in the future, or those wemay license to or from third parties, may not result in patents being issued. Even if issued, such patents may not provide us with sufficient proprietaryprotection or competitive advantages against competitors with similar technology. The development of new technologies or products may take a number ofyears, and there can be no assurance that any patents which may be granted in respect of such technologies or products will not have expired or be due toexpire by the time such products are commercialized, or that such patents will successfully withstand any challenges during their respective terms.Although we believe that we make reasonable efforts to protect our intellectual property rights and to ensure that our proprietary technology does notinfringe the rights of third parties, we cannot ascertain the existence of all potentially conflicting intellectual property claims. Therefore, there is a risk thatthird parties may make claims of infringement against our products or technologies. There may be patents issued to, or patent applications filed by, thirdparties that relate to certain of our products. If patents exist or are issued that cover our products, we may not be able to manufacture, use, offer for sale, sell orimport such products without first getting a license from the patent holder. The patent holder may not grant us a license on reasonable terms, or it may refuseto grant us a license at all. This could delay or prevent us from developing, manufacturing, selling or importing those of our products that would require thelicense. Claims of intellectual property infringement also might require us to redesign affected products, enter into costly settlement or license agreements orpay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products. Even if we have anagreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not license theinfringed technology at all, license the technology on reasonable terms or substitute similar technology from another source, our business, financialcondition, cash flows and results of operations could be materially adversely affected.Because the patent positions of biopharmaceutical companies involve complex legal and factual questions, enforceability of patents cannot bepredicted with certainty. The ultimate degree of patent protection that will be afforded to products and processes, including ours, and those of our licensees,in the U.S. and in other important markets, remains uncertain and is dependent upon the scope of protection decided upon by the patent offices, courts andlawmakers in these countries. Patents, if issued, may be challenged, invalidated or circumvented. As more products are commercialized using our proprietaryproduct platforms, or as any product achieves greater commercial success, our patents become more likely to be subject to challenge by potentialcompetitors. The laws of certain countries may not protect our intellectual property rights to the same extent as do the laws of the U.S., and any patents thatwe own or license from others may not provide any protection against competitors. Furthermore, others may independently develop similar technologiesoutside the scope of our patent coverage.We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We try to protectthis information by entering into confidentiality agreements with parties that have access to it, such as our licensees, licensors, contract manufacturers,potential business partners, employees and consultants. Any of these parties may breach the agreements and disclose our confidential information, or ourcompetitors might learn of the information in some other way. To the extent that our employees, consultants or contractors use intellectual property ownedby others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If any trade secret, know-how or othertechnology not protected by a patent were to be disclosed to, or independently developed by, a competitor, such event could materially adversely affect ourbusiness, financial condition, cash flows and results of operations.Uncertainty over intellectual property in the biopharmaceutical industry has been the source of litigation, which is inherently costly and unpredictable,could significantly delay or prevent approval or commercialization of our products, and could adversely affect our business.There is considerable uncertainty within the biopharmaceutical industry about the validity, scope and enforceability of many issued patents in theU.S. and elsewhere in the world. We cannot currently determine the ultimate scope and validity of patents which may be granted to third parties in the futureor which patents might be asserted to be infringed by the manufacture, use or sale of our products.In part as a result of this uncertainty, there has been, and we expect that there may continue to be, significant litigation and an increasing number ofIPRs and administrative proceedings in the pharmaceutical industry regarding patents and other intellectual property rights. A patent holder might file anIPR, interference and/or infringement action against us, including in response to patent certifications required under the Hatch-Waxman Act, claiming thatcertain claims of one or more of our issued patents are invalid or that the manufacture, use, offer for sale, sale or import of our products infringed one or moreof such party’s patents. We may have to expend considerable time, effort and resources to defend such actions. In addition, we may need to enforce ourintellectual property rights against third parties who infringe our patents and other intellectual property or challenge our patents, patent applications ortrademark applications (see “—We or our licensees may face claims against our intellectual property rights covering our products and competition fromgeneric drug manufacturers” for additional information regarding litigation with generic drug manufacturers). We expect that litigation may be necessary insome instances to determine the validity and scope of certain of our proprietary rights. Competitors may sue us as a way of delaying the introduction of ourproducts.32Table of ContentsLitigation and trial proceedings, such as IPRs, concerning patents and other intellectual property rights may be expensive, protracted with no certaintyof success, and distracting to management. Ultimately, the outcome of such litigation and proceedings could adversely affect our business and the validityand scope of our patents or other proprietary rights or delay or prevent us from manufacturing and marketing our products.We rely on a limited number of pharmaceutical wholesalers to distribute our products.As is typical in the pharmaceutical industry, we utilize pharmaceutical wholesalers in connection with the distribution of the products that we marketand sell. A significant amount of our product is sold to end-users through the three largest wholesalers in the U.S. market, Cardinal Health Inc.,AmerisourceBergen Corp. and McKesson Corp. If we are unable to maintain our business relationships with these major pharmaceutical wholesalers oncommercially acceptable terms, if the buying patterns of these wholesalers fluctuate due to seasonality or if wholesaler buying decisions or other factorsoutside of our control change, such events could materially adversely affect our business, financial condition, cash flows and results of operations.Our business may suffer if we are unable to develop new products.Our long-term viability and growth will be significantly impacted by our ability to successfully develop new products from our research anddevelopment activities and we expect the development of products for our own account to consume substantial resources. Since we fund the development ofour proprietary products, there is a risk that we may not be able to continue to fund all such development efforts to completion or to provide the supportnecessary to perform the clinical trials, obtain regulatory approvals, obtain a final DEA scheduling designation (to the extent our products are controlledsubstances) or market any approved products on a worldwide basis. If we develop commercial products on our own, the risks associated with suchdevelopment programs may be greater than those associated with our programs that are developed with licensees.If our delivery technologies or product development efforts fail to result in the successful development and commercialization of products, if ourlicensees decide not to pursue development and/or commercialization of our products or if our products do not perform as anticipated, such events couldmaterially adversely affect our business, financial condition, cash flows and results of operations (see “—Our revenues may be lower than expected as a resultof failure by the marketplace to accept our products or for other factors” for factors that may affect the market acceptance of our products approved for sale).The FDA or other regulatory agencies may impose limitations or post-approval requirements on any product approval.Even if regulatory approval to market a product is granted by the FDA or other regulatory agencies, the approval may impose limitations on theindicated use for which the product may be marketed or additional post-approval requirements, such as a REMS, with which we would need to comply inorder to maintain the approval of such product. Our business could be seriously harmed if we do not complete these post-approval requirements and the FDAor other regulatory agencies, as a result, require us to change the label for our products or if such requirements restrict the marketing, sale or use of ourproducts.Further, if a product for which we obtain regulatory approval is a controlled substance, it will not become commercially available until after the DEAprovides its final schedule designation, which may take longer and may be more restrictive than we expect or may change after its initial designation. Wecurrently expect ALKS 3831, if approved, to require such DEA final schedule designation prior to commercialization. A restrictive designation couldadversely affect our ability to commercialize such products and could materially adversely affect our business, financial condition, cash flows and results ofoperations.In addition, legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotionalactivities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidanceor interpretations will be changed, or what the impact of such changes on the commercialization of our products, if any, may be.Litigation, arbitration or regulatory action (such as citizens petitions) filed against regulatory agencies related to our product or Alkermes, includingsecurities litigation, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our products, orotherwise negatively impact our business.We may be the subject of certain claims, including those asserting violations of securities and fraud and abuse laws and derivative actions. Followingperiods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against companies. For example,in November 2017, a purported stockholder of ours filed a putative class action against us and certain of our officers on behalf of a putative class ofpurchasers of our securities during the period of February 24, 2015 through November 14, 2017. Such action alleges violations of Sections 10(b) and 20(a) ofthe Exchange Act based on allegedly false or misleading statements and omissions regarding our marketing practices related to VIVITROL, and seeks torecover unspecified damages for alleged inflation in the price of securities, and reasonable costs and expenses, including attorneys’ fees. In December 2018and January 2019, two purported stockholders of ours filed putative class actions against us and certain of our officers on behalf of a putative class ofpurchasers of our securities during the period of February 17, 2017 through November 1, 2018. Such actions allege violations of Sections 10(b) and 20(a) ofthe Exchange Act based on allegedly false or misleading statements and33Table of Contentsomissions regarding our regulatory submission for ALKS 5461, our drug candidate for the adjunctive treatment of major depressive disorder, and the FDA’sreview and consideration of that submission, and seeks to recover unspecified money damages, prejudgment and postjudgment interest, reasonable attorneys’fees, expert fees and other costs. For further discussion of these putative class actions, see Note 16, Commitments and Contingent Liabilities in the “Notes toConsolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report. These class actions and any similar future litigation couldresult in substantial costs and a diversion of management’s attention and resources, which could harm our business.We may be the subject of certain government inquiries or requests for documentation. For example, in June 2017 we received a subpoena from anOffice of the U.S. Attorney, and in January 2019 we received a civil investigative demand from an Office of the U.S. Attorney, in each case for documentsrelated to VIVITROL. We are cooperating with the government. If, as a result of the government’s requests, proceedings are initiated and we are found to haveviolated one or more applicable laws, we may be subject to significant liability, including without limitation, civil fines, criminal fines and penalties, civildamages and exclusion from federal funded healthcare programs such as Medicare and Medicaid, as well as potential liability under the federal anti-kickbackstatute and False Claims Act and state False Claims Acts, and may be required to enter into a corporate integrity or other settlement with the government, anyof which could materially affect our reputation, business, financial condition, cash flows and results of operations. Conduct giving rise to such liability couldalso form the basis for private civil litigation by third-party payers or other persons allegedly harmed by such conduct. In addition, if some of our existingbusiness practices are challenged as unlawful, we may have to change those practices, including changes and impacts on the practices of our sales force,which could also have a material adverse effect on our business, financial condition, cash flows and results of operations.We may not be successful in defending ourselves in litigation or arbitration which may result in large judgments or settlements against us, whichcould have a negative effect on our business, financial condition, cash flows and results of operations. Further, our liability insurance coverage may not besufficient to satisfy, or may not cover, any expenses or liabilities that may arise. Additionally, regardless of whether or not there is merit to the claimsunderlying any lawsuits or government inquiries of which we are subject, or whether or not we are found as a result of such lawsuits or inquiries to haveviolated any applicable laws, such lawsuits and inquiries can be expensive to defend or respond to, may divert the attention of our management and otherresources that would otherwise be engaged in managing our business, and may further cause significant and potentially irreparable harm to our publicreputation.We may also be the subject of citizen petitions that request that the FDA refuse to approve, delay approval of, or impose additional approvalrequirements for our NDAs. If successful, such petitions can significantly delay, or even prevent, the approval of the NDA in question. Even if the FDAultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition or impose additional approvalrequirements as a result of such petition. These outcomes and others could adversely affect our share price as well as our ability to generate revenues from thecommercialization and sale of our products and products using our proprietary technologies.If we fail to comply with the extensive legal and regulatory requirements affecting the healthcare industry, we could face costs, penalties and a loss ofbusiness.Our activities, and the activities of our licensees and third-party providers, are subject to extensive government regulation. Government regulation byvarious national, state and local agencies, which includes detailed inspection of, and controls over, research and laboratory procedures, clinicalinvestigations, product approvals and manufacturing, marketing and promotion, adverse event reporting, sampling, distribution, recordkeeping, storage, anddisposal practices, and achieving compliance with these regulations, substantially increases the time, difficulty and costs incurred in obtaining andmaintaining approvals to market newly developed and existing products. Government regulatory actions can result in delay in the release of products, seizureor recall of products, suspension or revocation of the authority necessary for the manufacture and sale of products, and other civil or criminal sanctions,including fines and penalties. Biopharmaceutical companies also have been the target of government lawsuits and investigations alleging violations ofgovernment regulation, including claims asserting submission of incorrect pricing information, impermissible off-label promotion of pharmaceuticalproducts, payments intended to influence the referral of healthcare business, submission of false claims for government reimbursement, antitrust violationsand violations related to environmental matters. In addition, we may be the subject of securities law claims and derivative actions.While we have implemented numerous risk mitigation measures, we cannot guarantee that we, our employees, our licensees, our consultants or ourcontractors are, or will be, in compliance with all applicable U.S. federal and state laws and regulations, applicable laws and regulations outside the U.S., andinterpretations of the applicability of these laws to marketing practices. If we or our agents fail to comply with any of those regulations or laws, a range ofactions could result, including the termination of clinical trials, the failure to approve a product, restrictions on our products or manufacturing processes,withdrawal of our products from the market, significant fines, exclusion from government healthcare programs or other sanctions or litigation.34Table of ContentsChanges affecting the healthcare industry, including new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations ordecisions, related to patent protection and enforcement, healthcare availability, and product pricing and marketing, could also adversely affect our revenuesand our potential to be profitable. For example, the costs of prescription pharmaceuticals in the U.S. has been the subject of considerable discussion in theU.S. and the current administration has stated that it will address such costs through new legislative and administrative measures. On January 31, 2019, HHSreleased a notice of proposed rulemaking as part of ongoing administration drug pricing reform efforts that would modify a regulatory provision that hadpreviously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statuteand that would add new regulatory safe harbors for certain price reductions passed through to dispensing pharmacies and payments to pharmacy benefitmanagers. Such changes in law, regulation and the interpretation of existing laws and regulations could have a material adverse effect on our business,financial condition, cash flows and results of operations.We face competition in the biopharmaceutical industry.We face intense competition in the development, manufacture, marketing and commercialization of our products from many and varied sources, suchas research institutions and biopharmaceutical companies, including other companies with similar technologies, and manufacturers of generic drugs (see “—We or our licensees may face claims against our intellectual property rights covering our products and competition from generic drug manufacturers.” foradditional information relating to competition from generic drug manufacturers). Some of these competitors are also our licensees, who control thecommercialization of products from which we receive manufacturing and/or royalty revenues. These competitors are working to develop and market othersystems, products, and other methods of preventing or reducing disease, and new small-molecule and other classes of drugs that can be used with or without adrug delivery system.The biopharmaceutical industry is characterized by intensive research, development and commercialization efforts and rapid and significanttechnological change. Many of our competitors are larger and have significantly greater financial and other resources than we do. We expect our competitorsto attempt to develop new technologies, products and processes that may be more effective than those we develop. The development of technologicallyimproved or different products or technologies may make our products or product platforms obsolete or noncompetitive before we recover expenses incurredin connection with their development or realize any revenues from any product.There are other companies developing extended-release product platforms. In many cases, there are products on the market or in development that maybe in direct competition with our products. In addition, we know of new chemical entities that are being developed that, if successful, could compete againstour products. These chemical entities are being designed to work differently than our products and may turn out to be safer or more effective than ourproducts. Among the many experimental therapies being tested around the world, there may be some that we do not now know of that may compete with ourproprietary product platforms or products. Our licensees could choose a competing technology to use with their drugs instead of one of our product platformsand could develop products that compete with our products.With respect to our proprietary injectable product platform, we are aware that there are other companies developing extended-release delivery systemsfor pharmaceutical products, including, but not limited to Luye Pharma, which is developing risperidone formulated as extended release microspheres forintramuscular injection for the treatment of schizophrenia and/or schizoaffective disorders. In the treatment of schizophrenia, ARISTADA, INVEGASUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA and RISPERDAL CONSTA compete with each other and a number of other injectable productsincluding ZYPREXA RELPREVV ((olanzapine) For Extended Release Injectable Suspension), which is marketed and sold by Lilly; ABILIFY MAINTENA,(aripiprazole for extended release injectable suspension), a once-monthly injectable formulation of ABILIFY (aripiprazole) developed by Otsuka Pharm. Co.;PERSERIS (risperidone for extended release injectable suspension), a once-monthly formulation of risperidone marketed by Indivior plc; oral compoundscurrently on the market; and generic versions of branded oral and injectable products. In the treatment of bipolar disorder, RISPERDAL CONSTA competeswith antipsychotics such as oral aripiprazole, REXULTI, LATUDA, VRYLAR, ABILIFY MAINTENA, risperidone, quetiapine, olanzapine, ziprasidone andclozapine.In the treatment of alcohol dependence, VIVITROL competes with generic acamprosate calcium (also known as CAMPRAL) and generic disulfiram(also known as ANTABUSE) as well as currently marketed drugs, including generic drugs, also formulated from naltrexone. Other pharmaceutical companiesare developing products that have shown some promise in treating alcohol dependence that, if approved by the FDA, would compete with VIVITROL.In the treatment of opioid dependence, VIVITROL competes with SUBOXONE (buprenorphine HCl/naloxone HCl dehydrate sublingual tablets),SUBOXONE (buprenorphine/naloxone) Sublingual Film, SUBUTEX (buprenorphine HCl sublingual tablets) and SUBLOCADE (once-monthlybuprenorphine extended-release injection), each of which is marketed and sold by Indivior plc, and BUNAVAIL buccal film (buprenorphine and naloxone)marketed by BioDelivery Sciences, PROBUPHINE (buprenorphine) from Titan Pharmaceuticals, Inc. and ZUBSOLV (buprenorphine and naloxone) marketedby Orexo US, Inc., and once launched, will compete with BRIXADI, which will be marketed by Braeburn, Inc. It also competes with methadone, oralnaltrexone and generic versions of SUBUTEX and SUBOXONE sublingual tablets. Other pharmaceutical companies are developing products that haveshown promise in treating opioid dependence that, if approved by the FDA, would compete with VIVITROL.35Table of ContentsWhile AMPYRA/FAMPYRA is approved as a treatment to improve walking in patients with MS, there are a number of FDA-approved therapies for MSdisease management that seek to reduce the frequency and severity of exacerbations or slow the accumulation of physical disability for people with certaintypes of MS. These products include AVONEX, TYSABRI, TECFIDERA, and PLEGRIDY from Biogen; OCREVUS from Genentech; BETASERON fromBayer HealthCare Pharmaceuticals; COPAXONE from Teva Pharmaceutical Industries Ltd.; REBIF and NOVANTRONE from EMD Serono, Inc.; GILENYAand EXTAVIA from Novartis AG; AUBAGIO and LEMTRADA from Sanofi-Aventis, and generic products, including generic versions of AMPYRA.With respect to our NanoCrystal technology, we are aware that other technology approaches similarly address poorly water-soluble drugs. Theseapproaches include nanoparticles, cyclodextrins, lipid-based self-emulsifying drug delivery systems, dendrimers and micelles, among others, any of whichcould limit the potential success and growth prospects of products incorporating our NanoCrystal technology. In addition, there are many competingtechnologies to our OCR technology, some of which are owned by large pharmaceutical companies with drug delivery divisions and other, smaller drugdelivery-specific companies.If we are unable to compete successfully in the biopharmaceutical industry, our business, financial condition, cash flows and results of operationscould be materially adversely affected.We or our licensees may face claims against intellectual property rights covering our products and competition from generic drug manufacturers.In the U.S., generic manufacturers of innovator drug products may file ANDAs and, in connection with such filings, certify that their products do notinfringe the innovator’s patents and/or that the innovator’s patents are invalid. This often results in litigation between the innovator and the ANDA applicant.This type of litigation is commonly known in the U.S. as “Paragraph IV” litigation.For example, we and our partner Acorda received notices of numerous ANDA filings challenging the validity of one or more of the Orange Book-listedpatents for AMPYRA and/or asserting that a generic form of AMPYRA would not infringe such patents, and we and Acorda engaged in Paragraph IVlitigation with various ANDA filers disputing such claims. For further discussion of the legal proceedings related to the patents covering AMPYRA, see Note16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Item 3—Legal Proceedings” in this Annual Report.Similarly, Janssen Pharmaceuticals NV and Janssen Pharmaceuticals, Inc. initiated a patent infringement lawsuit against Teva Pharmaceuticals USA,Inc. (“Teva”), who filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA. For a discussion of the legal proceedings related tothe patents covering INVEGA SUSTENNA, see Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” and“Item 3—Legal Proceedings” in this Annual Report.Although we intend to vigorously enforce our intellectual property rights, and we expect our licensees will do the same, there can be no assurance thatwe or our licensees will prevail in defense of such patent rights. Our and our licensees’ existing patents could be invalidated, found unenforceable or foundnot to cover generic forms of our or our licensees’ products. If an ANDA filer were to receive FDA approval to sell a generic version of our products and/orprevail in any patent litigation, our products would become subject to increased competition and our business, financial condition, cash flows and results ofoperations could be materially adversely affected.The commercial use of our products may cause unintended side effects or adverse reactions, or incidents of misuse may occur, which could adversely affectour business and share price.We cannot predict whether the commercial use of our products will produce undesirable or unintended side effects that have not been evident in theuse of, or in clinical trials conducted for, such products to date. The administration of drugs in humans carries the inherent risk of product liability claimswhether or not the drugs are actually the cause of an injury. Our products may cause, or may appear to have caused, injury or dangerous drug interactions, andwe may not learn about or understand those effects until the products have been administered to patients for a prolonged period of time. Additionally,incidents of product misuse may occur.These events, among others, could result in product recalls, product liability actions or withdrawals or additional regulatory controls (includingadditional regulatory scrutiny, REMS programs, and requirements for additional labeling). As our development activities progress and we continue to havecommercial sales, this product liability insurance coverage may be inadequate to satisfy liabilities that arise, we may be unable to obtain adequate coverageat an acceptable cost or at all, or our insurer may disclaim coverage as to a future claim. This could prevent or limit our commercialization of our products. Inaddition, the reporting of adverse safety events involving our products, including instances of product misuse, and public rumors about such events couldcause our product sales or share price to decline or experience periods of volatility. These types of events could have a material adverse effect on ourbusiness, financial condition, cash flows and results of operations.36Table of ContentsOur business involves environmental, health and safety risks.Our business involves the use of hazardous materials and chemicals and is subject to numerous environmental, health and safety laws and regulationsand to periodic inspections for possible violations of these laws and regulations. Under certain of these laws and regulations, we could be liable for anycontamination at our current or former properties or third-party waste disposal sites. In addition to significant remediation costs, contamination can give riseto third-party claims for fines, penalties, natural resource damages, personal injury and damage (including property damage). The costs of compliance withenvironmental, health and safety laws and regulations are significant. Any violations, even if inadvertent or accidental, of current or future environmental,health or safety laws or regulations, or the cost of compliance with any resulting order or fine and any liability imposed in connection with anycontamination for which we may be responsible, could materially adversely affect our business, financial condition, cash flows and results of operations.We may not become profitable on a sustained basis.At December 31, 2018, our accumulated deficit was $1,185.4 million, which was primarily the result of net losses incurred from 1987, the yearAlkermes, Inc., was founded, through December 31, 2018, partially offset by net income over certain fiscal periods. There can be no assurance we will achievesustained profitability.A major component of our revenue is dependent on our and our licensees’ ability to commercialize our products and to manufacture our productseconomically. Our ability to achieve sustained profitability in the future depends, in part, on our or our licensees’ (as applicable) ability to: •successfully commercialize VIVITROL, ARISTADA and ARISTADA INITIO and any other products that may be marketed in the U.S. or inother countries in which such products are approved; •obtain and maintain regulatory approval for products both in the U.S. and in other countries; •efficiently manufacture our products; •support the commercialization of products by our licensees; •enter into agreements to develop and commercialize our products; •develop, have manufactured or expand our capacity to manufacture successfully and cost effectively, and market, our products; •obtain adequate reimbursement coverage for our products from insurance companies, government programs and other third-party payers; •obtain additional research and development funding for our proprietary products; and •achieve certain product development milestones.In addition, the amounts we spend will impact our profitability. Our spending will depend, in part, on: •the progress of our research and development programs for our products, including pre-clinical and clinical trials; •the time and expense that will be required to pursue FDA and/or other regulatory approvals for our products and whether such approvals areobtained; •the time that will be required for the DEA to provide its final scheduling designation for our approved products that are controlled substances; •the time and expense required to prosecute, enforce, defend and/or challenge patent and other intellectual property rights; •the cost of building, operating and maintaining manufacturing and research facilities; •the cost of third-party manufacturers; •the number of products we pursue, particularly proprietary products; •how competing technological and market developments affect our products; •the cost of possible acquisitions of technologies, compounds, product rights or companies; •the cost of obtaining licenses to use technology or intellectual property rights owned by others for proprietary products and otherwise;37Table of Contents •the costs related to potential litigation, arbitration or government requests for information; and •the costs associated with recruiting, compensating and retaining a highly skilled workforce in an environment where competition for suchemployees is intense.We may not achieve all or any of these goals, and thus we cannot provide assurances that we will ever be profitable on a sustained basis or achievesignificant revenues. Even if we do achieve some or all of these goals, we may not achieve significant or sustained commercial success.Our level of indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business.In March 2018, we amended and refinanced the term loan under our credit agreement, (previously referred to as “Term Loan B-1”, and as so amendedand refinanced, the “2023 Term Loans”), in order to, among other things, extend the due date of the loan from September 25, 2021 to March 26, 2023, reducethe interest payable thereon from LIBOR plus 2.75% with a LIBOR floor of 0.75% to LIBOR plus 2.25% with a 0% LIBOR floor and increase covenantflexibility. As of December 31, 2018, our borrowings consisted of $282.1 million outstanding under the 2023 Term Loans.The 2023 Term Loans are secured by a first priority lien on substantially all of the combined company assets and properties of Alkermes plc and mostof its subsidiaries, which serve as guarantors. The agreements governing the 2023 Term Loans include a number of restrictive covenants that, among otherthings, and subject to certain exceptions and baskets, impose operating and financial restrictions on us. Our level of indebtedness and the terms of thesefinancing arrangements could adversely affect our business by, among other things: •requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing theavailability of our cash flow for other purposes, including business development efforts, research and development, commercial and capitalexpenditures; •limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby placing us at acompetitive disadvantage compared to competitors with less debt; •limiting our ability to take advantage of significant business opportunities, such as potential acquisition opportunities; and •increasing our vulnerability to adverse economic and industry conditions.Our failure to comply with these restrictions or to make these payments could lead to an event of default that could result in an acceleration of theindebtedness. Our future operating results may not be sufficient to ensure compliance with these covenants or to remedy any such default. In the event of anacceleration of this indebtedness, we may not have, or be able to obtain, sufficient funds to make any accelerated payments.Discontinuation, reform or replacement of LIBOR, or uncertainty related to the potential for any of the foregoing, may adversely affect us.In July 2017, the U.K. Financial Conduct Authority announced that LIBOR could be effectively discontinued after 2021. In addition, otherregulators have suggested reforming or replacing other benchmark rates. The discontinuation, reform or replacement of LIBOR or any other benchmark ratesmay have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets. Uncertainty as to thenature of such potential discontinuation, reform or replacement may negatively impact the volatility of LIBOR rates, liquidity, our access to funding requiredto operate our business, or the trading market for our 2023 Term Loans.Under our 2023 Term Loans, if the administrative agent determines that LIBOR is not reasonably ascertainable, or is notified by our lenders thatLIBOR does not adequately and fairly reflect the costs to our lenders of maintaining the loans, we would be required to pay interest under an alternative baserate which could cause the amount of interest payable on the 2023 Term Loans to be materially different than expected. We may choose in the future topursue an amendment to our 2023 Term Loans to provide for a transition mechanism or other alternative reference rate in anticipation of LIBOR’sdiscontinuation, but we can give no assurance that we will be able to reach agreement with our lenders on any such amendment.38Table of ContentsWe may require additional funds to execute on our business strategy, and such funding may not be available on commercially favorable terms or at all andmay cause dilution to our existing shareholders.We may require additional funds in the future to execute on our business strategy, and we may seek funds through various sources, including debt andequity offerings, corporate collaborations, bank borrowings, arrangements relating to assets, sale of royalty streams we receive on our products or otherfinancing methods or structures. The source, timing and availability of any financings will depend on market conditions, interest rates and other factors. If weissue additional equity securities or securities convertible into equity securities to raise funds, our shareholders will suffer dilution of their investment, and itmay adversely affect the market price of our ordinary shares. In addition, as a condition to providing additional funds to us, future investors or lenders maydemand, and may be granted, rights superior to those of existing shareholders. If we issue additional debt securities in the future, our existing debt serviceobligations will increase further. If we are unable to generate sufficient cash to meet these obligations and need to use existing cash or liquidate investmentsin order to fund our debt service obligations or to repay our debt, we may be forced to delay or terminate clinical trials or curtail operations. We cannot becertain, however, that additional financing will be available from any of these sources when needed or, if available, will be on acceptable terms, if at all,particularly if the credit and financial markets are constrained at the time we require funding. If we fail to obtain additional capital when we need it, we maynot be able to execute our business strategy successfully and may have to give up rights to our product platforms, and/or products, or grant licenses on termsthat may not be favorable to us.Adverse financial market conditions may exacerbate certain risks affecting our business.As a result of adverse financial market conditions, organizations that reimburse for use of our products, such as government health administrationauthorities and private health insurers, may be unable to satisfy such obligations or may delay payment. In addition, federal and state health authorities mayreduce reimbursements (including Medicare and Medicaid reimbursements in the U.S.) or payments, and private insurers may increase their scrutiny ofclaims. We are also dependent on the performance of our licensees, and we sell our products to our licensees through contracts that may not be secured bycollateral or other security. Accordingly, we bear the risk if our licensees are unable to pay amounts due to us thereunder. Due to volatility in the financialmarkets, there may be a disruption or delay in the performance of our third-party contractors, suppliers or licensees. If such third parties are unable to payamounts owed to us or satisfy their commitments to us, or if there are reductions in the availability or extent of reimbursement available to us, our business,financial condition, cash flows and results of operations would be adversely affected.Currency exchange rates may affect revenues and expenses.We conduct a large portion of our business in international markets. For example, we derive a majority of our RISPERDAL CONSTA revenues and allof our FAMPYRA, XEPLION and TREVICTA revenues from sales in countries other than the U.S., and these sales are denominated in non-U.S. dollar(“USD”) currencies. We also incur substantial operating costs in Ireland and face exposure to changes in the exchange ratio of the USD and the Euro arisingfrom expenses and payables at our Irish operations that are settled in Euro. Our efforts to mitigate the impact of fluctuating currency exchange rates may notbe successful. As a result, currency fluctuations among our reporting currency, USD, and the currencies in which we do business will affect our results ofoperations, often in unpredictable ways. Refer to “Item 7A—Quantitative and Qualitative Disclosures about Market Risk” for additional information relatingto our foreign currency exchange rate risk.Our future success largely depends upon our ability to attract and retain key personnel.Our ability to compete and succeed in the highly competitive biopharmaceutical industry and in the disease states in which we market and sellproducts depends largely upon the continued service of our management and scientific and commercial teams and our ability to attract, retain and motivatehighly skilled technical, scientific, manufacturing, management, regulatory, compliance and selling and marketing personnel. Each of our executive officersand all of our employees are employed “at will,” meaning we or each officer or employee may terminate the employment relationship at any time. The loss ofkey personnel or our inability to hire and retain personnel who have technical, scientific, manufacturing, management, regulatory, compliance or commercialbackgrounds could materially adversely impact our business, including the achievement of our manufacturing, research and development, commercial andother business objectives.Future transactions may harm our business or the market price of our ordinary shares.We regularly review potential transactions related to technologies, products or product rights and businesses complementary to our business. Thesetransactions could include: •mergers; •acquisitions; •strategic alliances;39Table of Contents •licensing agreements; and •co-promotion agreements.We may choose to enter into one or more of these transactions at any time, which may cause substantial fluctuations in the market price of ourordinary shares. Moreover, depending upon the nature of any transaction, we may experience a charge to earnings, which could also materially adverselyaffect our results of operations and could harm the market price of our ordinary shares.If we are unable to successfully integrate the companies, businesses or assets that we acquire, or we are unable to integrate successfully with acompany who acquires our company, business or assets, such events could materially adversely affect our business, financial condition, cash flows and resultsof operations.Mergers, acquisitions and other strategic transactions involve various inherent risks, including: •uncertainties in assessing the value, strengths and potential profitability of, and identifying the extent of all weaknesses, risks, contingent andother liabilities of, the respective parties; •the potential loss of key customers, management and employees of an acquired business; •the consummation of financing transactions, acquisitions or dispositions and the related effects on our business; •the ability to achieve identified operating and financial synergies from an acquisition in the amounts and within the timeframe predicted; •problems that could arise from the integration of the respective businesses, including the application of internal control processes to theacquired business; •difficulties that could be encountered in managing international operations; and •unanticipated changes in business, industry, market or general economic conditions that differ from the assumptions underlying our rationalefor pursuing the transaction.Any one or more of these factors could cause us not to realize the benefits anticipated from a transaction. Moreover, any acquisition opportunities wepursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both, whichcould result in significant dilution to our shareholders. Future acquisitions could also result in our assuming more long-term liabilities relative to the value ofthe acquired assets than we have assumed in our previous acquisitions.If goodwill or other intangible assets become impaired, we could have to take significant charges against earnings.At December 31, 2018, we had $191.0 million of amortizable intangible assets and $92.9 million of goodwill. Under accounting principles generallyaccepted in the U.S. (“GAAP”), we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite‑livedintangible assets have been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. Any reduction orimpairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results ofoperations and shareholders’ equity in future periods.Our effective tax rate may increase.As a global biopharmaceutical company, we are subject to taxation in a number of different jurisdictions. As a result, our effective tax rate is derivedfrom a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that willbecome payable in each of these places. Our effective tax rate may fluctuate depending on a number of factors, including, but not limited to, the distributionof our profits or losses between the jurisdictions where we operate and differences in interpretation of tax laws. In addition, the tax laws of any jurisdiction inwhich we operate may change in the future, which could impact our effective tax rate. Tax authorities in the jurisdictions in which we operate may audit us. Ifwe are unsuccessful in defending any tax positions adopted in our submitted tax returns, we may be required to pay taxes for prior periods, interest, fines orpenalties, and may be obligated to pay increased taxes in the future, any of which could have a material adverse effect on our business, financial condition,cash flows and results of operations.40Table of ContentsOur deferred tax assets may not be realized.As of December 31, 2018, we had $85.8 million in net deferred tax assets in the U.S. Included in this amount was approximately $38.7 million ofresearch and development tax credit carryforwards that can be used to offset federal tax in future periods. These carryforwards will expire within the nexttwenty years. It is possible that some or all of the deferred tax assets will not be realized, especially if we incur losses in the U.S. in the future. Losses may arisefrom unforeseen operating events (see “—We may not become profitable on a sustained basis” for additional information relating to operating losses) or theoccurrence of significant excess tax benefits arising from the exercise of stock options and/or the vesting of restricted stock units. Unless we are able togenerate sufficient taxable income in the future, a substantial valuation allowance to reduce the carrying value of our U.S. deferred tax assets may be required,which would materially increase our expenses in the period the allowance is recognized and materially adversely affect our business, financial condition andresults of operations.The business combination of Alkermes, Inc. and the drug technology business (“EDT”) of Elan Corporation, plc may limit our ability to use our taxattributes to offset taxable income, if any, generated from such business combination.On September 16, 2011, the businesses of Alkermes, Inc. and EDT were combined under Alkermes plc (this combination is referred to as the “BusinessCombination”). For U.S. federal income tax purposes, a corporation is generally considered tax resident in the place of its incorporation. Because we areincorporated in Ireland, we should be deemed an Irish corporation under these general rules. However, Section 7874 of the Internal Revenue Code of 1986, asamended (the “Code”) generally provides that a corporation organized outside the U.S. that acquires substantially all of the assets of a corporation organizedin the U.S. will be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes if shareholders of the acquired U.S.corporation own at least 80% (of either the voting power or the value) of the stock of the acquiring foreign corporation after the acquisition by reason ofholding stock in the domestic corporation, and the “expanded affiliated group” (as defined in Section 7874) that includes the acquiring corporation does nothave substantial business activities in the country in which it is organized.In addition, Section 7874 provides that if a corporation organized outside the U.S. acquires substantially all of the assets of a corporation organized inthe U.S., the taxable income of the U.S. corporation during the period beginning on the date the first assets are acquired as part of the acquisition, through thedate which is ten years after the last date assets are acquired as part of the acquisition, shall be no less than the income or gain recognized by reason of thetransfer during such period or by reason of a license of property by the expatriated entity after such acquisition to a foreign affiliate during such period, whichis referred to as the “inversion gain,” if shareholders of the acquired U.S. corporation own at least 60% (of either the voting power or the value) of the stock ofthe acquiring foreign corporation after the acquisition by reason of holding stock in the domestic corporation, and the “expanded affiliated group” of theacquiring corporation does not have substantial business activities in the country in which it is organized. If this rule was to apply to the BusinessCombination, among other things, Alkermes, Inc. would have been restricted in its ability to use the approximately $274.0 million of U.S. federal netoperating loss (“NOL”) carryforwards and $38.0 million of U.S. state NOL carryforwards that it had as of March 31, 2011. We do not believe that either ofthese limitations should apply as a result of the Business Combination. However, the U.S. Internal Revenue Service (the “IRS”) could assert a contraryposition, in which case we could become involved in tax controversy with the IRS regarding possible additional U.S. tax liability. If we were to beunsuccessful in resolving any such tax controversy in our favor, we could be liable for significantly greater U.S. federal and state income tax than weanticipate being liable for through the Business Combination, which would place further demands on our cash needs.Certain U.S. holders of our ordinary shares may suffer adverse tax consequences if any of our non-U.S. subsidiaries are characterized as a “controlledforeign corporation”.In December 2017, the Tax Cuts and Jobs Act was signed into law. This legislation significantly changes U.S. tax law by, among other things,changing the rules which determine whether a foreign corporation is treated for U.S. tax purposes as a controlled foreign corporation, or CFC, for taxableyears ended December 31, 2017 and onwards. The impact of this change on certain holders of our ordinary shares is uncertain and could be adverse,including potential income inclusions and reporting requirements for U.S. persons (as defined in the Internal Revenue Code) who are treated as owning(directly or indirectly) at least 10% of the value or voting power of our shares. The determination of CFC status is complex and includes attribution rules, theapplication of which is not entirely certain. Recent changes to these attribution rules relating to the determination of CFC status make it possible that one ormore of our non-U.S. subsidiaries will be classified as a CFC. Existing and prospective investors should consult their tax advisers regarding the potentialapplication of these rules to their investments in us.See “Certain Irish and United States Federal Income Tax Considerations – United States Federal Income Tax Considerations” in our Form S-1/A,filed with the SEC on February 29, 2012, for additional discussion with respect to other potential U.S. federal income tax consequences of investments in us.41Table of ContentsOur business could be negatively affected as a result of the actions of activist shareholders.Proxy contests and other actions by activist shareholders have been waged against many companies in the biopharmaceutical industry over the lastfew years. If faced with a proxy contest or other activist shareholder action, we may not be able to respond successfully to the contest or action, which couldbe disruptive to our business. Even if we are successful, our business could be adversely affected by any proxy contest or activist shareholder actioninvolving us because: •responding to proxy contests and other actions by activist shareholders can be costly and time-consuming, disrupting operations and divertingthe attention of management and employees, and can lead to uncertainty; •perceived uncertainties as to future direction may result in the loss of potential acquisitions, collaborations or in-licensing opportunities, andmay make it more difficult to attract and retain qualified personnel and business partners; and •if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement ourstrategic plan in a timely manner and create additional value for our shareholders.These actions could cause the market price of our ordinary shares to experience periods of volatility.If any of our licensees undergoes a change in control or in management, this may adversely affect revenues from our products.Any change of control, or change in management, of our licensees may result in a reprioritization of our product within such licensee’s portfolio, orsuch licensee may fail to maintain the financial or other resources necessary to continue the development and/or commercialization of such product.If any of our licensees undergoes a change of control and the acquirer either is unable to perform such licensee’s obligations under its agreements withus or has a product that competes with ours that such acquirer does not divest, it could materially adversely affect our business, financial condition, cashflows and results of operations.Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation tosuffer.In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information andthat of our suppliers and partners, as well as personally identifiable information of patients, clinical trial participants and employees. Similarly, our partnersand third-party providers possess certain of our sensitive data. The secure maintenance of this information is critical to our operations and business strategy.Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error,malfeasance or other disruptions. Certain types of information technology or infrastructure attacks or breaches may go undetected for a prolonged period oftime. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any suchaccess, disclosure or other loss of information, including our data being breached at our partners or third-party providers, could result in legal claims orproceedings and liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation which couldadversely affect our business.We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage.We are subject to laws and regulations covering data privacy and the protection of personal information, including health information. The legislativeand regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issueswhich may affect our business. In the U.S., numerous federal and state laws and regulations, including state security breach notification laws, state healthinformation privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of personal information. Eachof these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. If we fail to comply withapplicable laws and regulations we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individuallyidentifiable health information from a covered entity in a manner that is not authorized or permitted by the Health Insurance Portability and AccountabilityAct of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA.42Table of ContentsNumerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well. The EU andother jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In the EU, for example, effectiveMay 25, 2018, the GDPR replaced the prior EU Data Protection Directive (95/46) that governed the processing of personal data in the European Union. TheGDPR imposes significant obligations on controllers and processors of personal data, including, as compared to the prior directive, higher standards forobtaining consent from individuals to process their personal data, more robust notification requirements to individuals about the processing of their personaldata, a strengthened individual data rights regime, mandatory data breach notifications, limitations on the retention of personal data and increasedrequirements pertaining to health data, and strict rules and restrictions on the transfer of personal data outside of the EU, including to the U.S. The GDPR alsoimposes additional obligations on, and required contractual provisions to be included in, contracts between companies subject to the GDPR and their third-party processors that relate to the processing of personal data. The GDPR allows EU member states to make additional laws and regulations further limitingthe processing of genetic, biometric or health data.Adoption of the GDPR increased our responsibility and liability in relation to personal data that we process and may require us to put in placeadditional mechanisms to ensure compliance. Any failure to comply with the requirements of GDPR and applicable national data protection laws of EUmember states, could lead to regulatory enforcement actions and significant administrative and/or financial penalties against us (fines of up to €20,000,000or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher), and could adversely affect our business, financialcondition, cash flows and results of operations.If we identify a material weakness in our internal control over financial reporting, our ability to meet our reporting obligations and the trading price ofour ordinary shares could be negatively affected.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Accordingly, a material weaknessincreases the risk that the financial information we report contains material errors.We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we arerequired under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, howeverwell designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of thesystem are met. If we, or our independent registered public accounting firm, determine that our internal controls over financial reporting are not effective, orwe discover areas that need improvement in the future, these shortcomings could have an adverse effect on our business and financial results, and the price ofour ordinary shares could be negatively affected.If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm isunable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in thereliability of our financial statements, which could lead to a decline in the trading price of our ordinary shares. Failure to comply with reporting requirementscould also subject us to sanctions and/or investigations by the SEC, the Nasdaq or other regulatory authorities.43Table of ContentsItem 1B. Unresolved Staff CommentsNone.Item 2. PropertiesWe lease approximately 14,600 square feet of corporate office space in Dublin, Ireland, which houses our corporate headquarters. This lease expires in2022. We lease two properties in Waltham, Massachusetts. One facility has approximately 175,000 square feet of space and houses corporate offices,administrative areas and laboratories. This lease expires in 2021 and includes a tenant option to extend the term for up to two five-year periods. The secondproperty we lease in Waltham, Massachusetts has approximately 67,000 square feet of office space. This lease expires in 2020 and includes a tenant option toextend the term for up to two one-year periods. We lease approximately 7,000 square feet of corporate office and administrative space in Washington, DC.This lease expires in 2029 and includes a tenant option to extend the term for an additional five-year period.In March 2018, we entered into a lease agreement for approximately 220,000 square feet of office and laboratory space located in a building to bebuilt at 900 Winter Street, Waltham, Massachusetts (“900 Winter Street”). We plan to occupy the premises in early 2020. The initial term of the lease shallcommence on the earlier of (i) the Delivery Date (defined as (i) the later of January 20, 2020, or (ii) the date on which the landlord substantially completes itswork in accordance with the terms of the lease), or (ii) the date we enter into possession of all or any substantial portion of 900 Winter Street for the conductof our business (the “Commencement Date”). The initial lease term expires on the last day of the calendar month in which the fifteenth (15th) anniversary ofthe Commencement Date occurs, with an option to extend for an additional ten (10) years.We own an R&D and manufacturing facility in Athlone, Ireland (approximately 400,000 square feet) and a manufacturing facility in Wilmington,Ohio (approximately 360,600 square feet).We believe that our current and planned facilities are suitable and adequate for our current and near‑term pre-clinical, clinical and commercialrequirements.Item 3. Legal ProceedingsFor information regarding legal proceedings, refer to Note 16, Commitments and Contingent Liabilities in the “Notes to Consolidated FinancialStatements” in this Annual Report, which is incorporated into this Part I, Item 3 by reference.Item 4. Mine Safety DisclosuresNot Applicable.44Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket and shareholder informationOur ordinary shares are traded on the Nasdaq under the symbol “ALKS.” There were 119 shareholders of record for our ordinary shares on February 4,2019. In addition, the last reported sale price of our ordinary shares as reported on the Nasdaq on February 4, 2019 was $33.18.DividendsNo dividends have been paid on our ordinary shares to date, and we do not expect to pay cash dividends thereon in the foreseeable future. Weanticipate that we will retain all earnings, if any, to support our operations and our proprietary drug development programs. Any future determination as tothe payment of dividends will be at the sole discretion of our board of directors and will depend on our financial condition, results of operations, capitalrequirements and other factors our board of directors deems relevant.Repurchase of equity securitiesOn September 16, 2011, our board of directors authorized the continuation of the Alkermes, Inc. program to repurchase up to $215.0 million of ourordinary shares at the discretion of management from time to time in the open market or through privately negotiated transactions. We did not purchase anyshares under this program during the year ended December 31, 2018. As of December 31, 2018, we had purchased a total of 8,866,342 shares at a cost of$114.0 million. The 2023 Term Loans include restrictive covenants that impose certain limitations on our ability to repurchase our ordinary shares.During the three months ended December 31, 2018, we acquired 112,733 Alkermes ordinary shares, at an average price of $34.03 per share related tothe vesting of employee equity awards to satisfy withholding tax obligations.Irish taxes applicable to U.S. holdersThe following is a general summary of the main Irish tax considerations applicable to the purchase, ownership and disposition of our ordinary sharesby U.S. holders. It is based on existing Irish law and practices in effect on January 15, 2019, and on discussions and correspondence with the Irish RevenueCommissioners. Legislative, administrative or judicial changes may modify the tax consequences described below.The statements do not constitute tax advice and are intended only as a general guide. Furthermore, this information applies only to ordinary sharesheld as capital assets and does not apply to all categories of shareholders, such as dealers in securities, trustees, insurance companies, collective investmentschemes and shareholders who acquire, or who are deemed to acquire, their ordinary shares by virtue of an office or employment. This summary is notexhaustive and shareholders should consult their own tax advisers as to the tax consequences in Ireland, or other relevant jurisdictions where we operate,including the acquisition, ownership and disposition of ordinary shares.Withholding tax on dividendsWhile we have no current plans to pay dividends, dividends on our ordinary shares would generally be subject to Irish dividend withholding tax(“DWT”) at the standard rate of income tax, which is currently 20%, unless an exemption applies. Dividends on our ordinary shares that are owned byresidents of the U.S. and held beneficially through the Depositary Trust Company (“DTC”) will not be subject to DWT provided that the address of thebeneficial owner of the ordinary shares in the records of the broker is in the U.S.Dividends on our ordinary shares that are owned by residents of the U.S. and held directly (outside of DTC) will not be subject to DWT provided thatthe shareholder has completed the appropriate Irish DWT form and this form remains valid. Such shareholders must provide the appropriate Irish DWT form toour transfer agent at least seven business days before the record date for the first dividend payment to which they are entitled.If any shareholder who is resident in the U.S. receives a dividend subject to DWT, he or she should generally be able to make an application for arefund from the Irish Revenue Commissioners on the prescribed form.45Table of ContentsIncome tax on dividendsIrish income tax, if any, may arise in respect of dividends paid by us. However, a shareholder who is neither resident nor ordinarily resident in Irelandand who is entitled to an exemption from DWT, generally has no liability for Irish income tax or to the universal social charge on a dividend from us unlesshe or she holds his or her ordinary shares through a branch or agency in Ireland which carries out a trade on his or her behalf.Irish tax on capital gainsA shareholder who is neither resident nor ordinarily resident in Ireland and does not hold our ordinary shares in connection with a trade or businesscarried on by such shareholder in Ireland through a branch or agency should not be within the charge to Irish tax on capital gains on a disposal of ourordinary shares.Capital acquisitions taxIrish capital acquisitions tax (“CAT”) is comprised principally of gift tax and inheritance tax. CAT could apply to a gift or inheritance of our ordinaryshares irrespective of the place of residence, ordinary residence or domicile of the parties. This is because our ordinary shares are regarded as property situatedin Ireland as our share register must be held in Ireland. The person who receives the gift or inheritance has primary liability for CAT.CAT is levied at a rate of 33% above certain tax‑free thresholds. The appropriate tax‑free threshold is dependent upon (i) the relationship between thedonor and the recipient, and (ii) the aggregation of the values of previous gifts and inheritances received by the recipient from persons within the samecategory of relationship for CAT purposes. Gifts and inheritances passing between spouses are exempt from CAT. Our shareholders should consult their owntax advisers as to whether CAT is creditable or deductible in computing any domestic tax liabilities.Stamp dutyIrish stamp duty, if any, may become payable in respect of ordinary share transfers. However, a transfer of our ordinary shares from a seller who holdsshares through DTC to a buyer who holds the acquired shares through DTC should not be subject to Irish stamp duty. A transfer of our ordinary shares (i) by aseller who holds ordinary shares outside of DTC to any buyer, or (ii) by a seller who holds the ordinary shares through DTC to a buyer who holds the acquiredordinary shares outside of DTC, may be subject to Irish stamp duty, which is currently at the rate of 1% of the price paid or the market value of the ordinaryshares acquired, if greater. The person accountable for payment of stamp duty is the buyer or, in the case of a transfer by way of a gift or for less than marketvalue, all parties to the transfer.A shareholder who holds ordinary shares outside of DTC may transfer those ordinary shares into DTC without giving rise to Irish stamp duty providedthat the shareholder would be the beneficial owner of the related book‑entry interest in those ordinary shares recorded in the systems of DTC, and in exactlythe same proportions, as a result of the transfer and at the time of the transfer into DTC there is no sale of those book‑entry interests to a third party beingcontemplated by the shareholder. Similarly, a shareholder who holds ordinary shares through DTC may transfer those ordinary shares out of DTC withoutgiving rise to Irish stamp duty provided that the shareholder would be the beneficial owner of the ordinary shares, and in exactly the same proportions, as aresult of the transfer, and at the time of the transfer out of DTC there is no sale of those ordinary shares to a third party being contemplated by the shareholder.In order for the share registrar to be satisfied as to the application of this Irish stamp duty treatment where relevant, the shareholder must confirm to us that theshareholder would be the beneficial owner of the related book‑entry interest in those ordinary shares recorded in the systems of DTC, and in exactly the sameproportions or vice‑versa, as a result of the transfer and there is no agreement for the sale of the related book‑entry interest or the ordinary shares or an interestin the ordinary shares, as the case may be, by the shareholder to a third party being contemplated.46Table of ContentsStock performance graphThe information contained in the performance graph below shall not be deemed to be “soliciting material” or to be “filed” with the SEC, and suchinformation shall not be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that wespecifically incorporate it by reference into such filing.The following graph compares the cumulative total shareholder return on our ordinary shares from December 31, 2013 through December 31, 2018with the cumulative returns of the Nasdaq Composite Total Return Index and the Nasdaq Biotechnology Index. The comparison assumes $100 was investedon December 31, 2013 in our ordinary shares and in each of the foregoing indices and further assumes reinvestment of any dividends. We did not declare orpay any dividends on our ordinary shares during the comparison period. Nine Months Ended Year Ended December 31, December 31, 2013 2014 2015 2016 2017 2018 Alkermes 100 144 195 137 134 73 Nasdaq Composite Total Return 100 115 123 134 173 168 Nasdaq Biotechnology Index 100 134 149 117 142 128 47Table of ContentsItem 6. Selected Financial DataThe selected historical financial data set forth below at December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 arederived from our audited consolidated financial statements, which are included elsewhere in this Annual Report. The selected historical financial data setforth below at December 31, 2016 and for the years ended and at December 31, 2015 and 2014 are derived from audited consolidated financial statements,which are not included in this Annual Report.The following selected consolidated financial data should be read in conjunction with our consolidated financial statements, the related notes and“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part II of this Annual Report. The historicalresults are not necessarily indicative of the results to be expected for any future period. Year Ended December 31, (In thousands, except per share data) 2018 2017 2016 2015 2014 Consolidated Statements of Operations Data: REVENUES(1): Manufacturing and royalty revenues $526,675 $505,308 $487,247 $475,288 $516,876 Product sales, net 450,334 362,834 256,146 149,028 94,160 Research and development revenue 68,895 7,232 2,301 4,019 7,753 License revenue 48,370 28,000 — — — Total revenues 1,094,274 903,374 745,694 628,335 618,789 EXPENSES: Cost of goods manufactured and sold 176,420 154,748 132,122 138,989 175,832 Research and development 425,406 412,889 387,148 344,404 272,043 Selling, general and administrative 526,408 421,578 374,130 311,558 199,905 Amortization of acquired intangible assets 65,168 62,059 60,959 57,685 58,153 Total expenses 1,193,402 1,051,274 954,359 852,636 705,933 OPERATING LOSS (99,128) (147,900) (208,665) (224,301) (87,144)OTHER (EXPENSE) INCOME , NET(2) (27,839) 4,626 (5,722) 296 73,115 LOSS BEFORE INCOME TAXES (126,967) (143,274) (214,387) (224,005) (14,029)PROVISION (BENEFIT) FOR INCOME TAXES 12,344 14,671 (5,943) 3,158 16,032 NET LOSS $(139,311) $(157,945) $(208,444) $(227,163) $(30,061)LOSS PER ORDINARY SHARE: BASIC AND DILUTED $(0.90) $(1.03) $(1.38) $(1.52) $(0.21)WEIGHTED AVERAGE NUMBER OF ORDINARY SHARESOUTSTANDING: BASIC AND DILUTED 155,112 153,415 151,484 149,206 145,274 Consolidated Balance Sheet Data: Cash, cash equivalents and investments $620,039 $590,716 $619,165 $798,849 $801,646 Total assets(3) 1,825,007 1,797,227 1,726,423 1,855,744 1,919,058 Long-term debt(3) 279,308 281,436 283,666 349,944 355,756 Shareholders’ equity 1,171,285 1,202,808 1,209,481 1,314,275 1,396,837 (1)On January 1, 2018, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers (“Topic 606”). (2)2015 includes a $9.6 million gain on the sale of the Company’s Gainesville, GA manufacturing facility, the related manufacturing and royaltyrevenue associated with certain products manufactured at the facility, and the rights to IV/IM and parenteral forms of Meloxicam (the“Gainesville Transaction”). 2014 includes a gain on the sale of property, plant and equipment of $41.9 million, a gain on the sale of aninvestment in Civitas Therapeutics, Inc. of $29.6 million and a gain on the sale of an investment in Acceleron Pharma Inc. of $15.3 million. (3)In 2015, the Company retrospectively adopted the FASB’s guidance simplifying the presentation of debt issuance costs. As a result, deferredfinancing costs of $2.2 million that were classified within “Other long-term assets” at December 31, 2014 were reclassified to “Long-term debt”to conform to the then-current period presentation. 48Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following should be read in conjunction with our consolidated financial statements and related notes beginning on page F‑1 of this AnnualReport. The following discussion contains forward‑looking statements. Actual results may differ significantly from those projected in the forward‑lookingstatements. See “Cautionary Note Concerning Forward‑Looking Statements” on page 3 of this Annual Report. Factors that might cause future results to differmaterially from those projected in the forward‑looking statements also include, but are not limited to, those discussed in “Item 1A—Risk Factors” andelsewhere in this Annual Report.OverviewWe earn revenue on net sales of VIVITROL, ARISTADA and ARISTADA INITIO, which are proprietary products that we manufacture, market and sellin the U.S., and manufacturing and/or royalty revenues on net sales of products commercialized by our licensees. Our key marketed products are expected togenerate significant revenues for us in the near‑ and medium‑term and we believe are singular or competitively advantaged products in their classes. In 2018,these key marketed products consisted of VIVITROL; ARISTADA and ARISTADA INITIO; INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA;RISPERDAL CONSTA; and AMPYRA/FAMPYRA. Revenues from these key products accounted for 80% of our total revenues during 2018, as compared to86% during 2017 and 2016.In 2018, we incurred an operating loss of $99.1 million, as compared to $147.9 million in 2017. Revenues increased by 21% in 2018, as compared to2017, which was primarily due to revenue earned under our license and collaboration agreement with Biogen for BIIB098 and increased sales of ARISTADA.This was partially offset by a 14% increase in operating expenses, which were primarily in support of the increase in sales of our proprietary products andcontinued investment in our R&D pipeline and commercial organization. These items are discussed in further detail within the Results of Operations sectionbelow.Results of OperationsManufacturing and Royalty RevenuesManufacturing revenues for products that incorporate our technologies, except for those from Janssen related to RISPERDAL CONSTA, arerecognized over time as products move through the manufacturing process, using an input method based on costs as a measure of progress. Manufacturingrevenue from RISPERDAL CONSTA is recognized at the point in time the product has been fully manufactured. Royalties are generally earned on ourlicensees’ net sales of products that incorporate our technologies and are recognized in the period the products are sold by our licensees. The following tablecompares manufacturing and royalty revenues earned in the years ended December 31, 2018, 2017 and 2016: Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018–2017 2017–2016 Manufacturing and royalty revenues: INVEGA SUSTENNA/XEPLION & INVEGATRINZA/TREVICTA $241.4 $214.9 $184.2 $26.5 $30.7 AMPYRA/FAMPYRA 107.1 117.0 114.2 (9.9) 2.8 RISPERDAL CONSTA 71.1 84.9 87.2 (13.8) (2.3)Other 107.1 88.5 101.6 18.6 (13.1)Manufacturing and royalty revenues $526.7 $505.3 $487.2 $21.4 $18.1 Under our INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA agreement with Janssen, we earn royalties on end‑market net sales ofINVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA of 5% up to the first $250 million in calendar‑year sales, 7% on calendar‑year sales ofbetween $250 million and $500 million, and 9% on calendar-year sales exceeding $500 million. The royalty rate resets at the beginning of eachcalendar‑year to 5%. The increase in INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA royalty revenues in each period was due to anincrease in Janssen’s end‑market net sales of INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA. Janssen’s end‑market net sales of INVEGASUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA were $2.9 billion, $2.6 billion and $2.2 billion during the years ended December 31, 2018, 2017and 2016, respectively. The adoption of Topic 606 had no impact on the method in which we recognize royalty revenue from sales of INVEGASUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA.Under Topic 606, we recognize manufacturing revenue, equal to 7.5% of Janssen’s unit net sales price of RISPERDAL CONSTA, at the point in timewhen RISPERDAL CONSTA has been fully manufactured, which is when the product is approved for shipment. Prior to the adoption of Topic 606 werecognized manufacturing revenue when RISPERDAL CONSTA was shipped to Janssen. We continue to record royalty revenue, equal to 2.5% of end-marketnet sales, when the end-market sale of RISPERDAL CONSTA occurs.49Table of ContentsThe decrease in RISPERDAL CONSTA revenue in 2018, as compared to 2017, was due to a 19% decrease in manufacturing revenue and a 9%decrease in royalty revenue. The decrease in manufacturing revenues was due to a 19% decrease in the number of units of RISPERDAL CONSTAmanufactured for Janssen. The decrease in royalty revenue was due to a decline in Janssen’s end-market net sales of RISPERDAL CONSTA. Janssen’send‑market net sales of RISPERDAL CONSTA were $737.0 million, $805.0 million and $893.0 million during the years ended December 31, 2018, 2017 and2016, respectively. The decrease in RISPERDAL CONSTA revenue in 2017, as compared to 2016, was primarily due to a 10% decrease in royalty revenuesdue to the decline in Janssen’s end-market net sales of RISPERDAL CONSTA. RISPERDAL CONSTA is covered by a patent until 2021 in the EU and 2023in the U.S. For a discussion of legal proceedings related to this patent, see Note 16, Commitments and Contingent Liabilities in the “Notes to ConsolidatedFinancial Statements” and “Item 3—Legal Proceedings” in this Annual Report, and specifically the section entitled “—We or our licensees may face claimsagainst intellectual property rights covering our products and competition from generic drug manufacturers.”We expect revenues from our long‑acting, atypical antipsychotic franchise to continue to grow as INVEGA SUSTENNA/XEPLION grows and INVEGATRINZA/TREVICTA is launched around the world. A number of companies, including us, are working to develop products to treat schizophrenia and/orbipolar disorder that may compete with INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDAL CONSTA. Increased competitionmay lead to reduced unit sales of INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and RISPERDAL CONSTA, as well as increasing pricingpressure. The latest of the patents subject to our license agreement with Janssen covering INVEGA SUSTENNA/XEPLION expires in 2030 in the U.S. andcertain other countries and in 2022 in the EU. The latest of the licensed patents covering INVEGA TRINZA/TREVICTA expired in 2017 in the U.S. and willexpire in 2022 in the EU. In addition, Janssen has other patents not subject to our license agreement, including one that covers INVEGA SUSTENNA in theU.S. and expires in 2031 and one that covers INVEGA TRINZA in the U.S. and expires in 2036.In January 2018, Janssen Pharmaceuticals NV and Janssen Pharmaceuticals, Inc. initiated a patent infringement lawsuit in the U.S. District Court forthe District of New Jersey against Teva, who filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA before the expiration ofU.S. Patent No. 9,439,906. For further discussion of the legal proceedings related to the patents covering INVEGA SUSTENNA, see Note 16, Commitmentsand Contingent Liabilities in the “Notes to Consolidated Financial Statements” and “Part I, Item 3—Legal Proceedings” in this Annual Report and forinformation about risks relating to the INVEGA SUSTENNA Paragraph IV litigation, see “Part I, Item 1A—Risk Factors” in this Annual Report, andspecifically the section entitled “—We or our licensees may face claims against intellectual property rights covering our products and competition fromgeneric drug manufacturers.” With the adoption of Topic 606, we changed the way we record certain of our manufacturing and royalty revenue for AMPYRA and FAMPYRA. ForAMPYRA manufactured under our license and supply agreements with Acorda, we now record manufacturing and royalty revenue as the product is beingmanufactured, rather than when it is shipped to Acorda. For FAMPYRA, we record manufacturing revenue as the product is being manufactured, rather thanwhen it is shipped to Biogen, but continue to record royalty revenue when the end-market sale of FAMPYRA occurs. See Note 3, Revenue from Contractswith Customers, in the “Notes to Consolidated Financial Statements” in this Annual Report, for additional information regarding the adoption of Topic 606.The decrease in the amount of manufacturing and royalty revenue recognized for AMPYRA and FAMPYRA in 2018, as compared to 2017, was due toa 13% decrease in revenue from AMPYRA, partially offset by an 8% increase in revenue from FAMPYRA. The decrease in AMPYRA revenues was primarilydue to a 19% decrease in the amount of AMPYRA shipped to Acorda, which was due to the entry of generic forms of AMPYRA to the U.S. market inSeptember 2018. For further discussion of the legal proceedings related to the patents covering AMPYRA, see “Part II, Item 1—Legal Proceedings” and Note16, Commitments and Contingent Liabilities in this Annual Report, and for information about risks relating to such legal proceedings see “Part I, Item 1A—Risk Factors” of this Annual Report and specifically the section entitled “—We or our licensees may face claims against intellectual property rights coveringour products and competition from generic drug manufacturers.” We expect revenues from AMPYRA to continue to decline due to the entry of generic formsof AMPYRA in the U.S. market. The increase in revenue from FAMPYRA was primarily due to a 10% increase in manufacturing revenues due to an increasein the price we received on FAMPYRA shipments to Biogen. The legal proceedings related to the patents covering AMPYRA do not involve the patentscovering FAMPYRA, and the latest of the patents covering FAMPYRA expires in 2025 in the EU.The increase in AMPYRA/FAMPYRA revenues in 2017, as compared to 2016, was primarily due to a 4% increase in manufacturing revenue, whichwas due to an 11% increase in the amount of FAMPYRA shipped to Biogen, partially offset by an 8% decrease in the amount of AMPYRA shipped toAcorda.Included in other manufacturing and royalty revenue in the table above is $26.7 million of royalty revenue, representing our proportional share of theproceeds Zealand Pharma A/S’ (“Zealand”) sale to Royalty Pharma of certain royalty streams for products that utilize technology that we had previouslylicensed to Zealand.50Table of ContentsCertain of our manufacturing and royalty revenues are earned in countries outside of the U.S. and are denominated in currencies in which the productis sold. See “Part II, Item 7A—Quantitative and Qualitative Disclosures about Market Risk” of this Annual Report for information on currency exchange raterisk related to our revenues.Product Sales, NetOur product sales, net consist of sales of VIVITROL, ARISTADA and ARISTADA INITIO in the U.S., primarily to wholesalers, specialty distributorsand pharmacies. The following table presents the adjustments deducted from product sales, gross to arrive at product sales, net for sales of VIVITROL,ARISTADA and ARISTADA INITIO in the U.S. during the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, (In millions) 2018 % of Sales 2017 % of Sales 2016 % of Sales Product sales, gross $846.5 100.0 % $657.7 100.0 % $444.6 100.0 %Adjustments to product sales, gross: Medicaid rebates (197.0) (23.3)% (147.8) (22.5)% (94.2) (21.2)%Chargebacks (65.5) (7.7)% (47.9) (7.3)% (31.5) (7.1)%Product discounts (65.1) (7.7)% (51.0) (7.8)% (35.1) (7.9)%Medicare Part D (29.8) (3.5)% (15.1) (2.3)% (3.4) (0.8)%Other (38.8) (4.6)% (33.1) (5.0)% (24.3) (5.5)%Total adjustments (396.2) (46.8)% (294.9) (44.8)% (188.5) (42.4)%Product sales, net $450.3 53.2 % $362.8 55.2 % $256.1 57.6 % Our product sales, net for VIVITROL and ARISTADA/ARISTADA INITIO in 2018 were $302.6 million and $147.7 million, respectively, as comparedto $269.3 million and $93.5 million in 2017, respectively, and $209.0 million and $47.1 million in 2016, respectively.The increase in product sales, gross in 2018, as compared to 2017, was due to a 16% increase in VIVITROL gross sales and a 69% increase inARISTADA/ARISTADA INITIO gross sales. The increase in VIVITROL gross sales was due to a 16% increase in the number of units sold as there was nochange to the selling price of VIVITROL in 2018. The increase in sales of ARISTADA/ARISTADA INITIO was primarily due to a 52% increase in the numberof units sold and a 7% increase in price from December 31, 2017 to December 31, 2018. The increase in product sales, gross in 2017, as compared to 2016,was due to a 33% increase in VIVITROL gross sales and a 129% increase in ARISTADA/ARISTADA INITIO gross sales. The increase in VIVITROL grosssales was due to a 33% increase in the number of units sold as there was no change to the selling price of VIVITROL in 2017. The increase in sales ofARISTADA/ARISTADA INITIO was primarily due to a 113% increase in the number of units sold and a 5% price increase, which was effective in April 2017.ARISTADA 441 mg, 662 mg and 882 mg launched in the U.S. in October 2015. ARISTADA 1064 mg, our two-month dosing option, launched in the U.S. inJune 2017 and ARISTADA INITIO, which is approved for the initiation or re-initiation of ARISTADA for the treatment of schizophrenia, was approved by theFDA in June 2018 and launched in July 2018.The increase in Medicare Part D rebates as a percentage of sales in 2018, as compared to 2017 was primarily due to increases in the amount ofARISTADA sold under this program.A number of companies, including us, are working to develop products to treat addiction, including alcohol and opioid dependence that may competewith, and negatively impact, future sales of VIVITROL. Increased competition and increased pricing pressure may lead to reduced unit sales of VIVITROL.VIVITROL is covered by a patent that will expire in the U.S. in 2029 and in Europe in 2021; and, as such, we do not anticipate generic versions of thisproduct to enter the market in the near term. A number of companies, including us, currently market and/or are working to develop products to treatschizophrenia that may compete with and negatively impact future sales of ARISTADA and ARISTADA INITIO. Increased competition and increased pricingpressure may lead to reduced unit sales of ARISTADA and ARISTADA INITIO. ARISTADA is covered by a patent that will expire in the U.S. in 2035; and, assuch, we do not anticipate any generic versions of this product to enter the market in the near term. We expect our product sales, net will continue to grow asVIVITROL continues to penetrate the opioid and alcohol dependence markets in the U.S., and as ARISTADA continues to gain market share in the U.S.51Table of ContentsLicense Revenue Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 License revenue $48.4 $28.0 $— $20.4 $28.0 Amounts earned as license revenue relate to our license and collaboration agreement with Biogen for BIIB098. The amount recognized in 2018 wastriggered by Biogen’s decision to pay the $50.0 million option payment following Biogen’s review of preliminary gastrointestinal tolerability data from theongoing clinical development program for BIIB098, including certain data from our long-term safety clinical trial and part A of the elective, randomized,head-to-head phase 3 gastrointestinal tolerability clinical trial comparing BIIB098 and dimethyl fumarate. In 2017, we recognized the upfront cash paymentof $28.0 million as license revenue under ASC Subtopic 605-25, Multiple Element Arrangements (“ASC 605-25”). This is discussed in greater detail withinthe Critical Accounting Estimates section below.Research and Development Revenue Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Research and development revenue $68.9 $7.2 $2.3 $61.7 $4.9The increase in R&D revenue in 2018, as compared to 2017, and in 2017, as compared to 2016, was primarily due to revenue earned under our licenseand collaboration agreement with Biogen for BIIB098, as discussed in further detail within the Critical Accounting Estimates section below. Our R&Drevenues earned under our license and collaboration agreement with Biogen for BIIB098 were $65.4 million and $2.3 million in 2018 and 2017,respectively.Costs and ExpensesCost of Goods Manufactured and Sold Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Cost of goods manufactured and sold $176.4 $154.7 $132.1 $(21.7) $(22.6) The increase in cost of goods manufactured and sold in 2018, as compared to 2017, was primarily due to a 24% and 39% increase in cost of goods soldrelated to VIVITROL and ARISTADA, respectively, which were driven by the increase in the sales of these products. The increase in cost of goodsmanufactured and sold in 2017, as compared to 2016, was primarily due to the increase in cost of goods sold related to VIVITROL and ARISTADA and anincrease in cost of goods manufactured related to RISPERDAL CONSTA. Cost of goods sold for VIVITROL and ARISTADA increased by 33% and 83%,respectively, in 2017, as compared to 2016 driven by increases in sales. Cost of goods manufactured for RISPERDAL CONSTA increased by 13% in 2017, ascompared to 2016, which was primarily due to an increase in the number of units shipped to Janssen.Research and Development ExpensesFor each of our R&D programs, we incur both external and internal expenses. External R&D expenses include clinical and non‑clinical activitiesperformed by CROs, consulting fees, laboratory services, purchases of drug product materials and third‑party manufacturing development costs. Internal R&Dexpenses include employee‑related expenses, occupancy costs, depreciation and general overhead. We track external R&D expenses for each of ourdevelopment programs; however, internal R&D expenses are not tracked by individual program as they benefit multiple programs or our technologies ingeneral.52Table of ContentsThe following table sets forth our external R&D expenses for the years ended December 31, 2018, 2017 and 2016 relating to our then-currentindividual Key Development Programs and all other development programs, and our internal R&D expenses by the nature of such expenses: Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 External R&D Expenses: Key development programs: ALKS 3831 $52.0 $91.9 $71.0 $39.9 $(20.9)BIIB098 43.1 47.4 26.9 4.3 (20.5)ALKS 5461 30.3 42.2 46.2 11.9 4.0 ALKS 4230 23.3 7.0 4.8 (16.3) (2.2)ARISTADA and ARISTADA line extensions 20.1 13.7 36.3 (6.4) 22.6 Other external R&D expenses 49.7 38.4 58.7 (11.3) 20.3 Total external R&D expenses 218.5 240.6 243.9 22.1 3.3 Internal R&D expenses: Employee-related 163.9 132.2 110.1 (31.7) (22.1)Depreciation 11.9 10.5 7.9 (1.4) (2.6)Occupancy 11.0 9.6 9.0 (1.4) (0.6)Other 20.1 20.0 16.2 (0.1) (3.8)Total internal R&D expenses 206.9 172.3 143.2 (34.6) (29.1)Research and development expenses $425.4 $412.9 $387.1 $(12.5) $(25.8) These amounts are not necessarily predictive of future R&D expenses. In an effort to allocate our spending most effectively, we continually evaluateour products under development, based on the performance of such products in pre‑clinical and/or clinical trials, our expectations regarding the likelihood oftheir regulatory approval and our view of their commercial viability, among other factors. The decrease in expenses related to ALKS 3831 in 2018, as compared to 2017, was primarily due to the decrease in activity within the ENLIGHTEN-1and ENLIGHTEN-2 pivotal trials, which were initiated in December 2015 and February 2016, respectively, partially offset by an increase in activity within aphase 3 study of ALKS 3831 in young adults, which was initiated in June 2017. The increase in expenses related to ALKS 3831 in 2017, as compared to2016, was primarily due to the timing of activity within the ENLIGHTEN-1 and ENLIGHTEN-2 pivotal trials and the initiation of the phase 3 study of ALKS3831 in young adults. The decrease in expenses related to BIIB098 in 2018, as compared to 2017, and in increase in expenses in 2017, as compared to 2016, were primarilydue to the timing of activity within the two-year, multicenter, open-label phase 3 study designed to assess the safety of BIIB098, which was initiated inDecember 2015. In December 2018, we and Biogen announced that we submitted a NDA to the FDA seeking marketing approval of BIIB098 for the treatmentof relapsing forms of MS. We also initiated an elective, randomized, head-to-head phase 3 study designed to compare the gastrointestinal tolerability ofBIIB098 and TECFIDERA in patients with relapsing-remitting MS in March 2017. The decrease in expenses related to ALKS 5461 in 2018, as compared to 2017, was primarily due to a decrease in activity within the program as wecompleted submission of our NDA to the FDA seeking marketing approval of ALKS 5461 for the adjunctive treatment of MDD in January 2018. The decreasein expenses related to ALKS 5461 in 2017, as compared to 2016, was primarily due to the completion of the three core phase 3 studies related to the program.We announced topline results of the FORWARD-3 and FORWARD-4 studies in January 2016 and topline results from FORWARD-5 were announced inOctober 2016. The increase in expenses related to ARISTADA and ARISTADA line extensions in 2018, as compared to 2017, was primarily due to an increase ofactivity related to the phase 3b clinical study to evaluate the efficacy and safety of ARISTADA and INVEGA SUSTENNA in patients experiencing an acuteexacerbation of schizophrenia. The decrease in expenses related to ARISTADA and ARISTADA line extensions in 2017, as compared to 2016, was primarilydue to the timing of the phase 1 clinical study of extended dosing intervals of aripiprazole lauroxil in patients with schizophrenia. ARISTADA 1064 mg, ourtwo-month dosing option, was approved by the FDA in June 2017. In October 2017, we submitted an NDA to the FDA for ARISTADA INITIO, which wasapproved by the FDA in June 2018. The increases in expenses related to ALKS 4230 in 2018, as compared to 2017, and in 2017, as compared to 2016, were primarily related to the timingof the phase 1 study for ALKS 4230, as described in Key Development Programs above under the heading “ALKS 4230” within “Part I, Item 1—Business” inthis Annual Report. 53Table of ContentsThe increase in other external R&D expenses in 2018, as compared to 2017, was due to activity related to our early-stage, pre-clinical developmentactivity. The decrease in other external R&D expenses in 2017, as compared to 2016, was primarily due to a $10.0 million non-refundable, upfront paymentwe paid as partial consideration of a grant to us of rights and licenses pursuant to a collaboration and license option agreement with Synchronicity Pharma,Inc. (“Synchronicity”), formerly Reset Therapeutics, Inc. (“Reset”). The remainder of the changes were due to activity related to our early-stage, pre-clinicaldevelopment activity. The increase in employee-related expenses in both periods presented was primarily due to an increase in headcount. Our R&D-relatedheadcount increased by 17% in 2018, as compared to 2017, and 9% in 2017, as compared to 2016. For additional detail on the status of our key development programs, refer to Key Development Programs within “Part I, Item 1—Business” in thisAnnual Report.Selling, General and Administrative Expenses Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Selling, general and administrative expense $526.4 $421.6 $374.1 $(104.8) $(47.5) The increase in selling, general and administrative (“SG&A”) expense in both periods presented was primarily due to increases in marketing andprofessional services fees and employee-related expenses. Marketing and professional services fees increased by 29% and 27%, respectively, and wereprimarily due to additional brand investments in both VIVITROL and ARISTADA, as well as an increase investment in patient access support services, suchas reimbursement and transition assistance, for both of these products. Employee-related expenses increased by 21% and 6%, respectively, and were primarilydue to an increase in our SG&A-related headcount of 22% in 2018 and 17% in 2017.Amortization of Acquired Intangible Assets Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Amortization of acquired intangible assets $65.2 $62.1 $61.0 $(3.1) $(1.1) Our amortizable intangible assets consist of technology and collaborative arrangements acquired as part of the acquisition of EDT in September 2011,which are being amortized over 12 to 13 years. We amortize our amortizable intangible assets using the economic use method, which reflects the pattern thatthe economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract.Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet at December 31, 2018 is expectedto be approximately $40.0 million, $40.0 million, $40.0 million, $35.0 million and $35.0 million in the years ending December 31, 2019 through 2023,respectively.Other (Expense) Income, Net Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Interest income $9.2 $4.6 $3.8 $4.6 $0.8 Interest expense (15.4) (12.0) (14.9) (3.4) 2.9 Change in the fair value of contingent consideration (19.6) 21.6 7.9 (41.2) 13.7 Other expense, net (2.0) (9.6) (2.5) 7.6 (7.1)Total other (expense) income, net $(27.8) $4.6 $(5.7) $(32.4) $10.3 The increase in interest expense in 2018, as compared to 2017, was due to our amending and refinancing our 2023 Term Loans in March 2018 in orderto, among other things, extend the due date of the loan from September 25, 2021 to March 26, 2023, reduce the interest payable from LIBOR plus 2.75% witha LIBOR floor of 0.75% to LIBOR plus 2.25% with a 0% LIBOR floor and increase covenant flexibility (the “Refinancing”). The Refinancing resulted in a$2.3 million charge in 2018, which was included in interest expense. The decrease in interest expense in 2017, as compared to 2016, was due an amendmentof our outstanding term loans at September 25, 2016. We incurred a charge of $2.1 million in connection with this transaction in 2016, which was included ininterest expense.54Table of ContentsIn April 2015, we entered into the Gainesville Transaction with Recro Pharma, Inc. (“Recro”) and Recro Pharma LLC and received $54.0 million incash, $2.1 million in warrants to acquire Recro common stock and $57.6 million in contingent consideration tied to low double digit royalties on net sales ofthe IV/IM and parenteral forms of Meloxicam and any other product with the same active ingredient as Meloxicam IV/IM that is discovered or identifiedusing certain of our intellectual property to which Recro was provided a right of use, through license or transfer, pursuant to the Gainesville Transaction (the“Meloxicam Products”), and up to $120.0 million in milestone payments upon the achievement of certain regulatory and sales milestones related to theMeloxicam Products. We determined the fair value of the contingent consideration through three valuation approaches, which are described in greater detailin Critical Accounting Estimates, Contingent Consideration, later in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Annual Report. At each reporting date, we update our assessment of the fair value of this contingent consideration and reflect any changesto the fair value within the consolidated statements of operations and comprehensive loss and will continue to do so until the milestones and/or royaltiesincluded in the contingent consideration have been settled.During the years ended December 31, 2018, 2017 and 2016, we determined that the fair value of the contingent consideration decreased by $19.6million and increased by $21.6 million and $7.9 million, respectively. The decrease in 2018 was primarily due to the complete response letter Recro receivedfrom the FDA in May 2018 regarding its NDA for IV Meloxicam. As a result of the receipt of the complete response letter, we delayed our expectation of theanticipated date for the FDA’s approval of the IV Meloxicam NDA and reduced the amount of forecasted sales in our valuation model. Recro resubmitted theNDA for IV Meloxicam in September 2018 and the FDA assigned a PDUFA date of March 24, 2019 to the resubmitted application. In addition, in December2018, we amended our agreements with Recro and its affiliates relating to certain development milestone payments owed to us by Recro, such that the $45.0million previously due to us upon approval by the FDA of the IV Meloxicam NDA, was replaced with $5.0 million which was paid in the first quarter of 2019,$5.0 million to be paid in the second quarter of 2019, and if the IV Meloxicam NDA is approved by the FDA, $5.0 million to be paid within 180 daysfollowing such approval and $45.0 million payable in seven equal annual installments of approximately $6.4 million beginning on the first anniversary ofsuch NDA approval date.The increase in the fair value of the contingent consideration in 2017, as compared to 2016, was primarily due to a prior change in the structure of thedevelopment milestones related to approval of the IV Meloxicam NDA and a shorter time to payment and improved probability of success on the milestonesand royalties included in the contingent consideration. The valuation of the contingent consideration is discussed in greater detail in Critical AccountingEstimates, Contingent Consideration, later in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of thisAnnual Report.The decrease in other expense, net in 2018, as compared to 2017, and the increase in 2017, as compared to 2016, were primarily due to an impairmentcharge related to our investment in Synchronicity, which was accounted for under the equity method. In September 2017, we recorded an other-than-temporary impairment charge of $10.5 million, which represented our remaining investment in Synchronicity, as we believed that Synchronicity was unableto generate future earnings that justified the carrying amount of the investment.Provision (Benefit) for Income Taxes Change Year Ended December 31, Favorable/(Unfavorable) (In millions) 2018 2017 2016 2018 - 2017 2017 - 2016 Income tax provision (benefit) $12.3 $14.7 $(5.9) $2.4 $(20.6)The income tax provision (benefit) in 2018, 2017 and 2016 were primarily due to U.S. federal and state taxes. The favorable change in income taxes in2018, as compared to 2017, was due to the one-off nature of a $21.5 million tax expense in 2017 from the enactment of the Tax Cuts and Jobs Act (the “Act”or “Tax Reform”), partially offset by increased taxes on income earned in the U.S. The unfavorable change in income taxes in 2017, as compared to 2016, wasprimarily due to Tax Reform and an increase in income earned in the U.S., partially offset by the recognition of excess tax benefits related to share-basedcompensation.No provision for income tax has been provided on undistributed earnings of our foreign subsidiaries because such earnings are permanently reinvestedor may be repatriated to Ireland without incurring any tax liability. Cumulative unremitted earnings of overseas subsidiaries totaled approximately$327.1 million at December 31, 2018.As of December 31, 2017, a deferred tax asset of $13.3 million was recorded as a provisional amount related to performance-based compensation tocovered employees prior to November 2, 2017. We have since completed our review of the Act and have determined the performance-based compensationwas provided pursuant to binding arrangements and should be deductible. We concluded that it had met the requirements for recognition of the tax benefitand we no longer consider this item a provisional amount in our financial statements in accordance with Staff Accounting Bulletin 118 (“SAB 118”).We will continue to evaluate the future impact of the Act and will update our disclosures as additional information and interpretive guidance becomesavailable and management’s analysis evolves.55Table of ContentsAt December 31, 2018, we maintained a valuation allowance of $11.7 million against certain U.S. state deferred tax assets and $207.4 million againstcertain Irish deferred tax assets as we determined that it is more‑likely‑than‑not that these net deferred tax assets will not be realized. If we demonstrateconsistent profitability in the future, the evaluation of the recoverability of these deferred tax assets may change and the remaining valuation allowance maybe released in part or in whole.As of December 31, 2018, we had $1.4 billion of Irish NOL carryforwards, $2.5 million of U.S. state NOL carryforwards, $44.8 million of federal R&Dcredits, $2.0 million of alternative minimum tax (“AMT”) credits and $14.8 million of U.S. state tax credits which either expire on various dates through2038 or can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and U.S. taxable income and taxand, in the case of the AMT credits, may be refundable. These loss and credit carryforwards are subject to review and possible adjustment by the appropriatetaxing authorities. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based upon changes in theownership of our ordinary shares.Liquidity and Capital ResourcesOur financial condition is summarized as follows: December 31, 2018 December 31, 2017 (In millions) U.S. Ireland Total U.S. Ireland Total Cash and cash equivalents $139.3 $127.5 $266.8 $114.7 $76.6 $191.3 Investments—short-term 203.3 69.2 272.5 127.5 114.7 242.2 Investments—long-term 51.5 29.2 80.7 108.9 48.3 157.2 Total cash and investments $394.1 $225.9 $620.0 $351.1 $239.6 $590.7 Outstanding borrowings—short and long-term $279.3 $— $279.3 $281.4 $— $281.4 At December 31, 2018, our investments consisted of the following: Gross Amortized Unrealized Estimated (In millions) Cost Gains Losses Fair Value Investments—short-term available-for-sale $272.3 $0.3 $(0.6) $272.0 Investments—short-term held-to-maturity 0.5 — — 0.5 Investments—long-term available-for-sale 77.4 — (0.3) 77.1 Investments—long-term held-to-maturity 3.5 0.1 — 3.6 Total $353.7 $0.4 $(0.9) $353.2Sources and Uses of CashWe generated $99.3 million and $19.2 million and used $63.8 million of cash from operating activities during the years ended December 31, 2018,2017 and 2016, respectively. We expect that our existing cash and investments will be sufficient to finance our anticipated working capital and other cashrequirements, such as capital expenditures and principal and interest payments on our long‑term debt, for at least the twelve months following the date fromwhich our financial statements were issued. Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain additionalfinancing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financingmethods or structures. In addition, the 2023 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional amounts aslong as we meet certain conditions, including a specified leverage ratio.Our investment objectives are, first, to preserve liquidity and conserve capital and, second, to generate investment income. We mitigate credit risk inour cash reserves by maintaining a well‑diversified portfolio that limits the amount of investment exposure as to institution, maturity and investment type.Our available‑for‑sale investments consist primarily of short‑ and long‑term U.S. government and agency debt securities and corporate debt securities. Weclassify available‑for‑sale investments in an unrealized loss position, which do not mature within 12 months, as long‑term investments. We have the intentand ability to hold these investments until recovery, which may be at maturity, and it is more‑likely‑than‑not that we would not be required to sell thesesecurities before recovery of their amortized cost. At December 31, 2018, we performed an analysis of our investments with unrealized losses for impairmentand determined that they were temporarily impaired.56Table of ContentsInformation about our cash flows, by category, is presented in the accompanying consolidated statements of cash flows. The following tablesummarizes our cash flows for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, (In millions) 2018 2017 2016 Cash and cash equivalents, beginning of period $191.3 $186.4 $181.1 Cash flows provided by (used in) operating activities 99.3 19.2 (63.8)Cash flows (used in) provided by investing activities (22.2) (18.4) 127.2 Cash flows (used in) provided by financing activities (1.6) 4.1 (58.1)Cash and cash equivalents, end of period $266.8 $191.3 $186.4Operating ActivitiesThe increases in cash provided by operating activities in 2018, as compared to 2017, and in 2017, as compared to 2016, were primarily due to a 21%increase in the amount of cash collected from our customers. This was partially offset by a 20% and 17% increase in the amount of cash paid to ouremployees, respectively, and a 4% and 6% increase in the amount of cash paid to our suppliers, respectively. The increase in the amount of cash we collectedfrom our customers is primarily due to the increase in revenues in each period as compared to the prior period. The increase in the amount of cash paid to ouremployees is primarily due to the increase in our headcount in each period, as compared to the prior period, and the increase in the amount of cash paid to oursuppliers is due to the increase in R&D and commercial activity in each period, as compared to the prior period, as previously discussed.Investing ActivitiesThe increases in cash used in investing activities in 2018, as compared to 2017, and in 2017, as compared to 2016, were primarily due to an increasein property, plant and equipment additions. Cash paid for the addition to property, plant and equipment increased by 35% and 15%, respectively, and wasprimarily due to the construction of facilities and equipment at our Wilmington, Ohio location for the manufacture of products currently in development andexisting proprietary products. Amounts included as construction in progress at December 31, 2018 primarily include capital expenditures at ourmanufacturing facility in Wilmington, Ohio. We expect to spend approximately $95.0 million during the year ended December 31, 2019 for capitalexpenditures. We continue to evaluate our manufacturing capacity based on expectations of demand for our products and will continue to record suchamounts within construction in progress until such time as the underlying assets are placed into service, or we determine we have sufficient existing capacityand the assets are no longer required, at which time we would recognize an impairment charge. We continue to periodically evaluate whether facts andcircumstances indicate that the carrying value of these long‑lived assets to be held and used may not be recoverable.In addition to the increase in capital spending, we had an increase in the net sales of investments of 43% and a decrease of 82% in 2018 as comparedto 2017, and in 2017 as compared to 2016, respectively. In 2017, this increase was partially offset by a $15.0 million investment in Synchronicity that wemade in 2016.Financing ActivitiesThe change in cash flows from financing activities in 2018, as compared to 2017, was primarily due to a $5.8 million decrease in the net cash providedfrom stock option exercises by our employees. The increase in cash provided by financing activities in 2017, as compared to 2016, was primarily due to a$60.9 million principal payment for a term loan which matured in September 2016, which had an original principal balance of $75.0 million, bore interest atLIBOR plus 2.75%, with no LIBOR floor. In 2017, our financing activities consisted of $7.1 million in cash received from our employees related to stockoption exercises and $3.0 million in principal payments we made under the Term Loan B-1 (which has since been refinanced as described above into the2023 Term Loans).BorrowingsAt December 31, 2018, our borrowings consisted of $282.1 million outstanding under the 2023 Term Loans. Please refer to Note 10, Long‑Term Debt,in the accompanying “Notes to Consolidated Financial Statements” for a discussion of our outstanding term loans.57Table of ContentsContractual ObligationsThe following table summarizes our obligations to make future payments under our current contracts at December 31, 2018: Less Than One to Three to More than One Year Three Years Five Years Five Years Contractual Obligations (In thousands) Total (2019) (2020 - 2021) (2022 - 2023) (After 2023) 2023 Term Loans—Principal $282,118 $2,843 $5,686 $273,589 $— 2023 Term Loans—Interest 53,690 12,844 25,298 15,548 — Operating lease obligations 53,601 9,394 15,424 4,843 23,940 Purchase obligations 530,307 530,307 — — — Total contractual cash obligations $919,716 $555,388 $46,408 $293,980 $23,940As interest on the 2023 Term Loans is based on a one, three or six-month LIBOR rate of our choosing, we are using the one-month LIBOR rate, whichwas 2.32% at December 31, 2018 as this exceeds the LIBOR rate floor under the terms of the 2023 Term Loans and is the frequency in which we make interestpayments.This table excludes any liabilities pertaining to uncertain tax positions as we cannot make a reliable estimate of the period of cash settlement with therespective taxing authorities. At December 31, 2018, we had $6.1 million of net liabilities associated with uncertain tax positions. We do not anticipate thatthe amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months.Off‑Balance Sheet ArrangementsAt December 31, 2018, we were not a party to any off‑balance sheet arrangements that have, or are reasonably likely to have, a current or future effecton our financial condition, results of operations, liquidity, capital expenditures or capital resources.Critical Accounting EstimatesOur consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we arerequired to make assumptions and estimates about future events, and apply judgments on historical experience, current trends and other factors thatmanagement believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies,assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because futureevents and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could bematerial.Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the “Notes to Consolidated FinancialStatements.” We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financialresults, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that areinherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the Audit and Risk Committee of our board ofdirectors.Revenue from Contracts with CustomersWhen entering into arrangements with customers, we identify whether our performance obligations under each arrangement represent a distinct goodor service or a series of distinct goods or services. If a contract contains more than one performance obligation, we allocate the total transaction price to eachperformance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying eachperformance obligation. The fair value of performance obligations under each arrangement may be derived using an estimate of selling price if we do not sellthe goods or services separately.We recognize revenue when or as we satisfy a performance obligation by transferring an asset or providing a service to a customer. Managementjudgment is required in determining the consideration to be earned under an arrangement and the period over which we are expected to complete ourperformance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory and that are determined to beperformance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the levelof effort required in an arrangement and the period over which we expect to complete our aggregate performance obligations.58Table of ContentsManufacturing RevenueWe recognize manufacturing revenues from the sale of products we manufacture for resale by our licensees. Manufacturing revenues for our partneredproducts, with the exception of those from Janssen related to RISPERDAL CONSTA, are recognized over time as products move through the manufacturingprocess, using a standard cost-based model as a measure of progress, which represents a faithful depiction of the transfer of control of the goods. We recognizemanufacturing revenue from these products over time as we determined, in each instance, that we would have a right to payment for performance completedto date if our customer were to terminate the manufacturing agreement for reasons other than our non-performance and the products have no alternative use.We invoice our licensees upon shipment with payment terms between 30 to 90 days. Prior to the adoption of Topic 606, we recorded manufacturing revenuefrom the sale of products we manufactured for resale by our partners after we had shipped such products and risk of loss had passed to our partner, assumingpersuasive evidence of an arrangement existed, the sales price was fixed or determinable and collectability was reasonably assured.We are the exclusive manufacturer of RISPERDAL CONSTA for commercial sale under our manufacturing and supply agreement with Janssen. Wedetermined that it is appropriate to record revenue under this agreement at the point in time when control of the product passes to Janssen, which isdetermined to be when the product has been fully manufactured, since Janssen does not control the product during the manufacturing process and, in theevent Janssen terminates the manufacturing and supply agreement, it is uncertain whether, and at what amount, we would be reimbursed for performancecompleted to date for product not yet fully manufactured. The manufacturing process is considered fully complete once the finished goods have beenapproved for shipment by both us and Janssen.The sales price for certain of our manufacturing revenues is based on the end-market sales price earned by our licensees. As end-market sales generallyoccur after we have recorded manufacturing revenue, we estimate the sales price for such products based on information supplied to us by our licensees, ourhistorical transaction experience and other third-party data. Differences between actual manufacturing revenues and estimated manufacturing revenues arereconciled and adjusted for in the period in which they become known, which is generally within the same quarter. The difference between our actual andestimated manufacturing revenues has not been material to date.Royalty RevenueWe recognize royalty revenues related to the sale of products by our licensees that incorporate our technology. Royalties, with the exception of thoseearned on sales of AMPYRA as set forth below, qualify for the sales-and-usage exemption under Topic 606 as (i) royalties are based strictly on the sales-and-usage by the licensee; and (ii) a license of IP is the sole or predominant item to which such royalties relate. Based on this exemption, these royalties areearned in the period the products are sold by our partner and we have a present right to payment. Royalties on AMPYRA manufactured under our license andsupply agreements with Acorda are incorporated into the standard cost-based model described in the manufacturing revenues section, above, as the terms ofsuch agreements entitle us to royalty revenue as the product is being manufactured, which represents a faithful depiction of the transfer of goods, and notbased on the actual end-market sales of the licensee.In anticipation of the entry of generic forms of AMPYRA to the U.S. market, during the three months ended September 30, 2018, we supplied fivebatches of AMPYRA to Acorda for which we agreed to defer the receipt of royalties on end-market sales of the product until the product was sold by Acorda,rather than as it was manufactured. Upon delivery of these five batches, royalty revenue for AMPYRA reverted to being recognized as the product ismanufactured.Certain of our royalty revenues are recognized based on information supplied to us by our licensees and require estimates to be made. Differencesbetween actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, which isgenerally within the same quarter. The difference between our actual and estimated royalty revenues has not been material to date.59Table of ContentsResearch and Development Revenue and License RevenueIn November 2017, we granted Biogen, under a license and collaboration agreement, a worldwide, exclusive, sublicensable license to develop,manufacture and commercialize BIIB098 and other products covered by patents licensed to Biogen under the agreement. Upon entering into the agreement,we received an up-front cash payment of $28.0 million. In June 2018, we received an additional cash payment of $50.0 million following Biogen’s review ofpreliminary gastrointestinal tolerability data from the ongoing clinical development program for BIIB098. We are also eligible to receive an additionalpayment of $150.0 million upon an approval by the FDA on or before December 31, 2021 of a 505(b)(2) NDA (or, in certain circumstances, a 505(b)(1) NDA)for BIIB098. We are also eligible to receive additional payments upon achievement of developmental milestones with respect to the first two products, otherthan BIIB098, covered by patents licensed to Biogen under the agreement. In addition, we will receive a mid-teens percentage royalty on worldwide net salesof BIIB098, subject to, under certain circumstances, minimum annual payments for the first five years following FDA approval of BIIB098. We will alsoreceive royalties on net sales of products, other than BIIB098, covered by patents licensed to Biogen under the agreement, at tiered royalty rates calculated aspercentages of net sales ranging from high-single digits to sub-teen double-digits. All royalties are payable on a product-by-product and country-by-countrybasis until the later of (i) the last-to-expire patent right covering the applicable product in the applicable country and (ii) a specified period of time from thefirst commercial sale of the applicable product in the applicable country. Royalties for all such products and the minimum annual payments for BIIB098 aresubject to reductions as set forth in the agreement. Biogen paid a portion of the BIIB098 development costs we incurred in 2017 and, since January 1, 2018,Biogen is responsible for all BIIB098 development costs we incur, subject to annual budget limitations. We have retained the right to manufacture clinicalsupplies and commercial supplies of BIIB098 and all other products covered by patents licensed to Biogen under the agreement, subject to Biogen’s right tomanufacture or have manufactured commercial supplies as a back-up manufacturer and subject to good faith agreement by the parties on the terms of suchmanufacturing arrangements.We evaluated the agreement under Topic 606 and determined that we had four deliverables: (i) the grant of a distinct, right-to-use license ofintellectual property to Biogen; (ii) future development services; (iii) clinical supply; and (iv) participation on a joint steering committee with Biogen. Ourparticipation on the joint steering committee was considered to be perfunctory and thus not recognized as a performance obligation. The deliverables, asidefrom the participation in the joint steering committee which was considered to be perfunctory, were determined to be separate performance obligations as thelicense is separately identifiable from the development services and clinical supply, and the development services are not expected to significantly modify orcustomize the IP.We allocated the arrangement consideration to each performance obligation using standalone selling prices based on an estimate of selling price forthe license and other deliverables. We used a discounted cash flow model to estimate the standalone selling price of the license in order to allocate theconsideration to the performance obligations. To estimate the standalone selling price of the license, we assessed the likelihood of the FDA’s approval ofBIIB098 and estimated the expected future cash flows assuming FDA approval and maintenance of the IP protecting BIIB098. We then discounted these cashflows using a discount rate of 8.0%, which we believed captured a market participant’s view of the risk associated with the expected cash flows. The estimateof selling price of the development services and clinical supply were determined through third-party evidence. We believe that a change in the assumptionsused to determine our estimate of selling price for the license most likely would not have a significant effect on the allocation of consideration transferred.Under Topic 606, we allocated the upfront payment of $28.0 million as follows: $27.0 million to the delivery of the license; $0.9 million to futuredevelopment services; and $0.1 million to clinical supply. We allocated the $50.0 million payment received following Biogen’s review of preliminarygastrointestinal tolerability data from the ongoing clinical development program for BIIB098 as follows: $48.3 million to the delivery of the license; $1.5million to future development services; and $0.2 million to clinical supply. The amounts allocated to the license were recognized upon receipt of thepayments as delivery of the license occurred upon entry into the agreement in 2017 and the amounts allocated to the development services and clinicalsupply will be recognized over the course of the development work and as clinical supply is delivered to Biogen, which is expected to continue through2019.We determined that the future milestones we are entitled to receive, including the $150.0 million payment upon approval by the FDA on or beforeDecember 31, 2021 of a 505(b)(2) NDA (or, in certain circumstances, a 505(b)(1) NDA) for BIIB098, and sales-based royalties, are variable consideration. Weare using the most likely amount method for estimating the variable consideration to be received related to the milestones under this arrangement. Given thechallenges inherent in developing and obtaining approval for pharmaceutical and biologic products, there was substantial uncertainty as to whether thesemilestones would be achieved at the time the license and collaboration agreement was entered into. Accordingly, we have not included these milestones inthe transaction price as it is not probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The royalties are subjectto the sales-based exception and will be recorded as revenue when the corresponding sale occurs.60Table of ContentsProduct Sales, NetOur product sales, net consist of sales of VIVITROL, ARISTADA and ARISTADA INITIO in the U.S. primarily to wholesalers, specialty distributorsand pharmacies. Product sales, net are recognized when the customer obtains control of the product, which is when the product has been received by thecustomer.Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with ourcustomers, health care providers or payers. Our process for estimating reserves established for these variable consideration components does not differmaterially from historical practices. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may besubject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulativerevenues recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust theseestimates, which could have an effect on earnings in the period of adjustment. The following are our significant categories of sales discounts and allowances: •Medicaid Rebates—we record accruals for rebates to states under the Medicaid Drug Rebate Program as a reduction of sales when the product isshipped into the distribution channel using the expected value. We rebate individual states for all eligible units purchased under the Medicaidprogram based on a rebate per unit calculation, which is based on our average manufacturer prices. We estimate expected unit sales and rebatesper unit under the Medicaid program and adjusts our rebate based on actual unit sales and rebates per unit. To date, actual Medicaid rebateshave not differed materially from our estimates; •Chargebacks—discounts that occur when contracted indirect customers purchase directly from wholesalers and specialty distributors.Contracted customers generally purchase a product at its contracted price. The wholesaler or specialty distributor, in turn, then generallycharges back to us the difference between the wholesale acquisition cost and the contracted price paid to the wholesaler or specialty distributorby the customer. The allowance for chargebacks is made using the expected value and is based on actual and expected utilization of theseprograms. Chargebacks could exceed historical experience and our estimates of future participation in these programs. To date, actualchargebacks have not differed materially from our estimates; •Product Discounts—cash consideration, including sales incentives, given by us under agreements with a number of wholesaler, distributor,pharmacy, and treatment provider customers that provide them with a discount on the purchase price of products. The reserve is made using theexpected value and to date, actual product discounts have not differed materially from our estimates; and •Product Returns—we record an estimate for product returns at the time our customers take control of our product. We estimate this liabilityusing the expected value based on our historical return levels and specifically identified anticipated returns due to known business conditionsand product expiry dates. Return amounts are recorded as a deduction to arrive at product sales, net. Once product is returned, it is destroyed. •Medicare Part D— We record accruals for Medicare Part D liabilities under the Medicare Coverage Gap Discount Program (“CGDP”) as areduction of sales. Under the CGDP, patients reaching the annual coverage gap threshold are eligible for reimbursement coverage for out-of-pocket costs for covered prescription drugs. Under an agreement with the Center for Medicare and Medicaid, manufacturers are responsible toreimburse prescription plan sponsors for the portion of out-of-pocket expenses not covered under their Medicare plans.61Table of ContentsOur provisions for sales and allowances reduced gross product sales as follows: (In millions) MedicaidRebates Chargebacks ProductDiscounts ProductReturns MedicarePart D Other Total Balance, December 31, 2016 $43.8 $1.1 $5.6 $13.5 $1.3 $1.9 $67.2 Provision: Current year 153.5 47.9 51.2 7.5 16.0 25.8 301.9 Prior year (5.7) — (0.2) (0.8) — (0.3) (7.0)Total 147.8 47.9 51.0 6.7 16.0 25.5 294.9 Actual: Current year (66.0) (46.3) (42.0) (0.1) (12.6) (20.8) (187.8)Prior year (35.7) (0.8) (6.0) (1.3) (0.8) (2.0) (46.6)Total (101.7) (47.1) (48.0) (1.4) (13.4) (22.8) (234.4)Balance, December 31, 2017 $89.9 $1.9 $8.6 $18.8 $3.9 $4.6 $127.7 Provision: Current year 203.1 65.5 65.2 6.6 29.8 32.1 402.3 Prior year (6.1) — (0.1) — — — (6.2)Total 197.0 65.5 65.1 6.6 29.8 32.1 396.1 Actual: Current year (80.5) (63.7) (51.1) — (17.8) (27.5) (240.6)Prior year (83.0) (1.4) (10.4) (3.5) (4.8) (3.7) (106.8)Total (163.5) (65.1) (61.5) (3.5) (22.6) (31.2) (347.4)Balance, December 31, 2018 $123.4 $2.3 $12.2 $21.9 $11.1 $5.5 $176.4InvestmentsWe hold investments in U.S. government and agency obligations, debt securities issued by foreign agencies and backed by foreign governments andcorporate debt securities. In accordance with the accounting standard for fair value measurements, we have classified our financial assets as Level 1, 2 or 3within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets that we have the ability toaccess. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair valuesdetermined by Level 3 inputs utilize unobservable data points for the asset.Substantially all of our investments are classified as “available‑for‑sale” and are recorded at their estimated fair value. The valuation of ouravailable‑for‑sale securities for purposes of determining the amount of gains and losses is based on the specific identification method. Our held‑to‑maturityinvestments are restricted investments held as collateral under certain letters of credit related to our lease arrangements and are recorded at amortized cost.The earnings on our investment portfolio may be adversely affected by changes in interest rates, credit ratings, collateral value, the overall strength ofcredit markets and other factors that may result in other‑than‑temporary declines in the value of the securities. On a quarterly basis, we review the fair marketvalue of our investments in comparison to amortized cost. If the fair market value of a security is less than its carrying value, we perform an analysis to assesswhether we intend to sell or whether we would more‑likely‑than‑not be required to sell the security before the expected recovery of the amortized cost basis.Where we intend to sell a security, or may be required to do so, the security’s decline in fair value is deemed to be other‑than‑temporary, and the full amountof the unrealized loss is recorded within earnings as an impairment loss. Regardless of our intent to sell a security, we perform additional analysis on allsecurities with unrealized losses to evaluate losses associated with the creditworthiness of the security. Credit losses are identified where we do not expect toreceive cash flows sufficient to recover the amortized cost basis of a security.For equity securities, when assessing whether a decline in fair value below our cost basis is other‑than‑temporary, we consider the fair market value ofthe security, the duration of the security’s decline and the financial condition of the issuer. We then consider our intent and ability to hold the equity securityfor a period of time sufficient to recover our carrying value. Where we have determined that we lack the intent and ability to hold an equity security to itsexpected recovery, the security’s decline in fair value is deemed to be other‑than‑temporary and is recorded within earnings as an impairment loss.Share‑Based CompensationOur share‑based compensation plans provide for compensation in the form of incentive stock options, non‑qualified stock options and restricted stockunits. See Note 2, Summary of Significant Accounting Policies, and Note 13, Share‑Based Compensation, in our “Notes to Consolidated FinancialStatements” for a complete discussion of our share‑based compensation plans.62Table of ContentsThe fair value of restricted stock units is equal to the closing price of our shares on the date of grant. The fair value of stock option awards isdetermined through the use of a Black‑Scholes option‑pricing model. The Black‑Scholes model requires us to estimate certain subjective assumptions. Theseassumptions include the expected option term, which takes into account both the contractual term of the option and the effect of our employees’ and non-employee directors’ expected exercise and post‑vesting termination behavior, expected volatility of our ordinary shares over the option’s expected term,which is developed using both the historical volatility of our ordinary shares and implied volatility from our publicly traded options, the risk‑free interestrate over the option’s expected term and an expected annual dividend yield. Due to the differing exercise and post‑vesting termination behaviors of ouremployees and non‑employee directors, we establish separate Black‑Scholes input assumptions for three distinct employee populations: our seniormanagement; our non‑employee directors; and all other employees. For the years ended December 31, 2018, 2017 and 2016, the ranges in weighted‑averageassumptions were as follows: Year Ended December 31, 2018 2017 2016Expected option term 5 - 8 years 5 - 8 years 5 - 7 yearsExpected stock volatility 44 % - 49 % 43 % - 47 % 39 % - 53 %Risk-free interest rate 2.25 % - 3.10 % 1.69 % - 2.38 % 0.95 % - 2.14 %Expected annual dividend yield — — — In addition to the above, we apply judgment in developing estimates of award forfeitures. For the year ended December 31, 2018, we used anestimated forfeiture rate of zero for our non‑employee directors, 2.25% for members of senior management and 6.0% for all other employees.For all of the assumptions used in valuing stock options and estimating award forfeitures, our historical experience is generally the starting point fordeveloping our assumptions, which may be modified to reflect information available at the time of grant that would indicate that the future is reasonablyexpected to differ from the past.Amortization and Impairment of Long‑Lived AssetsLong‑lived assets, other than goodwill which is separately tested for impairment, are evaluated for impairment whenever events or changes incircumstances indicate the carrying value of an asset may not be recoverable. When evaluating long‑lived assets for potential impairment, we first comparethe carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are lessthan the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’sestimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if theamount of the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the assetbecomes its new cost basis. For a depreciable long‑lived asset, the new cost basis will be depreciated over the remaining useful life of that asset.When reviewing long‑lived assets for impairment, we group long‑lived assets with other assets and liabilities at the lowest level for which identifiablecash flows are largely independent of the cash flows of other assets and liabilities. Our impairment loss calculations contain uncertainties because theyrequire management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of theassets and selecting the discount rate that reflects the risk inherent in future cash flows.Our amortizable intangible assets include technology and collaborative arrangements that were acquired as part of the Business Combination. Theseintangible assets are being amortized as revenue is generated from these products, which we refer to as the economic benefit amortization model. Thisamortization methodology involves calculating a ratio of actual current period sales to total anticipated sales for the life of the product and applying thisratio to the carrying amount of the intangible asset.In order to determine the pattern in which the economic benefits of our intangible assets are consumed, we estimated the future revenues to be earnedunder our collaboration agreements and our NanoCrystal and OCR technology‑based intangible assets from the date of acquisition to the end of theirrespective useful lives. The factors used to estimate such future revenues included: (i) our and our licensees’ projected future sales of the existing commercialproducts based on these intangible assets; (ii) our projected future sales of new products based on these intangible assets which we anticipate will belaunched commercially; (iii) the patent lives of the technologies underlying such existing and new products; and (iv) our expectations regarding the entry ofgeneric and/or other competing products into the markets for such existing and new products. These factors involve known and unknown risks anduncertainties, many of which are beyond our control and could cause the actual economic benefits of these intangible assets to be materially different fromour estimates.Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet at December 31, 2018, is expectedto be approximately $40.0 million, $40.0 million, $40.0 million, $35.0 million and $35.0 million in the years ending December 31, 2019 through 2023,respectively. Although we believe such available information and assumptions are reasonable, given the inherent risks and uncertainties underlying ourexpectations regarding such future revenues, there is the potential for our actual results to vary significantly from such expectations. If revenues are projectedto change, the related amortization of the intangible asset will change in proportion to the change in revenue.63Table of ContentsIf there are any indications that the assumptions underlying our most recent analysis would be different than those utilized within our currentestimates, our analysis would be updated and may result in a significant change in the anticipated lifetime revenue of the products associated with ouramortizable intangible assets. For example, the occurrence of an adverse event could substantially increase the amount of amortization expense associatedwith our acquired intangible assets as compared to previous periods or our current expectations, which may result in a significant negative impact on ourfuture results of operations.GoodwillWe evaluate goodwill for impairment for our reporting units annually, as of October 31, and whenever events or changes in circumstances indicate itscarrying value may not be recoverable. A reporting unit is an operating segment, as defined by the segment reporting accounting standards, or a componentof an operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financialinformation is available and is reviewed by management. Two or more components of an operating segment may be aggregated and deemed a singlereporting unit for goodwill impairment testing purposes if the components have similar economic characteristics. As of December 31, 2018, we have oneoperating segment and two reporting units. Our goodwill, which solely relates to the Business Combination, has been assigned to one reporting unit whichconsists of the former EDT business.We have the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If we elect thisoption and determine, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carryingamount, the quantitative impairment test is required; otherwise, no further testing is required. Among other relevant events and circumstances that affect thefair value of reporting units, we consider individual factors, such as microeconomic conditions, changes in the industry and the markets in which we operateas well as historical and expected future financial performance. Alternatively, we may elect to not first assess qualitative factors and instead immediatelyperform the quantitative impairment test.In 2017, we elected to early adopt guidance issued by the FASB in January 2017 that simplifies the test for goodwill impairment. This guidanceremoves Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwillimpairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carryingamount of goodwill.On October 31, 2018, we elected to perform a quantitative impairment test and determined that the fair value of the reporting unit exceeded itscarrying value.Contingent ConsiderationWe record contingent consideration we receive at fair value on the acquisition date. We estimate the fair value of contingent consideration throughvaluation models that incorporate probability-adjusted assumptions related to the achievement of milestones and thus likelihood of receiving relatedpayments. We revalue our contingent consideration each reporting period, with changes in the fair value of contingent consideration recognized within theconsolidated statements of operations and comprehensive loss. Changes in the fair value of contingent consideration can result from changes to one ormultiple inputs, including adjustments to the discount rates, changes in the amount or timing of cash flows, changes in the assumed achievement or timing ofany development or sales-based milestones and changes in the assumed probability associated with regulatory approval.The period over which we discount contingent consideration is based on the current development stage of the product candidates, the specificdevelopment plan for that product candidate adjusted for the probability of completing the development step, and the date on which contingent paymentswould be triggered. In estimating the probability of success, we utilize data regarding similar milestone events from several sources, including industrystudies and our own experience. These fair value measurements are based on significant inputs not observable in the market. Significant judgment wasemployed in determining the appropriateness of these assumptions at the acquisition date and for each subsequent period. Accordingly, changes inassumptions described above could have a material impact on the increase or decrease in the fair value of contingent consideration recorded in any givenperiod.At December 31, 2018, our contingent consideration related to consideration to be received as part of the Gainesville Transaction. We received one$5.0 million payment in the first quarter of 2019 and will receive another $5.0 million payment in the second quarter of 2019; we are eligible to receive lowdouble-digit royalties on net sales of IV/IM and parenteral forms of Meloxicam and any other Meloxicam Product(s); and we are eligible to receive up to$130.0 million in milestone payments upon the achievement of certain regulatory and sales milestones related to the Meloxicam Products.64Table of ContentsIn accordance with the accounting standard for fair value measurements, our contingent consideration has been classified as a Level 3 asset as its fairvalue is based on significant inputs not observable in the market. The fair value of the contingent consideration was determined as follows: •We received $5.0 million in the first quarter of 2019 and will receive another $5.0 million in the second quarter of 2019; we are entitled toreceive $5.0 million upon regulatory approval of an NDA for the first Meloxicam Product; and $45.0 million in seven equal, annualinstallments beginning on the first anniversary of such approval. The fair value of the regulatory milestone was estimated based on applyingthe likelihood of achieving the regulatory milestone and applying a discount rate from the expected time the milestone occurs to the balancesheet date. We expect the regulatory milestone event to occur in the first quarter of 2019 and used a discount rate of 15.8%; •We are entitled to receive future royalties on net sales of Meloxicam Products. To estimate the fair value of the future royalties, we assessed thelikelihood of a Meloxicam Product being approved for sale and estimated the expected future sales given approval and IP protection. We thendiscounted these expected payments using a discount rate of 16.0%, which we believe captures a market participant’s view of the riskassociated with the expected payments; and •We are entitled to receive payments of up to $80.0 million upon achieving certain sales milestones on future sales of the Meloxicam Product.The sales milestones were determined through the use of a real options approach, where net sales are simulated in a risk-neutral world. Toemploy this methodology, we used a risk-adjusted expected growth rate based on our assessments of expected growth in net sales of theapproved Meloxicam Product, adjusted by an appropriate factor capturing their respective correlation with the market. A resulting expected(probability-weighted) milestone payment was then discounted at a cost of debt of 15.8%.Significant judgment was employed in determining the appropriateness of these assumptions at the acquisition date and for each subsequent period.Accordingly, changes in assumptions described above could have a material impact on the increase or decrease in the fair value of contingent considerationwe record in any given period.Valuation of Deferred Tax AssetsWe evaluate the need for deferred tax asset valuation allowances based on a more‑likely‑than‑not standard. The ability to realize deferred tax assetsdepends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable taxjurisdiction. We consider the following possible sources of taxable income when assessing the realization of deferred tax assets: •future reversals of existing taxable temporary differences; •future taxable income exclusive of reversing temporary differences and carryforwards; •taxable income in prior carryback years; and •tax‑planning strategies.The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidencefactors including, but not limited to: •nature, frequency and severity of recent losses; •duration of statutory carryforward periods; •historical experience with tax attributes expiring unused; and •near‑ and medium‑term financial outlook.We utilize a rolling three years of actual and current year anticipated results as the primary measures of cumulative losses in recent years.The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in ourfinancial statements or tax returns and future profitability. Our accounting for deferred tax consequences represents our best estimate of those future events.Changes in our current estimates, due to unanticipated events or otherwise, could have a material effect on our financial condition and results of operations.For information related to risks surrounding our deferred tax assets, see “Item 1A—Risk Factors” and specifically the section entitled “—Our deferred taxassets may not be realized.”65Table of ContentsRecent Accounting PronouncementsPlease refer to Note 2, Summary of Significant Accounting Policies, “New Accounting Pronouncements” in our “Notes to Consolidated FinancialStatements” for a discussion of new accounting standards.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe hold securities in our investment portfolio that are sensitive to market risks. Our securities with fixed interest rates may have their market valueadversely impacted by a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to thesefactors, our future investment income may fall short of expectation due to a fall in interest rates or we may suffer losses in principal if we are forced to sellsecurities that decline in market value due to changes in interest rates. However, because we classify our investments in debt securities as available‑for‑sale,no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to beother‑than‑temporary. Should interest rates fluctuate by 10%, our interest income would change by an immaterial amount over an annual period. We do notbelieve that we have a material exposure to interest rate risk as our investment policies specify credit quality standards for our investments and limit theamount of credit exposure from any single issue, issuer or type of investment.We do not believe that inflation and changing prices have had a material impact on our results of operations, and as approximately 49% and 28% ofour investments at December 31, 2018 are in corporate debt securities with a minimum rating of Aa2 (Moody’s)/AA (Standard and Poor’s) and debt securitiesissued by the U.S. government or its agencies, respectively, our exposure to liquidity and credit risk is not believed to be significant.At December 31, 2018, our borrowings consisted of $282.1 million outstanding under the 2023 Term Loans. The 2023 Term Loans bear interest at aLIBOR rate of our choosing (one, three or six months), plus 2.25% with a 0% LIBOR floor. We are currently using the one-month LIBOR rate, which was2.32% at December 31, 2018. A 10% increase in the one-month LIBOR rate would have increased the amount of interest we owe under this agreement duringthe year ended December 31, 2018 by approximately $0.8 million. At December 31, 2017, a 10% increase in the three-month LIBOR rate, which was theLIBOR rate in use at the time, would have increased the amount of interest we owed by approximately $0.4 million. For a discussion about risks relating toLIBOR, see “Part I, Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “—Discontinuation, reform or replacement of LIBOR,or uncertainty related to the potential for any of the foregoing, may adversely affect us.”Currency Exchange Rate RiskManufacturing and royalty revenues we receive on certain of our products and services are a percentage of the net sales made by our licensees, and aportion of these sales are made in countries outside the U.S. and are denominated in currencies in which the product is sold, which is predominantly the Euro.The manufacturing and royalty payments on these non‑U.S. sales are calculated initially in the currency in which the sale is made and are then converted intoUSD to determine the amount that our licensees pay us for manufacturing and royalty revenues. Fluctuations in the exchange ratio of the USD and thesenon‑U.S. currencies will have the effect of increasing or decreasing our revenues even if there is a constant amount of sales in non‑U.S. currencies. Forexample, if the USD weakens against a non‑U.S. currency, then our revenues will increase given a constant amount of sales in such non‑U.S. currency. For theyear ended December 31, 2018, an average 10% strengthening of the USD relative to the currencies in which these products are sold would have resulted inrevenues being reduced by approximately $36.1 million, as compared to a reduction in revenues of approximately $26.8 million for the year ended December31, 2017.We incur significant operating costs in Ireland and face exposure to changes in the exchange ratio of the USD and the Euro arising from expenses andpayables at our Irish operations that are settled in Euro. The impact of changes in the exchange ratio of the USD and the Euro on our USD denominatedrevenues earned in countries other than the U.S. is partially offset by the opposite impact of changes in the exchange ratio of the USD and the Euro onoperating expenses and payables incurred at our Irish operations that are settled in Euro. For the year ended December 31, 2018, an average 10% weakeningin the USD relative to the Euro would have resulted in an increase to our expenses denominated in Euro of approximately $9.3 million, as compared to anincrease in our expenses of approximately $6.9 million in the year ended December 31, 2017.66Table of ContentsItem 8. Financial Statements and Supplementary DataSelected Quarterly Financial Data (unaudited) (In thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year Ended December 31, 2018 REVENUES: Manufacturing and royalty revenues $114,601 $128,241 $116,411 $167,422 $526,675 Product sales, net 91,842 109,807 116,035 132,650 450,334 Research and development revenue 18,707 18,344 16,274 15,570 68,895 License revenues — 48,250 — 120 48,370 Total revenues 225,150 304,642 248,720 315,762 1,094,274 EXPENSES: Cost of goods manufactured and sold 44,476 43,417 39,410 49,117 176,420 Research and development 108,346 106,823 101,265 108,972 425,406 Selling, general and administrative 118,147 138,257 128,777 141,227 526,408 Amortization of acquired intangible assets 16,069 16,247 16,426 16,426 65,168 Total expenses 287,038 304,744 285,878 315,742 1,193,402 OPERATING (LOSS) INCOME (61,888) (102) (37,158) 20 (99,128)OTHER (EXPENSE) INCOME, NET (5,110) (24,343) 3,325 (1,711) (27,839)LOSS BEFORE INCOME TAXES (66,998) (24,445) (33,833) (1,691) (126,967)INCOME TAX (BENEFIT) PROVISION (4,493) 8,204 611 8,022 12,344 NET LOSS $(62,505) $(32,649) $(34,444) $(9,713) $(139,311)LOSS PER SHARE—BASIC AND DILUTED $(0.40) $(0.21) $(0.22) $(0.06) $(0.90) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year Ended December 31, 2017 REVENUES: Manufacturing and royalty revenues $114,679 $129,252 $122,677 $138,700 $505,308 Product sales, net 76,456 88,756 93,681 103,941 362,834 License revenues — — — 28,000 28,000 Research and development revenue 643 833 1,027 4,729 7,232 Total revenues 191,778 218,841 217,385 275,370 903,374 EXPENSES: Cost of goods manufactured and sold 40,412 39,775 36,054 38,507 154,748 Research and development 104,835 99,153 104,411 104,490 412,889 Selling, general and administrative 102,099 108,950 99,633 110,896 421,578 Amortization of acquired intangible assets 15,302 15,472 15,643 15,642 62,059 Total expenses 262,648 263,350 255,741 269,535 1,051,274 OPERATING (LOSS) INCOME (70,870) (44,509) (38,356) 5,835 (147,900)OTHER INCOME (EXPENSE), NET (1,720) (1,171) 2,566 4,951 4,626 (LOSS) EARNINGS BEFORE INCOME TAXES (72,590) (45,680) (35,790) 10,786 (143,274)INCOME TAX (BENEFIT) PROVISION (3,709) (2,681) 486 20,575 14,671 NET LOSS $(68,881) $(42,999) $(36,276) $(9,789) $(157,945)LOSS PER SHARE—BASIC AND DILUTED $(0.45) $(0.28) $(0.24) $(0.06) $(1.03) All financial statements required to be filed hereunder, other than the quarterly financial data required by Item 302 of Regulation S‑K summarizedabove, are filed as exhibits hereto, are listed under Item 15(a) (1) and (2) and are incorporated herein by reference.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.67Table of ContentsItem 9A. Controls and ProceduresDisclosure Controls and Procedures and Internal Control Over Financial ReportingControls and ProceduresOur management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of ourdisclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act), as of December 31, 2018. Based upon thatevaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosurecontrols and procedures were effective to provide reasonable assurance that (a) the information required to be disclosed by us in the reports that we file orsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (b) suchinformation is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate toallow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized thatany controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,and our management necessarily was required to apply its judgment in evaluating the cost‑benefit relationship of possible controls and procedures.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during the quarter ended December 31, 2018 that have materially affected, orare reasonably likely to materially affect, our internal control over financial reporting.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a‑15(f)and 15d‑15(f). Internal control over financial reporting is defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act as a process designed by, or underthe supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s boardof directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with GAAP and includes those policies and procedures that: •pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of theissuer; •provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withGAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors ofthe issuer; and •provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets thatcould have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013 Internal Control—Integrated Framework.Based on this assessment, our management has concluded that, as of December 31, 2018, our internal control over financial reporting was effective.The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report, which is included in this Annual Report, beginning on page F-1.Item 9B. Other InformationNone.68Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this item is incorporated herein by reference to the Proxy Statement for our 2019 Annual General Meeting ofShareholders.Item 11. Executive CompensationThe information required by this item is incorporated herein by reference to the Proxy Statement for our 2019 Annual General Meeting ofShareholders.Item 12. Security Ownership of Certain Beneficial Owners and ManagementThe information required by this item is incorporated herein by reference to the Proxy Statement for our 2019 Annual General Meeting ofShareholders.Item 13. Certain Relationships and Related Transactions and Director IndependenceThe information required by this item is incorporated herein by reference to the Proxy Statement for our 2019 Annual General Meeting ofShareholders.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated herein by reference to the Proxy Statement for our 2019 Annual General Meeting ofShareholders.69Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules (a)(1)Consolidated Financial Statements—The consolidated financial statements of Alkermes plc, required by this item, are submitted in a separatesection beginning on page F‑1 of this Annual Report. (2)Financial Statement Schedules—All schedules have been omitted because the absence of conditions under which they are required or becausethe required information is included in the consolidated financial statements or notes thereto. (3)The exhibits listed in the below Exhibit Index are filed or furnished as part of this Annual Report or are incorporated into this Annual Reportby reference.EXHIBIT INDEX Incorporated by reference hereinExhibit No. Description of Exhibit Form Date2.1 * Purchase and Sale Agreement, dated March 7, 2015, by and amongAlkermes Pharma Ireland Limited, Daravita Limited, Eagle HoldingsUSA, Inc., Recro Pharma, Inc., and Recro Pharma LLC. Exhibit 2.1 of the Alkermes plcCurrent Report on Form 8-K/A(File No. 001-35299) April 16, 20152.1.1 First Amendment to Purchase and Sale Agreement, dated December 8,2016 by and among Alkermes Pharma Ireland Limited, DaravitaLimited, Eagle Holdings USA, Inc., Recro Pharma, Inc., and RecroGainesville LLC. Exhibit 2.1.1 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 17, 20172.1.2 # Second Amendment to Purchase and Sale Agreement, dated December20, 2018, by and among Alkermes Pharma Ireland Limited, DaravitaLimited, Alkermes US Holdings, Inc. (as successor in interest to EagleHoldings USA, Inc.), Recro Pharma, Inc. and Recro Gainesville LLC. 3.1 Memorandum and Articles of Association of Alkermes plc. Exhibit 3.1 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 001-35299) May 26, 201610.1 Lease between Alkermes, Inc. and PDM Unit 850, LLC, dated as ofApril 22, 2009. Exhibit 10.5 to the Alkermes, Inc.Annual Report on Form 10-K (FileNo. 001-14131) May 28, 200910.1.1 First Amendment to Lease between Alkermes, Inc. and PDM Unit 850,LLC, dated as of June 18, 2009. Exhibit 10.2 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) August 6, 200910.1.2 Second Amendment to Lease between Alkermes, Inc. and PDM Unit850, LLC, dated as of November 12, 2013. Exhibit 10.74 of the Alkermes plcTransition Report on Form 10-KT(File No. 001-35299) February 27, 201410.1.3 Third Amendment to Lease between Alkermes, Inc. and PDM 850Unit, LLC, dated as of May 15, 2014. Exhibit 10.2 of the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) July 31, 201410.1.4 Fourth Amendment to Lease between Alkermes, Inc. and Gl TC 850Winter Street, LLC, dated as of December 30, 2014. Exhibit 10.7 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) July 30, 201510.1.5 # Fifth Amendment to Lease between Alkermes, Inc. and GI TC 850Winter Street, LLC, dated as of October 31, 2018. 10.2 License Agreement, dated as of February 13, 1996, between MedisorbTechnologies International L.P. and Janssen Pharmaceutica Inc.(United States) (assigned to Alkermes, Inc. in July 2006). Exhibit 10.2 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 25, 201670Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.2.1 * Third Amendment To Development Agreement, Second AmendmentTo Manufacturing and Supply Agreement and First Amendment ToLicense Agreements by and between Janssen PharmaceuticaInternational, Janssen Pharmaceutica Inc. and Alkermes ControlledTherapeutics Inc. II, dated April 1, 2000 (assigned to Alkermes, Inc. inJuly 2006). Exhibit 10.5 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 8, 200510.2.2 * Second Amendment, dated as of August 16, 2012, to the LicenseAgreement, dated as of February 13, 1996, as amended, by andbetween Alkermes, Inc. and Janssen Pharmaceutica Inc. and theLicense Agreement, dated as of February 21, 1996, as amended, byand between Alkermes, Inc. and JPI Pharmaceutica International, andthe Fifth Amendment, dated as of August 16, 2012, to theManufacturing and Supply Agreement, dated as of August 6, 1997, asamended, by and between Alkermes, Inc., Janssen Pharmaceutica Inc.and JPI Pharmaceutica International. Exhibit 10.3 of the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) November 1, 201210.3 License Agreement, dated as of February 21, 1996, between MedisorbTechnologies International L.P. and Janssen PharmaceuticaInternational (worldwide except United States) (assigned to Alkermes,Inc. in July 2006). Exhibit 10.3 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 25, 201610.4 Manufacturing and Supply Agreement, dated August 6, 1997, by andamong JPI Pharmaceutica International, Janssen Pharmaceutica, Inc.and Alkermes Controlled Therapeutics Inc. II (assigned to Alkermes,Inc. in July 2006). Exhibit 10.4 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 25, 201610.4.1 * Fourth Amendment To Development Agreement and First AmendmentTo Manufacturing and Supply Agreement by and between JanssenPharmaceutica International, Janssen Pharmaceutica Products, L.P. andAlkermes Controlled Therapeutics Inc. II, dated December 20, 2000(assigned to Alkermes, Inc. in July 2006). Exhibit 10.4 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 8, 200510.4.2 Addendum to the Manufacturing and Supply Agreement by andamong JPI Pharmaceutica International, Janssen Pharmaceutica Inc.and Alkermes Controlled Therapeutics Inc. II, dated August 1, 2001. Exhibit 10.4.2 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 25, 201610.4.3 Letter Agreement and Exhibits to Manufacturing and SupplyAgreement, dated February 1, 2002, by and among JPI PharmaceuticaInternational, Janssen Pharmaceutica Inc. and Alkermes ControlledTherapeutics Inc. II (assigned to Alkermes, Inc. in July 2006). Exhibit 10.4.3 to the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) February 25, 201610.4.4 * Amendment to Manufacturing and Supply Agreement by and betweenJPI Pharmaceutica International, Janssen Pharmaceutica Inc. andAlkermes Controlled Therapeutics Inc. II, dated December 22, 2003(assigned to Alkermes, Inc. in July 2006). Exhibit 10.6 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) July 30, 201510.4.5 * Fourth Amendment To Manufacturing and Supply Agreement by andbetween JPI Pharmaceutica International, Janssen Pharmaceutica Inc.and Alkermes Controlled Therapeutics Inc. II, dated January 10, 2005(assigned to Alkermes, Inc. in July 2006). Exhibit 10.9 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 8, 200510.4.6 * Sixth Amendment to Manufacturing and Supply Agreement by andbetween JPI Pharmaceutica International, Janssen Pharmaceutica Inc.and Alkermes Controlled Therapeutics Inc. II (assigned to Alkermes,Inc. in July 2006), effective as of July 1, 2018. Exhibit 10.11 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) October 23, 201871Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.5 * Development and License Agreement, dated as of May 15, 2000, byand between Alkermes Controlled Therapeutics Inc. II and AmylinPharmaceuticals, Inc., as amended on October 24, 2005 and July 17,2006 (assigned, as amended, to Alkermes, Inc. in July 2006). Exhibit 10.28 to the Alkermes, Inc.Annual Report on Form 10-K (FileNo. 001-14131) May 21, 201010.5.1 * Third Amendment to Development and License Agreement, datedMarch 20, 2018, by and between Amylin Pharmaceuticals, LLC andAlkermes Pharma Ireland Limited (as successor-in-interest to AlkermesControlled Therapeutics Inc. II), amending that certain Developmentand License Agreement, by and between ACTII and Amylin, datedMay 15, 2000, as amended on October 24, 2005 and July 17, 2006. Exhibit 10.3 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) April 26, 201810.6 * Agreement by and between JPI Pharmaceutica International, JanssenPharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. II,dated December 21, 2002 (assigned to Alkermes, Inc. in July 2006). Exhibit 10.6 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 8, 200510.6.1 * Amendment to Agreement by and between JPI PharmaceuticaInternational, Janssen Pharmaceutica Inc. and Alkermes ControlledTherapeutics Inc. II, dated December 16, 2003 (assigned to Alkermes,Inc. in July 2006). Exhibit 10.7 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 8, 200510.7 Amended and Restated License Agreement, dated September 26,2003, by and between Acorda Therapeutics, Inc. and ElanCorporation, plc. Exhibit 10.14 of the AcordaTherapeutics, Inc. Quarterly Reporton Form 10-Q/A (File No.000-50513; film No. 11821367) July 20, 201110.7.1 * Supply Agreement, dated September 26, 2003, by and between AcordaTherapeutics, Inc. and Elan Corporation, plc. Exhibit 10.22 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) May 23, 201310.7.2 Amendment No. 1 Agreement, dated June 30, 2009, to the Amendedand Restated License Agreement dated September 26, 2003 and theSupply Agreement dated September 26, 2003, and Consent toSublicense, by and among Elan Pharma International Limited (assuccessor in interest to Elan Corporation, plc), Acorda Therapeutics,Inc. and Biogen Idec International GmbH. Exhibit 10.56 to AcordaTherapeutics, Inc.’s QuarterlyReport on Form 10-Q (File No.000-50513; film No. 09999376) August 10, 200910.7.3 Amendment No. 2, dated March 29, 2012, to the Amended andRestated License Agreement, dated September 26, 2003, as amended,and the Supply Agreement, dated September 26, 2003, as amended, ineach case by and between Acorda Therapeutics, Inc. and AlkermesPharma Ireland Limited (as successor in interest to Elan Corporation,plc). Exhibit 10.46 of the AcordaTherapeutics, Inc. Annual Reporton Form 10-K (File No.000-50513;film no. 13653677) February 28, 201310.7.4 Amendment No. 3, dated February 14, 2013, to the Amended andRestated License Agreement, dated September 26, 2003, as amendedand the Supply Agreement, dated September 26, 2003, as amended, ineach case by and between Acorda Therapeutics, Inc. and AlkermesPharma Ireland Limited (as successor in interest to Elan Corporation,plc). Exhibit 10.1 of the AcordaTherapeutics, Inc. Quarterly Reporton Form 10-Q (File No. 000-50513; film No. 13831684) May 10, 201310.8 * License Agreement by and among Elan Pharmaceutical ResearchCorp., d/b/a Nanosystems and Elan Pharma International Limited andJanssen Pharmaceutica N.V. dated as of March 31, 1999. Exhibit 10.23 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) May 23, 201372Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.8.1 First Amendment, dated as of July 31, 2003, to the License Agreementby and among Elan Drug Delivery, Inc. (formerly Elan PharmaceuticalResearch Corp.) and Elan Pharma International Limited and JanssenPharmaceutica NV dated March 31, 1999. Exhibit 10.24 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) May 23, 201310.8.2 * Agreement Amendment No. 2, dated as of July 31, 2009, to theLicense Agreement by and among Elan Pharmaceutical ResearchCorp., d/b/a Nanosystems and Elan Pharma International Limited andJanssen Pharmaceutica N.V. dated as of March 31, 1999, as amendedby the First Amendment, dated as of July 31, 2003. Exhibit 10.25 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 001-35299) May 23, 201310.9 Amendment to First Lien Credit Agreement, dated September 25,2012, among Alkermes, Inc., Alkermes plc, the guarantors partythereto, the lenders party thereto, Morgan Stanley Senior Funding, Inc.as Administrative Agent and Collateral Agent and the arrangers andagents party thereto. Exhibit 10.1 of the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) September 25, 201210.9.1 Amendment No. 2, dated as of February 14, 2013, to Amended andRestated Credit Agreement, dated as of September 16, 2011, asamended and restated on September 25, 2012, among Alkermes, Inc.,Alkermes plc, the guarantors party thereto, the lenders party thereto,Morgan Stanley Senior Funding, Inc. as Administrative Agent andCollateral Agent and the arrangers and agents party thereto. Exhibit 10.1 of the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) February 19, 201310.9.2 Amendment No. 3 and Waiver to Amended and Restated CreditAgreement, dated as of May 22, 2013, among Alkermes, Inc.,Alkermes plc, Alkermes Pharma Ireland Limited, Alkermes USHoldings, Inc., Morgan Stanley Senior Funding, Inc. as AdministrativeAgent and Collateral Agent and the lenders party thereto. Exhibit 10.52 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 011-35299) May 23, 201310.9.3 Amendment No. 4, dated as of October 12, 2016, to Amended andRestated Credit Agreement, dated as of September 16, 2011, asamended and restated on September 25, 2012, as further amended byAmendment No. 2 on February 14, 2013 and as amended byAmendment No. 3 and Waiver to Amended and Restated CreditAgreement dated as of May 22, 2013, among Alkermes, Inc., Alkermesplc, the guarantors party thereto, the lenders party thereto and MorganStanley Senior Funding, Inc. as Administrative Agent and CollateralAgent. Exhibit 10.2 of the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) November 2, 201610.9.4 Amendment No. 5, dated as of March 26, 2018, to Amended andRestated Credit Agreement, dated as of September 16, 2011, asamended and restated on September 25, 2012, as further amended byAmendment No. 2 on February 14, 2013, as amended by AmendmentNo. 3 and Waiver to Amended and Restated Credit Agreement datedas of May 22, 2013, and as amended by Amendment No. 4, dated as ofOctober 12, 2016, among Alkermes, Inc., Alkermes plc, the guarantorsparty thereto, the lenders party thereto and Morgan Stanley SeniorFunding, Inc. as Administrative Agent and Collateral Agent. Exhibit 10.5 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) April 26, 201810.10 * License and Collaboration Agreement, dated November 27, 2017, byand between Alkermes Pharma Ireland Limited and Biogen SwissManufacturing GmbH. Exhibit 10.10 of the Alkermes plcAnnual Report on Form 10-K (FileNo. 011-35299) February 16, 201873Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.10.1 * First Amendment to License and Collaboration Agreement betweenAlkermes Pharma Ireland Limited and Biogen Swiss ManufacturingGmbH, effective as of October 3, 2018. Exhibit 10.12 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) October 23, 201810.11 Lease between Alkermes, Inc. and PDM 900 Unit, LLC, dated March23, 2018. Exhibit 10.4 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) April 26, 201810.11.1 First Amendment to Lease, dated June 21, 2018, by and betweenAlkermes, Inc. and PDM 900 Unit, LLC. Exhibit 10.2 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) July 26, 201810.12 † Employment agreement, dated as of December 12, 2007, by andbetween Richard F. Pops and Alkermes, Inc. Exhibit 10.1 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 11, 200810.12.1 † Amendment to Employment Agreement, dated as of October 7, 2008,by and between Alkermes, Inc. and Richard F. Pops. Exhibit 10.5 to the Alkermes, Inc.Current Report on Form 8-K (FileNo. 001-14131) October 7, 200810.12.2 † Amendment No. 2 to Employment Agreement by and betweenAlkermes, Inc. and Richard F. Pops, dated September 10, 2009. Exhibit 10.2 to the Alkermes, Inc.Current Report on Form 8-K (FileNo. 001-14131) September 11, 200910.13 † Form of Employment Agreement, dated as of December 12, 2007,entered into by and between Alkermes, Inc. and each of Kathryn L.Biberstein, James M. Frates and Michael J. Landine. Exhibit 10.3 to the Alkermes, Inc.Quarterly Report on Form 10-Q(File No. 001-14131) February 11, 200810.13.1 † Form of Amendment to Employment Agreement entered into by andbetween Alkermes, Inc. and each of Kathryn L. Biberstein, James M.Frates and Michael J. Landine. Exhibit 10.7 to the Alkermes, Inc.Current Report on Form 8-K (FileNo. 001-14131) October 7, 200810.14 † Form of Covenant Not to Compete, of various dates, by and betweenAlkermes, Inc. and each of Kathryn L. Biberstein and James M. Frates. Exhibit 10.15 to the Alkermes, Inc.Annual Report on Form 10-K (FileNo. 001-14131) May 30, 200810.15 † Form of Covenant Not to Compete, of various dates, by and betweenAlkermes, Inc. and Michael J. Landine. Exhibit 10.15(a) to theAlkermes, Inc. Annual Report onForm 10-K (File No. 001-14131) May 30, 200810.16 † Offer Letter between Alkermes, Inc. and Mark P. Stejbach, effective asof February 15, 2012. Exhibit 10.2 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) March 5, 201210.16.1 † Employment Agreement by and between Alkermes, Inc. and Mark P.Stejbach, dated as of February 29, 2012. Exhibit 10.1 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) March 5, 201210.16.2 † Amendment to Employment Agreement, dated as of July 21, 2015, byand between Mark P. Stejbach and Alkermes, Inc. Exhibit 10.2 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) July 30, 201510.17 † Form of Employment Agreement entered into by and betweenAlkermes, Inc. and each of Iain M. Brown, David J. Gaffin, Craig C.Hopkinson, M.D. and James R. Robinson, Jr. Exhibit 10.1 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) November 2, 201610.17.1† Offer Letter between Alkermes, Inc. and Craig C. Hopkinson M.D.,effective as of April 24, 2017. Exhibit 10.17.1 of the Alkermesplc Annual Report on Form 10-K(File No. 011-35299) February 16, 201874Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.17.2 † Offer Letter between Alkermes, Inc. and James R. Robinson, Jr., datedFebruary 28, 2018. Exhibit 10.1 of the Alkermes plcQuarterly Report on Form 10-Q(File No. 011-35299) April 26, 201810.18 † Form of Indemnification Agreement by and between Alkermes, Inc.and each of its directors and executive officers. Exhibit 10.1 to the Alkermes, Inc.Current Report on Form 8-K (FileNo. 001-14131) March 25, 201010.19 † Form of Deed of Indemnification for Alkermes plc Officers. Exhibit 10.1 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) September 20, 201110.20 † Form of Deed of Indemnification for Alkermes plc Directors/Secretary. Exhibit 10.2 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) September 20, 201110.21 † Form of Deed of Indemnification for Alkermes, Inc. and SubsidiariesDirectors/Secretary. Exhibit 10.3 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) September 20, 201110.22† Alkermes plc Amended and Restated 2008 Stock Option andIncentive Plan, as amended. Exhibit 10.1 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2017(File No. 001-35299) April 27, 201710.22.1 † Form of Stock Option Award Certificate (Non-Employee Director)under the Alkermes plc Amended and Restated 2008 Stock Optionand Incentive Plan, as amended. Exhibit 10.4 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201610.22.2 † Form of Restricted Stock Unit Award Certificate (Time Vesting Only –Irish) under the Alkermes plc Amended and Restated 2008 StockOption and Incentive Plan, as amended. Exhibit 10.5 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201610.22.3 † Form of Restricted Stock Unit Award Certificate (Time Vesting Only –U.S.) under the Alkermes plc Amended and Restated 2008 StockOption and Incentive Plan, as amended. Exhibit 10.6 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201610.22.4 † Form of Stock Option Award Certificate (Time Vesting Non-QualifiedOption – Irish) under the Alkermes plc Amended and Restated 2008Stock Option and Incentive Plan, as amended. Exhibit 10.7 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201610.22.5 † Form Stock Option Award Certificate (Time Vesting Non-QualifiedOption – U.S.) under the Alkermes plc Amended and Restated 2008Stock Option and Incentive Plan, as amended. Exhibit 10.8 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201610.22.6 † Form of Stock Option Award Certificate (Incentive Stock Option –U.S.) under the Alkermes plc Amended and Restated 2008 StockOption and Incentive Plan, as amended. Exhibit 10.9 to the Alkermes plcQuarterly Report on Form 10-Q forthe quarter ended March 31, 2016(File No. 001-35299) April 28, 201675Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date10.22.7 † Form of 2008 Restricted Stock Unit Award Certificate (PerformanceVesting Only) under the Alkermes plc Amended and Restated 2008Stock Option and Incentive Plan, as amended. Exhibit 10.2 to the Alkermes, Inc.Current Report on Form 8-K (FileNo. 001-14131) May 22, 200910.23† Alkermes plc 2011 Stock Option and Incentive Plan, as amended. Exhibit 10.1 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) May 24, 201710.23.1 † Form of Incentive Stock Option Award Certificate under the Alkermesplc 2011 Stock Option and Incentive Plan, as amended. Exhibit 10.1 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.23.2 † Form of Non-Qualified Stock Option (Employee) Award Certificateunder the Alkermes plc 2011 Stock Option and Incentive Plan, asamended. Exhibit 10.2 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.23.3 † Form of Restricted Stock Unit (Time-Vesting) Award Certificate underthe Alkermes plc 2011 Stock Option and Incentive Plan, as amended. Exhibit 10.3 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.23.4 † Form of Restricted Stock Unit (Performance-Vesting) AwardCertificate under the Alkermes plc 2011 Stock Option and IncentivePlan, as amended. Exhibit 10.4 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.23.5 † Form of Non-Qualified Stock Option (Non-Employee Director) AwardCertificate under the Alkermes plc 2011 Stock Option and IncentivePlan, as amended. Exhibit 10.5 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.24 † Alkermes plc 2018 Stock Option and Incentive Plan. Exhibit 10.1 to the Alkermes plcCurrent Report on Form 8-K (FileNo. 011-35299) May 23, 201810.24.1 † Form of Incentive Stock Option Award Certificate under the Alkermesplc 2018 Stock Option and Incentive Plan. Exhibit 10.6 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.24.2 † Form of Non-Qualified Stock Option (Employee) Award Certificateunder the Alkermes plc 2018 Stock Option and Incentive Plan. Exhibit 10.7 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.24.3 † Form of Restricted Stock Unit (Time-Vesting) Award Certificate underthe Alkermes plc 2018 Stock Option and Incentive Plan. Exhibit 10.8 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23 ,201810.24.4 † Form of Restricted Stock Unit (Performance-Vesting) AwardCertificate under the Alkermes plc 2018 Stock Option and IncentivePlan. Exhibit 10.9 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201810.24.5 † Form of Non-Qualified Stock Option (Non-Employee Director) AwardCertificate under the Alkermes plc 2018 Stock Option and IncentivePlan. Exhibit 10.10 to the Alkermes plcQuarterly Report on Form 10-Q(File No. 001-35299) October 23, 201821.1 # List of subsidiaries 23.1 # Consent of PricewaterhouseCoopers LLP, an independent registeredpublic accounting firm 24.1 # Power of Attorney (included on the signature pages hereto) 31.1 # Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of theSecurities Exchange Act of 1934 31.2 # Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of theSecurities Exchange Act of 1934 32.1 ‡ Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002 101.INS +# XBRL Instance Document 101.SCH +# XBRL Taxonomy Extension Schema Document 76Table of Contents Incorporated by reference hereinExhibit No. Description of Exhibit Form Date101.CAL +# XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF +# XBRL Taxonomy Extension Definition Linkbase Document 101.LAB +# XBRL Taxonomy Extension Label Linkbase Document 101.PRE +# XBRL Taxonomy Extension Presentation Linkbase Document † Indicates a management contract or any compensatory plan, contract or arrangement.+ XBRL (Extensible Business Reporting Language).# Filed herewith.‡ Furnished herewith.* Confidential treatment has been granted or requested for certain portions of this exhibit. Such portions have been filed separately withthe SEC pursuant to a confidential treatment request. Item 16. Form 10-K SummaryNot applicable.77Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. ALKERMES PLC By:/s/ Richard F. PopsRichard F. PopsChairman and Chief Executive Officer February 15, 2019 POWER OF ATTORNEYPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated.Each person whose signature appears below in so signing also makes, constitutes and appoints Richard F. Pops and James M. Frates, and each of them,his true and lawful attorney‑in‑fact, with full power of substitution, for him in any and all capacities, to execute and cause to be filed with the Securities andExchange Commission any and all amendments to this Annual Report, with exhibits thereto and other documents in connection therewith, and herebyratifies and confirms all that said attorney‑in‑fact or his substitute or substitutes may do or cause to be done by virtue hereof. Signature Title Date /s/ Richard F. PopsRichard F. Pops Chairman and Chief Executive Officer (Principal Executive Officer) February 15, 2019 /s/ James M. FratesJames M. Frates Senior Vice President and Chief Financial Officer (Principal FinancialOfficer) February 15, 2019 /s/ Iain M. BrownIain M. Brown Senior Vice President and Chief Accounting Officer(Principal Accounting Officer) February 15, 2019 /s/ David W. AnsticeDavid W. Anstice Director February 15, 2019 /s/ Robert A. BreyerRobert A. Breyer Director February 15, 2019 /s/ Shane CookeShane Cooke Director February 15, 2019 /s/ Wendy L. DixonWendy L. Dixon Director February 15, 2019 /s/ Paul J. MitchellPaul J. Mitchell Director February 15, 2019 /s/ Nancy L. SnydermanNancy L. Snyderman Director February 15, 2019 /s/ Nancy J. WysenskiNancy J. Wysenski Director February 15, 2019 78Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of Alkermes plcOpinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Alkermes plc and its subsidiaries (the “Company”) as of December 31, 2018 and2017, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity and of cash flows for each of the three years inthe period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have auditedthe Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company asof December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Change in Accounting PrinciplesAs discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from contractswith customers in 2018 and the manner in which it accounts for share-based compensation in 2017.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financialreporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Controlover Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on theCompany's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities lawsand the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whethereffective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a testbasis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principlesused and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit ofinternal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also includedperforming such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.F-1Table of ContentsBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate./s/PricewaterhouseCoopers LLPBoston, MassachusettsFebruary 15, 2019We have served as the Company’s auditor since 2007.F-2Table of ContentsALKERMES PLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31, 2018 and 2017 December 31, 2018 December 31, 2017 (In thousands, except share and per share amounts) ASSETS CURRENT ASSETS: Cash and cash equivalents $266,762 $191,296 Investments—short-term 272,533 242,208 Receivables, net 292,223 233,590 Contract assets 8,230 — Inventory 90,196 93,275 Prepaid expenses and other current assets 53,308 48,475 Total current assets 983,252 808,844 PROPERTY, PLANT AND EQUIPMENT, NET 309,987 284,736 INTANGIBLE ASSETS, NET 191,001 256,168 INVESTMENTS—LONG-TERM 80,744 157,212 GOODWILL 92,873 92,873 CONTINGENT CONSIDERATION 65,200 84,800 DEFERRED TAX ASSETS 85,807 98,560 OTHER ASSETS 16,143 14,034 TOTAL ASSETS $1,825,007 $1,797,227 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $333,762 $286,166 Contract liabilities—short-term 3,169 1,956 Long-term debt—short-term 2,843 3,000 Total current liabilities 339,774 291,122 LONG-TERM DEBT 276,465 278,436 OTHER LONG-TERM LIABILITIES 27,958 19,204 CONTRACT LIABILITIES—LONG-TERM 9,525 5,657 Total liabilities 653,722 594,419 COMMITMENTS AND CONTINGENT LIABILITIES (Note 16) SHAREHOLDERS’ EQUITY: Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issuedand outstanding at December 31, 2018 and 2017, respectively — — Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 158,180,833 and156,057,632 shares issued; 155,757,344 and 154,009,456 shares outstanding at December31, 2018 and 2017, respectively 1,579 1,557 Treasury shares, at cost (2,423,489 and 2,048,176 shares at December 31, 2018 and 2017,respectively) (108,969) (89,347)Additional paid-in capital 2,467,323 2,338,755 Accumulated other comprehensive loss (3,280) (3,792)Accumulated deficit (1,185,368) (1,044,365)Total shareholders’ equity 1,171,285 1,202,808 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,825,007 $1,797,227 The accompanying notes are an integral part of these consolidated financial statements.F-3Table of ContentsALKERMES PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSYears Ended December 31, 2018, 2017 and 2016 Year Ended December 31, 2018 2017 2016 (In thousands, except per share amounts) REVENUES: Manufacturing and royalty revenues $526,675 $505,308 $487,247 Product sales, net 450,334 362,834 256,146 Research and development revenue 68,895 7,232 2,301 License revenue 48,370 28,000 — Total revenues 1,094,274 903,374 745,694 EXPENSES: Cost of goods manufactured and sold (exclusive of amortization of acquired intangibleassets shown below) 176,420 154,748 132,122 Research and development 425,406 412,889 387,148 Selling, general and administrative 526,408 421,578 374,130 Amortization of acquired intangible assets 65,168 62,059 60,959 Total expenses 1,193,402 1,051,274 954,359 OPERATING LOSS (99,128) (147,900) (208,665)OTHER (EXPENSE) INCOME, NET: Interest income 9,238 4,649 3,752 Interest expense (15,437) (12,008) (14,889)Change in the fair value of contingent consideration (19,600) 21,600 7,900 Other expense, net (2,040) (9,615) (2,485)Total other (expense) income, net (27,839) 4,626 (5,722)LOSS BEFORE INCOME TAXES (126,967) (143,274) (214,387)INCOME TAX PROVISION (BENEFIT) 12,344 14,671 (5,943)NET LOSS $(139,311) $(157,945) $(208,444)LOSS PER ORDINARY SHARE: Basic and diluted $(0.90) $(1.03) $(1.38)WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING: Basic and diluted 155,112 153,415 151,484 COMPREHENSIVE LOSS: Net loss $(139,311) $(157,945) $(208,444)Holding gain, net of a tax provision (benefit) of $159, $(295) and $237, respectively 512 (518) 522 COMPREHENSIVE LOSS $(138,799) $(158,463) $(207,922) The accompanying notes are an integral part of these consolidated financial statements. F-4Table of ContentsALKERMES PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYYears Ended December 31, 2018, 2017 and 2016 Accumulated Additional Other Ordinary Shares Paid-In Comprehensive Accumulated Treasury Stock Shares Amount Capital Loss Deficit Shares Amount Total (In thousands, except share data) BALANCE — December 31, 2015 152,128,941 $1,518 $2,114,711 $(3,795) $(739,498) (1,427,952) $(58,661) $1,314,275 Issuance of ordinary shares under employeestock plans 2,027,571 20 20,288 — — — — 20,308 Receipt of Alkermes' shares for the purchaseof stock options or to satisfy minimum taxwithholding obligations related to sharebased awards 34,769 1 510 — — (332,815) (13,978) (13,467)Share-based compensation expense — — 94,458 — — — — 94,458 Excess tax benefit from share-basedcompensation — — 1,830 — — — — 1,830 Unrealized gain on marketable securities, netof tax provision of $237 — — — 521 — — — 521 Net loss — — — — (208,444) — — (208,444)BALANCE — December 31, 2016 154,191,281 $1,539 $2,231,797 $(3,274) $(947,942) (1,760,767) $(72,639) $1,209,481 Issuance of ordinary shares under employeestock plans 1,850,084 16 23,501 — — — — 23,517 Receipt of Alkermes' shares for the purchaseof stock options or to satisfy minimum taxwithholding obligations related to sharebased awards 16,267 2 273 — — (287,409) (16,708) (16,433)Share-based compensation expense — — 83,184 — — — — 83,184 Unrealized loss on marketable securities, netof tax benefit of $(295) — — — (518) — — — (518)Cumulative effect adjustment related tochange in accounting for excess taxbenefits — — — — 61,522 — — 61,522 Net loss — — — — (157,945) — — (157,945)BALANCE — December 31, 2017 156,057,632 $1,557 $2,338,755 $(3,792) $(1,044,365) (2,048,176) $(89,347) $1,202,808 Issuance of ordinary shares under employeestock plans 1,087,815 11 20,866 — — — — 20,877 Receipt of Alkermes' shares for the purchaseof stock options or to satisfy minimum taxwithholding obligations related to sharebased awards 1,035,386 11 (11) — — (375,313) (19,622) (19,622)Share-based compensation expense — — 107,713 — — — — 107,713 Unrealized loss on marketable securities, netof tax provision of $159 — — — 512 — — — 512 Cumulative effect adjustment related to theadoption of new accounting standards — — — — (1,692) — — (1,692)Net loss — — — — (139,311) — — (139,311)BALANCE — December 31, 2018 158,180,833 $1,579 $2,467,323 $(3,280) $(1,185,368) (2,423,489) $(108,969) $1,171,285 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of ContentsALKERMES PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2018, 2017 and 2016 Year Ended December 31, 2018 2017 2016 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(139,311) $(157,945) $(208,444)Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 103,660 98,523 94,256 Share-based compensation expense 105,357 83,917 94,396 Deferred income taxes 10,623 7,234 (9,689)Change in the fair value of contingent consideration 19,600 (21,600) (7,900)Impairment of property, plant and equipment 5,746 — — Loss on debt refinancing 2,298 — 2,075 Payment made for debt refinancing (2,251) — — Impairment of investment in Synchronicity Pharma, Inc. — 10,471 — Excess tax benefit from share-based compensation — — (4,229)Other non-cash charges 979 3,471 2,936 Changes in assets and liabilities: Receivables (58,632) (42,489) (35,616)Contract assets 880 — — Inventory (2,665) (30,191) (26,381)Prepaid expenses and other assets (5,990) (9,506) (15,014)Accounts payable and accrued expenses 46,739 72,658 45,870 Contract liabilities 3,252 (1,447) (649)Other long-term liabilities 8,996 6,094 4,587 Cash flows provided by (used in) operating activities 99,281 19,190 (63,802)CASH FLOWS FROM INVESTING ACTIVITIES: Additions of property, plant and equipment (69,431) (51,300) (43,657)Proceeds from the sale of equipment 507 162 194 Purchases of investments (397,727) (431,712) (375,099)Sales and maturities of investments 444,456 464,494 560,805 Investment in Synchronicity Pharma, Inc. — — (15,000)Cash flows (used in) provided by investing activities (22,195) (18,356) 127,243 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of ordinary shares under share-based compensation arrangements 20,877 23,517 20,308 Employee taxes paid related to net share settlement of equity awards (19,622) (16,433) (13,467)Payment made for debt refinancing (743) — (65,813)Excess tax benefit from share-based compensation — — 4,229 Principal payments of long-term debt (2,132) (3,000) (3,429)Cash flows (used in) provided by financing activities (1,620) 4,084 (58,172)NET INCREASE IN CASH AND CASH EQUIVALENTS 75,466 4,918 5,269 CASH AND CASH EQUIVALENTS—Beginning of period 191,296 186,378 181,109 CASH AND CASH EQUIVALENTS—End of period $266,762 $191,296 $186,378 SUPPLEMENTAL CASH FLOW DISCLOSURE: Cash paid for interest $12,526 $11,143 $12,458 Cash paid for taxes $754 $2,992 $5,531 Non-cash investing and financing activities: Purchased capital expenditures included in accounts payable and accrued expenses $11,720 $11,151 $5,766 The accompanying notes are an integral part of these consolidated financial statements. F-6Table of Contents ALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATIONAlkermes plc (the “Company”) is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietarytechnologies to research, develop and commercialize, both with partners and on its own, pharmaceutical products that are designed to address unmet medicalneeds of patients in major therapeutic areas. The Company has a diversified portfolio of commercial drug products and a clinical pipeline of productcandidates focused on central nervous system (“CNS”) disorders such as schizophrenia, depression, addiction and multiple sclerosis (“MS”), and oncology.Headquartered in Dublin, Ireland, the Company has a research and development (“R&D”) center in Waltham, Massachusetts; R&D and manufacturingfacilities in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of ConsolidationThe consolidated financial statements include the accounts of Alkermes plc and its wholly-owned subsidiaries: Alkermes Ireland Holdings Limited;Daravita Pharma Ireland Limited; Daravita Limited; Alkermes Science Four Limited; Alkermes Science Five Limited; Alkermes Science Six Limited;Alkermes Pharma Ireland Limited; Alkermes U.S. Holdings, Inc.; Alkermes, Inc.; Alkermes Controlled Therapeutics, Inc.; Alkermes Europe, Ltd.; AlkermesFinance Ireland Limited; Alkermes Finance Ireland (No. 2) Limited; Alkermes Finance Ireland (No. 3) Limited; and Alkermes Finance S.à r.l. Intercompanyaccounts and transactions have been eliminated.Use of EstimatesThe preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States(“U.S.”) (“GAAP”) requires management to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities. On an on‑going basis, the Company evaluates its estimates and judgments andmethodologies, including those related to revenue from contracts with its customers and related allowances, impairment and amortization of intangibles andlong‑lived assets, share‑based compensation, income taxes including the valuation allowance for deferred tax assets, valuation of investments, contingentconsideration and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable,the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimatesunder different assumptions or conditions.Cash and Cash EquivalentsThe Company values its cash and cash equivalents at cost plus accrued interest, which the Company believes approximates their market value. TheCompany considers only those investments which are highly liquid, readily convertible into cash and so near their maturity, generally three months from thedate of purchase, that they present insignificant risk of change in value because of interest rate changes to be cash equivalents.InvestmentsThe Company has investments in various types of securities, consisting primarily of U.S. government and agency obligations, corporate debtsecurities and debt securities issued by foreign agencies and backed by foreign governments. The Company generally holds its interest-bearing investmentswith major financial institutions and in accordance with documented investment policies. The Company limits the amount of credit exposure to any onefinancial institution or corporate issuer. At December 31, 2018, substantially all these investments were classified as available for sale and were recorded atfair value.Holding gains and losses on available-for-sale investments are considered “unrealized” and are reported within “Accumulated other comprehensiveloss,” a component of shareholders’ equity. The Company uses the specific identification method for reclassifying unrealized gains and losses into earningswhen investments are sold. The Company conducts periodic reviews to identify and evaluate each investment that has an unrealized loss, in accordance withthe meaning of other-than-temporary impairment and its application to certain investments, as required by GAAP. An unrealized loss exists when the currentfair value of an individual security is less than its amortized cost basis. Unrealized losses on available-for-sale securities that are determined to be temporary,and not related to credit loss, are recorded in “Accumulated other comprehensive loss.”F-7Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For securities with unrealized losses, the Company performs an analysis to assess whether it intends to sell or whether it would more likely than not berequired to sell the security before the expected recovery of its amortized cost basis. If the Company intends to sell a security, or may be required to do so, thesecurity’s decline in fair value is deemed to be other-than-temporary and the full amount of the unrealized loss is recorded within earnings as an impairmentloss. Regardless of the Company’s intent to sell a security, the Company performs additional analysis on all securities with unrealized losses to evaluatelosses associated with the creditworthiness of the security. Credit losses are identified where the Company does not expect to receive cash flows sufficient torecover the amortized cost basis of a security. The Company's held-to-maturity investments are restricted investments held as collateral under letters of creditrelated to certain of the Company's agreements and are included in “Investments—long-term,” in the accompanying consolidated balance sheets.Fair Value of Financial InstrumentsThe Company’s financial assets and liabilities are recorded at fair value and are classified as Level 1, 2 or 3 within the fair value hierarchy, asdescribed in the accounting standards for fair value measurement. The Company’s financial assets and liabilities consist of cash equivalents, investments,contingent consideration and warrants to purchase the common stock of a publicly traded company and are classified within the fair value hierarchy asfollows: •Level 1–these valuations are based on a market approach using quoted prices in active markets for identical assets. Valuations of these productsdo not require a significant degree of judgment. Assets utilizing Level 1 inputs at December 31, 2018 included U.S. treasury securities,marketable securities classified as cash equivalents and a fixed term deposit account; •Level 2–these valuations are based on a market approach using quoted prices obtained from brokers or dealers for similar securities or forsecurities for which the Company has limited visibility into their trading volumes. Valuations of these financial instruments do not require asignificant degree of judgment. Assets and liabilities utilizing Level 2 inputs at December 31, 2018 included U.S. government agency debtsecurities, debt securities issued by foreign agencies and backed by foreign governments and investments in corporate debt securities that aretrading in the credit markets; and •Level 3–these valuations are based on an income approach using certain inputs that are unobservable and are significant to the overall fairvalue measurement. Valuations of these products require a significant degree of judgment. At December 31, 2018, assets utilizing Level 3inputs included contingent consideration, warrants to purchase the common stock of Recro Pharma, Inc. (“Recro”) and an investment in acorporate debt security.The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, other current assets, accountspayable and accrued expenses approximate fair value due to their short‑term nature.InventoryInventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Included in inventory are rawmaterials used in production of pre-clinical and clinical products, which have alternative future use and are charged to R&D expense when consumed. Thecost elements included within inventory include three primary categories for commercial products: cost of raw materials; direct labor; and overhead.Overhead is based on the normal capacity of the Company’s production facilities and does not include costs from abnormally low production or idlecapacity, which are expensed directly to the consolidated statement of operations and comprehensive loss.Property, Plant and EquipmentProperty, plant and equipment are recorded at cost, subject to review for impairment whenever events or changes in circumstances indicate that thecarrying amount of the assets may not be recoverable. Expenditures for repairs and maintenance are charged to expense as incurred and major renewals andimprovements are capitalized. Depreciation is calculated using the straight‑line method over the following estimated useful lives of the assets: Asset group TermBuildings and improvements 15 - 40 yearsFurniture, fixtures and equipment 3 - 10 yearsLeasehold improvements Shorter of useful life or lease term F-8Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Contingent ConsiderationThe Company records contingent consideration it is entitled to receive at fair value on the acquisition date. The Company estimates the fair value ofcontingent consideration through valuation models that incorporate probability-adjusted assumptions related to the achievement of milestones and thuslikelihood of receiving related payments. The Company revalues its contingent consideration each reporting period, with changes in the fair value ofcontingent consideration recognized within the consolidated statements of operations and comprehensive loss. Changes in the fair value of contingentconsideration can result from changes to one or multiple inputs, including adjustments to discount rates, changes in the amount or timing of cash flows,changes in the assumed achievement or timing of any development or sales-based milestones and changes in the assumed probability associated withregulatory approval.The period over which the Company discounts its contingent consideration is based on the current development stage of the product candidate, thespecific development plan for that product candidate, adjusted for the probability of completing the development steps, and when contingent paymentswould be triggered. In estimating the probability of success, the Company utilizes data regarding similar milestone events from several sources, includingindustry studies and the Company’s own experience. These fair value measurements are based on significant inputs not observable in the market. Significantjudgment was employed in determining the appropriateness of these assumptions at the acquisition date and for each subsequent period. Accordingly,changes in assumptions described above could have a material impact on the increase or decrease in the fair value of contingent consideration recorded inany given period.Goodwill and Intangible AssetsGoodwill represents the excess cost of the Company's investment in the net assets of acquired companies over the fair value of the underlyingidentifiable net assets at the date of acquisition. The Company’s goodwill consists solely of goodwill created as a result of the Company’s acquisition of ElanDrug Technologies (“EDT”) from Elan Corporation, plc (the “Business Combination”) in September 2011 and has been assigned to one reporting unit. Areporting unit is an operating segment or one level below an operating segment or a component to which goodwill is assigned when initially recorded.Goodwill is not amortized but is reviewed for impairment on an annual basis, as of October 31, and whenever events or changes in circumstancesindicate that the carrying value of the goodwill might not be recoverable. The Company has the option to first assess qualitative factors to determine whetherit is necessary to perform the quantitative impairment test. If the Company elects this option and believes, as a result of the qualitative assessment, that it ismore-likely-than-not that the fair value of its reporting unit is less than its carrying amount, the quantitative impairment test is required; otherwise, no furthertesting is required. Alternatively, the Company may elect to not first assess qualitative factors and immediately perform the quantitative impairment test. Inthe quantitative impairment test, the Company compares the fair value of its reporting unit to its carrying value. If the carrying value of the net assetsassigned to the reporting unit exceeds the fair value of its reporting unit, then the Company would record an impairment loss equal to the difference.The Company's finite-lived intangible assets, consisting of core developed technology and collaboration agreements acquired as part of theacquisition of EDT, were recorded at fair value at the time of their acquisition and are stated within the Company’s consolidated balance sheets net ofaccumulated amortization and impairments. The finite-lived intangible assets are amortized over their estimated useful lives using the economic use method,which reflects the pattern that the economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract. Theuseful lives of the Company's intangible assets are primarily based on the legal or contractual life of the underlying patent or contract, which does notinclude additional years for the potential extension or renewal of the contract or patent.Impairment of Long‑Lived AssetsThe Company reviews long‑lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carryingamount of the assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observablemarket value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that thecarrying amount of an asset or group of assets is not recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flowsresulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carryingamount of the assets, the assets are written‑down to their estimated fair values. Long‑lived assets to be disposed of are carried at fair value less costs to sellthem.F-9Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Revenue from Contracts with CustomersEffective January 1, 2018, the Company adopted the requirements of the Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification (“ASC”) 606, Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective method. As part of the adoption, theCompany reviewed all contracts that were not yet completed as of the date of initial application in determining the cumulative-effect impact related to theadoption of Topic 606. The cumulative-effect impact recorded to retained earnings resulted in an adjustment of approximately $0.8 million, which wasprimarily due to the acceleration of manufacturing revenue, offset by an adjustment to deferred revenue for license and milestone payments that will now berecognized over time. The following balance sheet accounts were impacted: (In thousands) Topic 606Adjustment Contract assets $9,110 Inventory (8,209)Deferred tax asset 109 Contract liabilities—short-term (1,104)Contract liabilities—long-term (724)Accumulated deficit 818 $— When entering into arrangements with customers, the Company identifies whether its performance obligations under the arrangement represent adistinct good or service or a series of distinct goods or services. If a contract contains more than one performance obligation, the Company allocates the totaltransaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or servicesunderlying each performance obligation. The fair value of performance obligations under the arrangement may be derived using an estimate of selling price ifthe Company does not sell the goods or services separately. The Company recognizes revenue when or as it satisfies a performance obligation by transferring an asset or providing a service to a customer.Management judgment is required in determining the consideration to be earned under an arrangement and the period over which the Company is expectedto complete its performance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory and that aredetermined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, indetermining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performanceobligations. The Company adopted Topic 606 using the modified retrospective method. As such, the Company recognized the cumulative effect of initiallyapplying Topic 606 as an adjustment to the opening balance of shareholders’ equity at January 1, 2018. Therefore, the comparative information has not beenadjusted and continues to be reported under the old revenue recognition guidance (“Topic 605”). The quantitative impacts of the changes are set out belowfor each of the condensed consolidated balance sheet and the condensed consolidated statement of operations and comprehensive loss for the currentreporting period.F-10Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)ADJUSTED CONDENSED CONSOLIDATED BALANCE SHEET December 31, 2018 (In thousands) As Reported Adjustment Balances WithoutAdoption of Topic606 ASSETS Contract assets $8,230 $(8,230)(1) $— Inventory 90,196 8,847 (2) 99,043 Deferred tax asset 85,807 (133)(3) 85,674 LIABILITIES Contract liabilities—short-term $3,169 $(3,169)(4) $— Deferred revenue—short-term — 1,224 (4) 1,224 Contract liabilities—long-term 9,525 (9,525)(4) — Deferred revenue—long-term — 8,852 (4) 8,852 SHAREHOLDERS' EQUITY Accumulated deficit $(1,185,368) $2,156 (5) $(1,183,212) The adjustments are a result of the following: (1)Adjustment to contract assets to reverse revenue recognized over time under Topic 606. (2)Adjustment to inventory to add back the cost of goods manufactured related to the revenue transactions summarized in item (1), above. (3)Adjustment to deferred tax asset to apply the tax impact of the revenue transactions summarized in item (1), above. (4)Adjustments to contract liabilities—short-term and contract liabilities—long-term is to reclassify amounts previously classified as deferredrevenue—short-term and deferred revenue—long-term under Topic 605. (5)Adjustment to accumulated deficit for the net impact of the transactions noted in items (1) through (4) above.F-11Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)ADJUSTED CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS AND COMPREHENSIVE LOSS Year Ended December 31, 2018 (In thousands, except per share amounts) As Reported Adjustment Balances WithoutAdoption of Topic606 REVENUES: Manufacturing and royalty revenues $526,675 $1,911 (1) $528,586 Product sales, net 450,334 — 450,334 Research and development revenue 68,895 48,473 (2) 117,368 License revenue 48,370 (48,370)(3) — Total revenues 1,094,274 2,014 1,096,288 EXPENSES: Cost of goods manufactured and sold 176,420 (640)(4) 175,780 Research and development 425,406 — 425,406 Selling, general and administrative 526,408 — 526,408 Amortization of acquired intangible assets 65,168 — 65,168 Total expenses 1,193,402 (640) 1,192,762 Operating loss (99,128) 2,654 (96,474)Other (expense) income, net (27,839) — (27,839)Loss before income taxes (126,967) 2,654 (124,313)Income tax provision (benefit) 12,344 24 12,368 Net loss $(139,311) $2,630 $(136,681) Loss per ordinary share — basic and diluted $(0.90) $0.02 $(0.88)WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING: Basic and diluted 155,112 155,112 155,112 The adjustments are a result of the following: (1)Adjustments to manufacturing and royalty revenues to recognize revenue under Topic 605 in the year ended December 31, 2018 that wasrecognized under Topic 606. (2)Adjustments to research and development revenue during the year ended December 31, 2018 to recognize revenue under Topic 605 that wasrecognized under Topic 606. (3)Adjustments to license revenue during the year ended December 31, 2018 to recognize revenue under Topic 605 that was recognized underTopic 606. (4)Adjustments to cost of goods manufactured and sold to recognize the cost from the transactions noted in item (1) above.The Company’s changes in assets and liabilities within its condensed consolidated statement of cash flows changed as a result of the differences in thecondensed consolidated balance sheet and changes in net loss in the condensed consolidated statement of operations, but the overall cash flows used inoperating activities did not change. F-12Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Collaborative ArrangementsThe Company has entered into collaboration agreements with pharmaceutical companies including Janssen Pharmaceutica Inc. (“Janssen, Inc.”),Janssen Pharmaceutica International, a division of Cilag International AG (“Janssen International”), and Janssen Pharmaceutica N.V. (together with Janssen,Inc., Janssen International and their affiliates “Janssen”) for INVEGA SUSTENNA®/XEPLION® and INVEGA TRINZA®/TREVICTA® as well as RISPERDALCONSTA®, Acorda Therapeutics, Inc. (“Acorda”) for AMPYRA®/FAMPYRA®, and Biogen Swiss Manufacturing GmbH (together with its affiliates,“Biogen”) for diroximel fumarate (“BIIB098”). Substantially all of the products developed under these arrangements, except for BIIB098, are currently beingmarketed as approved products for which the Company receives payments for manufacturing services and/or royalties on net product sales.Manufacturing RevenueThe Company recognizes manufacturing revenues from the sale of products it manufactures for resale by its licensees. Manufacturing revenues for theCompany’s partnered products, with the exception of those from Janssen related to RISPERDAL CONSTA, are recognized over time as products movethrough the manufacturing process, using a standard cost-based model as a measure of progress, which represents a faithful depiction of the transfer of controlof the goods. The Company recognizes manufacturing revenue from these products over time as it determined, in each instance, that it would have a right topayment for performance completed to date if its customer were to terminate the manufacturing agreement for reasons other than the Company’s non-performance and the products have no alternative use. The Company invoices its licensees upon shipment with payment terms between 30 to 90 days. Priorto the adoption of Topic 606, the Company recorded manufacturing revenue from the sale of products it manufactures for resale by its partners after theCompany had shipped such products and risk of loss had passed to the Company’s partner, assuming persuasive evidence of an arrangement existed, the salesprice was fixed or determinable and collectability was reasonably assured.The Company is the exclusive manufacturer of RISPERDAL CONSTA for commercial sale under its manufacturing and supply agreement withJanssen. The Company determined that it is appropriate to record revenue under this agreement at the point in time when control of the product passes toJanssen, which is determined to be when the product has been fully manufactured, since Janssen does not control the product during the manufacturingprocess and, in the event Janssen terminates the manufacturing and supply agreement, it is uncertain whether, and at what amount, the Company would bereimbursed for performance completed to date for product not yet fully manufactured. The manufacturing process is considered fully complete once thefinished goods have been approved for shipment by both the Company and Janssen.The sales price for certain of the Company’s manufacturing revenues is based on the end-market sales price earned by its licensees. As end-marketsales generally occur after the Company has recorded manufacturing revenue, the Company estimates the sales price for such products based on informationsupplied to it by the Company’s licensees, its historical transaction experience and other third-party data. Differences between actual manufacturing revenuesand estimated manufacturing revenues are reconciled and adjusted for in the period in which they become known, which is generally within the same quarter.The difference between the Company’s actual and estimated manufacturing revenues has not been material to date.Royalty RevenueThe Company recognizes royalty revenues related to the sale of products by its licensees that incorporate the Company's technologies. Royalties, withthe exception of those earned on sales of AMPYRA as set forth below, qualify for the sales-and-usage exemption under Topic 606 as (i) royalties are basedstrictly on the sales-and-usage by the licensee; and (ii) a license of intellectual property (“IP”) is the sole or predominant item to which such royalties relate.Based on this exemption, these royalties are earned in the period the products are sold by the Company's partner and the Company has a present right topayment. Royalties on AMPYRA manufactured under our license and supply agreements with Acorda are incorporated into the standard cost-based modeldescribed in the manufacturing revenues section, above, as the terms of such agreements entitle the Company to royalty revenue as the product is beingmanufactured, which represents a faithful depiction of the transfer of goods, and not based on the actual end-market sales of the licensee. Certain of theCompany's royalty revenues are recognized by the Company based on information supplied to the Company by its licensees and require estimates to bemade. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known,which is generally within the same quarter. The difference between the Company’s actual and estimated royalty revenues has not been material to date.Research and Development RevenueR&D revenue consists of funding that compensates the Company for formulation, pre‑clinical and clinical testing under R&D arrangements with itspartners. The Company generally bills its partners under R&D arrangements using a full‑time equivalent (“FTE”) or hourly rate, plus direct external costs, ifany. Revenue is recognized as the obligations under the R&D arrangements are performed.F-13Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)License RevenueThe Company recognizes revenue from the grant of distinct, right-to-use licenses of intellectual property (“IP”) when control of the license istransferred to the customer, which is the point in time the customer is able to direct the use of and obtain substantially all of the benefits from the license.Product Sales, NetThe Company’s product sales, net consist of sales of VIVITROL® and ARISTADA® in the U.S. primarily to wholesalers, specialty distributors andpharmacies. Product sales, net are recognized when the customer obtains control of the product, which is when the product has been received by the customer.Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with theCompany’s customers, health care providers or payers. The Company’s process for estimating reserves established for these variable considerationcomponents does not differ materially from historical practices. The transaction price, which includes variable consideration reflecting the impact ofdiscounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal ofthe amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from the Company’s estimates. Ifactual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment. The following are theCompany’s significant categories of sales discounts and allowances: •Medicaid Rebates— the Company records accruals for rebates to states under the Medicaid Drug Rebate Program as a reduction of sales whenthe product is shipped into the distribution channel using the expected value method. The Company rebates individual states for all eligibleunits purchased under the Medicaid program based on a rebate per unit calculation, which is based on the Company’s average manufacturerprices. The Company estimates expected unit sales and rebates per unit under the Medicaid program and adjusts its rebate based on actual unitsales and rebates per unit. To date, actual Medicaid rebates have not differed materially from the Company’s estimates; •Chargebacks— discounts that occur when contracted indirect customers purchase directly from wholesalers and specialty distributors.Contracted customers generally purchase a product at its contracted price. The wholesaler or specialty distributor, in turn, then generallycharges back to the Company the difference between the wholesale acquisition cost and the contracted price paid to the wholesaler or specialtydistributor by the customer. The allowance for chargebacks is made using the expected value method and is based on actual and expectedutilization of these programs. Chargebacks could exceed historical experience and the Company’s estimates of future participation in theseprograms. To date, actual chargebacks have not differed materially from the Company’s estimates; •Product Discounts—cash consideration, including sales incentives, given by the Company under agreements with a number of wholesaler,distributor, pharmacy, and treatment provider customers that provide them with a discount on the purchase price of products. The reserve ismade using the expected value method and to date, actual product discounts have not differed materially from the Company’s estimates; and •Product Returns— the Company records an estimate for product returns at the time its customers take control of the Company’s product. TheCompany estimates this liability using the expected value method based on its historical return levels and specifically identified anticipatedreturns due to known business conditions and product expiry dates. Return amounts are recorded as a deduction to arrive at product sales, net.Once product is returned, it is destroyed. •Medicare Part D—the Company records accruals for Medicare Part D liabilities under the Medicare Coverage Gap Discount Program (“CGDP”)as a reduction of sales. Under the CGDP, patients reaching the annual coverage gap threshold are eligible for reimbursement coverage for out-of-pocket costs for covered prescription drugs. Under an agreement with the Center for Medicare and Medicaid, manufacturers are responsibleto reimburse prescription plan sponsors for the portion of out-of-pocket expenses not covered under their Medicare plans.Receivables, netReceivables, net, include amounts billed and currently unconditionally due from customers. The amounts due are stated at their net estimatedrealizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amounts of receivables that will not be collected.The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and collateral tothe extent applicable. The Company’s allowance for doubtful accounts was $0.2 million at December 31, 2018 and 2017.F-14Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Contract AssetsContract assets include unbilled amounts resulting from sales under certain of the Company’s manufacturing contracts where revenue is recognizedover time. The products included in the contract assets table below complete the manufacturing process in ten days to eight weeks. Contract assets areclassified as current.Contract assets consisted of the following: (In thousands) Contract Assets Contract assets at January 1, 2018 $9,110 Additions 57,617 Transferred to receivables, net (58,497)Contract assets at December 31, 2018 $8,230 Contract LiabilitiesThe Company’s contract liabilities consist of contractual obligations related to deferred revenue.Contract liabilities consisted of the following: (In thousands) Contract Liabilities Contract liabilities at January 1, 2018 $9,442 Additions 6,381 Amounts recognized into revenue (3,129)Contract liabilities at December 31, 2018 $12,694 Foreign CurrencyThe Company's functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are recorded at the exchange rate prevailing onthe date of the transaction. The resulting monetary assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the subsequent balancesheet date. Gains and losses as a result of translation adjustments are recorded within “Other (expense) income, net” in the accompanying consolidatedstatements of operations and comprehensive loss. During the years ended December 31, 2018, 2017 and 2016 the Company recorded a (loss) gain on foreigncurrency translation of $(2.3) million, $3.7 million and $0.1 million, respectively.ConcentrationsFinancial instruments that potentially subject the Company to concentrations of credit risk are receivables and marketable securities. Billings to largepharmaceutical companies account for the majority of the Company's receivables, and collateral is generally not required from these customers. To mitigatecredit risk, the Company monitors the financial performance and credit worthiness of its customers. The following represents revenue and receivables fromthe Company's customers exceeding 10% of the total in each category as of, and for the years ended, December 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Customer Receivables Revenue Receivables Revenue Receivables Revenue Janssen 27%29%31%33%33%36%Acorda 15%10%14%13%17%15%Cardinal Health * 13%* * * * Biogen * 10%* * * * * Indicates the revenues or receivables for the customer did not exceed 10% of the Company’s total in each category as of or for the years endedDecember 31, 2018, 2017 and 2016, as noted. The Company holds its interest‑bearing investments with major financial institutions and, in accordance with documented investment policies, theCompany limits the amount of credit exposure to any one financial institution or corporate issuer. The Company’s investment objectives are, first, to assureliquidity and conservation of capital and, second, to obtain investment income.F-15Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Geographic InformationCompany revenues by geographic location, as determined by the location of the customer, and the location of its assets, are as follows: Year Ended December 31, (In thousands) 2018 2017 2016 Revenue by region: U.S. $884,600 $700,090 $557,312 Ireland 4,915 9,706 4,407 Rest of world 204,759 193,578 183,975 Assets by region: Current assets: U.S. $546,533 $402,481 $382,168 Ireland 433,837 403,167 407,761 Rest of world 2,882 3,196 749 Long-term assets: U.S.: Other $312,243 $360,641 $236,175 Ireland: Intangible assets $191,001 $256,168 $318,227 Goodwill 92,873 92,873 92,873 Other 245,638 278,701 288,470 Research and Development ExpensesFor each of its R&D programs, the Company incurs both external and internal expenses. External R&D expenses include costs related to clinical andnon‑clinical activities performed by contract research organizations, consulting fees, laboratory services, purchases of drug product materials and third‑partymanufacturing development costs. Internal R&D expenses include employee‑related expenses, occupancy costs, depreciation and general overhead. TheCompany tracks external R&D expenses for each of its development programs, however, internal R&D expenses, with the exception of those expenses relatedto BIIB098, are not tracked by individual program as they benefit multiple programs or its technologies in general.Selling, General and Administrative ExpensesSelling, general and administrative (“SG&A”) expenses are primarily comprised of employee-related expenses associated with sales and marketing,finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising and legal expenses and othergeneral and administrative costs.Advertising costs are expensed as incurred. During the years ended December 31, 2018, 2017 and 2016, advertising costs totaled $54.7 million, $34.4million and $24.0 million, respectively.Share‑Based CompensationThe Company’s share‑based compensation programs grant awards which include stock options and restricted stock units (“RSUs”), which vest withthe passage of time and, to a limited extent, vest based on the achievement of certain performance criteria. The Company issues new shares upon stock optionexercise or the vesting of RSUs. Certain of the Company’s employees are retirement eligible under the terms of the Company’s stock option plans (the“Plans”), and stock option awards to these employees generally vest in full upon retirement. Since there are no effective future service requirements for theseemployees, the fair value of these awards is expensed in full on the grant date or upon meeting the retirement eligibility criteria, whichever is later.Stock OptionsStock option grants to employees expire ten years from the grant date and generally vest one‑fourth per year over four years from the anniversary ofthe date of grant, provided the employee remains continuously employed with the Company, except as otherwise provided in the plan. Stock option grants todirectors are for ten‑year terms and generally vest over a one‑year period provided the director continues to serve on the Company’s board of directorsthrough the vesting date, except as otherwise provided in the plan. The estimated fair value of options is recognized over the requisite service period, whichis generally the vesting period. Share‑based compensation expense is based on awards ultimately expected to vest. Forfeitures are estimated based onhistorical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.F-16Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The fair value of stock option grants is based on estimates as of the date of grant using a Black‑Scholes option valuation model. The Company useshistorical data as the basis for estimating option terms and forfeitures. Separate groups of employees that have similar historical stock option exercise andforfeiture behavior are considered separately for valuation purposes. The ranges of expected terms disclosed below reflect different expected behavior amongcertain groups of employees. Expected stock volatility factors are based on a weighted average of implied volatilities from traded options on the Company’sordinary shares and historical share price volatility of the Company’s ordinary shares, which is determined based on a review of the weighted average ofhistorical daily price changes of the Company’s ordinary shares. The risk‑free interest rate for periods commensurate with the expected term of the shareoption is based on the U.S. treasury yield curve in effect at the time of grant. The dividend yield on the Company’s ordinary shares is estimated to be zero asthe Company has not paid and does not expect to pay dividends. The exercise price of options granted is equal to the closing price of the Company’sordinary shares traded on the Nasdaq Global Select Stock Market on the date of grant.The fair value of each stock option grant was estimated on the grant date with the following weighted‑average assumptions: Year Ended December 31, 2018 2017 2016Expected option term 5 - 8 years 5 - 8 years 5 - 7 yearsExpected stock volatility 44 % - 49 % 43 % - 47 % 39 % - 53 %Risk-free interest rate 2.25 % - 3.10 % 1.69 % - 2.38 % 0.95 % - 2.14 %Expected annual dividend yield — — — Time‑Vested Restricted Stock UnitsTime‑vested RSUs awarded to employees generally vest one‑fourth per year over four years from the anniversary of the date of grant, provided theemployee remains continuously employed with the Company. Shares of the Company’s ordinary shares are delivered to the employee upon vesting, subjectto payment of applicable withholding taxes. The fair value of time‑vested RSUs is equal to the closing price of the Company’s ordinary shares traded on theNasdaq Global Select Market on the date of grant. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.Performance-Based Restricted Stock UnitsPerformance-based RSUs awarded to employees vest upon the achievement of certain performance criteria. The estimated fair value of these RSUs isbased on the market value of the Company’s ordinary shares on the date of grant. Compensation expense for performance-based RSUs is recognized from themoment the Company determines the performance criteria probable to the date the Company deems the event is likely to occur. Cumulative adjustments arerecorded quarterly to reflect subsequent changes in the estimated outcome of performance-related conditions until the date results are determined.Income TaxesThe Company recognizes income taxes under the asset and liability method. Deferred income taxes are recognized for differences between thefinancial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse.The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In evaluating the Company’sability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, theexistence of cumulative income in the most recent fiscal years, changes in the business in which the Company operates and its forecast of future taxableincome. In determining future taxable income, the Company is responsible for assumptions utilized including the amount of Irish, U.S. and other foreignpre‑tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptionsrequire significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is using tomanage the underlying businesses.The Company accounts for uncertain tax positions using a more‑likely‑than‑not threshold for recognizing and resolving uncertain tax positions. Theevaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expectedto be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a taxposition. The Company evaluates its tax position on a quarterly basis. The Company also accrues for potential interest and penalties related to unrecognizedtax benefits in income tax expense.Comprehensive LossComprehensive loss consists of net loss and other comprehensive loss. Other comprehensive loss includes changes in equity that are excluded fromnet loss, such as unrealized holding gains and losses on available‑for‑sale marketable securities.F-17Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Loss Per ShareBasic loss per share is calculated based upon net loss available to holders of ordinary shares divided by the weighted average number of ordinaryshares outstanding. For the calculation of diluted earnings per share, the Company uses the weighted average number of ordinary shares outstanding, asadjusted for the effect of potential dilutive securities, including stock options and RSUs.Segment InformationThe Company operates as one business segment, which is the business of developing, manufacturing and commercializing medicines designed toyield better therapeutic outcomes and improve the lives of patients with serious diseases. The Company’s chief decision maker, the Chairman and ChiefExecutive Officer, reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.Employee Benefit Plans401(k) PlanThe Company maintains a 401(k) retirement savings plan (the “401(k) Plan”), which covers substantially all of its U.S.‑based employees. Eligibleemployees may contribute up to 100% of their eligible compensation, subject to certain Internal Revenue Service (“IRS”) limitations. The Company matches100% of employee contributions up to the first 5% of employee pay, up to IRS limits. Employee and Company contributions are fully vested when made.During the years ended December 31, 2018, 2017 and 2016, the Company contributed $12.1 million, $9.8 million and $8.1 million, respectively, to matchemployee deferrals under the 401(k) Plan.Defined Contribution PlanThe Company maintains a defined contribution plan for its Ireland‑based employees (the “Defined Contribution Plan”). The Defined ContributionPlan provides for eligible employees to contribute up to the maximum of 40%, depending upon their age, of their total taxable earnings subject to anearnings cap of €115,000. The Company provides a match of up to 18% of taxable earnings depending upon an individual’s contribution level. During theyears ended December 31, 2018, 2017 and 2016, the Company contributed $4.0 million, $3.7 million and $3.2 million, respectively, in contributions to theDefined Contribution Plan.New Accounting PronouncementsFrom time to time, new accounting pronouncements are issued by the FASB or other standard‑setting bodies that are adopted by the Company as ofthe specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will nothave a material impact on its financial position or results of operations upon adoption.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which enhances thereporting model for financial instruments by addressing certain aspects of recognition, measurement, presentation and disclosure of financial instruments.The amendments in this ASU include: requiring equity securities to be measured at fair value with changes in fair value recognized through the incomestatement; simplifying the impairment assessment of equity instruments without readily determinable fair values by requiring a qualitative assessment toidentify impairment; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not publicbusiness entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fairvalue that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requiring public business entities to use theexit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring an entity to present separately in othercomprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when theentity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requiring separate presentation offinancial assets and financial liabilities by measurement category and form of financial asset; and clarifying that an entity should evaluate the need for avaluation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This ASU waseffective and adopted by the Company in the year ended December 31, 2018, and the adoption of the ASU did not have an impact on its consolidatedfinancial statements.In February 2016, the FASB issued ASU 2016-02, Leases, in order to increase transparency and comparability among organizations by recognizinglease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Numerous updates have been issuedsubsequent to the initial ASU that provide clarification on a number of specific issues. The main difference between previous GAAP and this ASU is therecognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. This ASU becomes effective forthe Company in the year ending December 31, 2019. At this time, the Company is substantially complete with its assessment of the new ASU and although ithasn’t concluded as to the total expected impact the adoption of this new ASU will have on its consolidated financial statements, it has determined that theadoption will have a material impact on the Company’s balance sheet as it currently has, among other operatingF-18Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)leases, two operating leases for 67,000 and 175,000 square feet of office and laboratory space in two separate locations in Waltham, Massachusetts that expirein 2020 and 2021, respectively, and an operating lease for 14,600 square feet of corporate office space in Dublin, Ireland that expires in 2022. In addition,during the three months ended March 31, 2018, the Company entered into a lease for approximately 220,000 square feet of office and laboratory space to beconstructed in Waltham, Massachusetts with a delivery date of January 2020. The Company will adopt the standard retrospectively on January 1, 2019through a cumulative-effect adjustment without adjusting comparative periods.In April 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as part of its simplification initiative thatinvolves several aspects of the accounting for share-based payment transactions. The amendments in this update established that: (i) all excess tax benefitsand tax deficiencies be recognized as income tax expense or benefit in the income statement; (ii) excess tax benefits be classified as an operating activity inthe statement of cash flows; (iii) the entity make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest,which is current GAAP, or account for forfeitures as they occur; (iv) the threshold to qualify for equity classification permits withholding up to the maximumstatutory tax rates in the applicable jurisdictions; and (v) cash paid by an employer when directly withholding shares for tax withholding purposes beclassified as a financing activity in the statement of cash flows. This ASU became effective for the Company on January 1, 2017. The amendments related to(i), (iii) and (iv) were adopted by the Company on a modified retrospective basis, which resulted in a cumulative-effect adjustment to reduce accumulateddeficit by $61.5 million related to the timing of when excess tax benefits are recognized. The Company elected to continue to record expense only for thoseawards that are expected to vest. The amendments related to (ii) and (v) were adopted using the prospective transition method.In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, to provide financial statement users with moredecision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity ateach reporting date. To achieve this objective, the amendments in this ASU replace the incurred loss impairment methodology in current GAAP with amethodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit lossestimates. This ASU becomes effective for the Company in the year ending December 31, 2020, with early adoption permitted for the Company in the yearending December 31, 2019. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, to simplify and improve accounting ontransfers of assets between affiliated entities. This ASU eliminates the prohibition for all intra-entity asset transfers, except for inventory. Effective January 1,2018, the Company adopted this ASU and recorded a cumulative-effect adjustment of $0.9 million to retained earnings.In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which addresses the accounting fornonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. This ASU becomes effective for the Company in the year ending December31, 2019 and early adoption is permitted. The Company does not expect that the adoption of this ASU will have a material impact on its consolidatedfinancial statements.In August 2018, the FASB issued ASU 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,which aims to improve the effectiveness of fair value measurement disclosures. The amendments in this ASU modify the disclosure requirements on fair valuemeasurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting - Chapter 8: Notes to FinancialStatements, including the consideration of costs and benefits. This ASU becomes effective for the Company in the year ending December 31, 2020 and earlyadoption is permitted. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement ThatIs a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract withthe requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU also requires the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contractover the term of the hosting arrangement, which includes reasonably certain renewals. This ASU becomes effective for the Company in the year endingDecember 31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this ASU will have on its consolidated financialstatements.F-19Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactionsbetween participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. This ASU becomes effective for theCompany in the year ending December 31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this ASU will have onits consolidated financial statements.3. REVENUE FROM CONTRACTS WITH CUSTOMERSDuring the years ended December 31, 2018, 2017 and 2016, the Company recorded manufacturing and royalty revenues from its collaborationarrangements as follows: Year Ended December 31, 2018 (In thousands) ManufacturingRevenue Royalty Revenue Total INVEGA SUSTENNA/XEPLION & INVEGA TRINZA/TREVICTA $— $241,423 $241,423 AMPYRA/FAMPYRA 53,044 54,009 107,053 RISPERDAL CONSTA 52,770 18,352 71,122 Other 27,214 79,863 107,077 $133,028 $393,647 $526,675 Year Ended December 31, 2017 (In thousands) ManufacturingRevenue Royalty Revenue Total INVEGA SUSTENNA/XEPLION & INVEGA TRINZA/TREVICTA $— $214,931 $214,931 AMPYRA/FAMPYRA 55,373 61,646 117,019 RISPERDAL CONSTA 64,793 20,129 84,922 Other 32,655 55,781 88,436 $152,821 $352,487 $505,308 Year Ended December 31, 2016 (In thousands) ManufacturingRevenue Royalty Revenue Total INVEGA SUSTENNA/XEPLION & INVEGA TRINZA/TREVICTA $— $184,233 $184,233 AMPYRA/FAMPYRA 53,406 60,787 114,193 RISPERDAL CONSTA 64,914 22,316 87,230 Other 33,641 67,950 101,591 $151,961 $335,286 $487,247 During the years ended December 31, 2018, 2017 and 2016, the Company recorded product sales, net, as follows: Year Ended December 31, (In thousands) 2018 2017 2016 VIVITROL $302,609 $269,321 $208,982 ARISTADA 147,725 93,513 47,164 Total product sales, net $450,334 $362,834 $256,146 Research and Development Revenue and License Revenue The research and development revenue and license revenue recorded during the years ended December 31, 2018 and 2017 primarily related to revenueearned under the Company’s license and collaboration agreement with Biogen for BIIB098.In November 2017, the Company granted Biogen, under a license and collaboration agreement, a worldwide, exclusive, sublicensable license todevelop, manufacture and commercialize BIIB098 and other products covered by patents licensed to Biogen under the agreement. Upon entering into theagreement in November 2017, the Company received an up-front cash payment of $28.0 million. In June 2018, the Company received an additional cashpayment of $50.0 million following Biogen’s review of preliminary gastrointestinal tolerability data from the ongoing clinical development program forBIIB098. The Company is also eligible to receive an additional payment of $150.0 million upon an approval by the FDA on or before December 31, 2021 ofa 505(b)(2) new drug application (“NDA”) (or, in certain circumstances, a 505(b)(1) NDA) for BIIB098. The Company is also eligible to receive additionalpayments upon achievement of developmental milestones with respect to the first two products, other than BIIB098, covered by patents licensed to Biogenunder the agreement. In addition, the Company will receive a mid-teens percentage royalty on worldwide net sales of BIIB098, subject to, under certaincircumstances, minimum annual payments for the first five years following FDAF-20Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)approval of BIIB098. The Company will also receive royalties on net sales of products, other than BIIB098, covered by patents licensed to Biogen under theagreement, at tiered royalty rates calculated as percentages of net sales ranging from high-single digits to sub-teen double-digits. All royalties are payable ona product-by-product and country-by-country basis until the later of (i) the last-to-expire patent right covering the applicable product in the applicablecountry and (ii) a specified period of time from the first commercial sale of the applicable product in the applicable country. Royalties for all such productsand the minimum annual payments for BIIB098 are subject to reductions as set forth in the agreement. Biogen paid a portion of the BIIB098 developmentcosts the Company incurred in 2017 and, since January 1, 2018, Biogen is responsible for all BIIB098 development costs the Company incurs, subject toannual budget limitations. The Company has retained the right to manufacture clinical supplies and commercial supplies of BIIB098 and all other productscovered by patents licensed to Biogen under the agreement, subject to Biogen’s right to manufacture or have manufactured commercial supplies as a back-upmanufacturer and subject to good faith agreement by the parties on the terms of such manufacturing arrangements.The Company evaluated the agreement under Topic 606 and determined that it had four deliverables: (i) the grant of a distinct, right-to-use license ofIP to Biogen; (ii) future development services; (iii) clinical supply; and (iv) participation on a joint steering committee with Biogen. The Company’sparticipation on the joint steering committee was considered to be perfunctory and thus not recognized as a performance obligation. The deliverables, asidefrom the participation in the joint steering committee which was considered to be perfunctory, were determined to be separate performance obligations as thelicense is separately identifiable from the development services and clinical supply, and the development services are not expected to significantly modify orcustomize the IP.The Company allocated the arrangement consideration to each performance obligation using the standalone selling prices based on its estimate ofselling price for the license and other deliverables. The Company used a discounted cash flow model to estimate the standalone selling price of the license inorder to allocate the consideration to the performance obligations. To estimate the standalone selling price of the license, the Company assessed thelikelihood of the FDA’s approval of BIIB098 and estimated the expected future cash flows assuming FDA approval and maintenance of the IP protectingBIIB098. The Company then discounted these cash flows using a discount rate of 8.0%, which it believes captures a market participant’s view of the riskassociated with the expected cash flows. The estimate of selling price of the development services and clinical supply were determined through third-partyevidence. The Company believes that a change in the assumptions used to determine its estimate of selling price for the license most likely would not have asignificant effect on the allocation of consideration transferred.As the license was delivered to Biogen in November 2017, under Topic 606, the Company allocated the $28.0 million upfront payment as follows:$27.0 million to the delivery of the license; $0.9 million to future development services; and $0.1 million to clinical supply. The Company allocated the$50.0 million payment received in 2018 following Biogen’s review of preliminary gastrointestinal tolerability data from the ongoing clinical developmentprogram for BIIB098 as follows: $48.3 million to the delivery of the license; $1.5 million to future development services; and $0.2 million to clinical supply.The amounts allocated to the license were recognized upon receipt of the payments as delivery of the license occurred upon entry into the agreement in 2017.The amounts allocated to the development services and clinical supply will be recognized over the course of the development work and as clinical supply isdelivered to Biogen, which is expected to continue through 2019. The Company determined that the future milestones it is entitled to receive, including the $150.0 million payment upon approval by the FDA on orbefore December 31, 2021 of a 505(b)(2) NDA (or, in certain circumstances, a 505(b)(1) NDA) for BIIB098, and sales-based royalties, are variableconsideration. The Company is using the most likely amount method for estimating the variable consideration to be received related to the milestones underthis arrangement. Given the challenges inherent in developing and obtaining approval for pharmaceutical and biologic products, there was substantialuncertainty as to whether these milestones would be achieved at the time the license and collaboration agreement was entered into. Accordingly, theCompany has not included these milestones in the transaction price as it is not probable that a significant reversal in the amount of cumulative revenuerecognized will not occur. The royalties are subject to the sales-based exception and will be recorded when the corresponding sale occurs. The Company expects to earn an additional $60.4 million in research and development revenue under this agreement with Biogen through 2021.F-21Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)4. INVESTMENTSInvestments consist of the following: Gross Unrealized Losses Amortized Less than Greater than Estimated December 31, 2018 Cost Gains One Year One Year Fair Value Short-term investments: Available-for-sale securities: Corporate debt securities $120,197 $57 $(62) $(274) $119,918 U.S. government and agency debt securities 80,055 115 (11) (87) 80,072 International government agency debt securities 72,091 85 (8) (117) 72,051 272,343 257 (81) (478) 272,041 Held-to-maturity securities: Corporate debt securities 492 — — — 492 Total short-term investments 272,835 257 (81) (478) 272,533 Long-term investments: Available-for-sale securities: Corporate debt securities 53,505 — (185) (93) 53,227 U.S. government and agency debt securities 18,474 — (21) (12) 18,441 International government agency debt securities 5,457 — (4) — 5,453 77,436 — (210) (105) 77,121 Held-to-maturity securities: Certificates of deposit 1,820 — — — 1,820 Fixed term deposit account 1,667 136 — — 1,803 3,487 136 — — 3,623 Total long-term investments 80,923 136 (210) (105) 80,744 Total investments $353,758 $393 $(291) $(583) $353,277 December 31, 2017 Short-term investments: Available-for-sale securities: U.S. government and agency debt securities $150,673 $1 $(130) $(233) $150,311 Corporate debt securities 56,552 3 (48) (10) 56,497 International government agency debt securities 35,478 1 (54) (25) 35,400 Total short-term investments 242,703 5 (232) (268) 242,208 Long-term investments: Available-for-sale securities: Corporate debt securities 83,924 — (300) (34) 83,590 U.S. government and agency debt securities 48,948 — (270) (71) 48,607 International government agency debt securities 21,453 — (118) — 21,335 154,325 — (688) (105) 153,532 Held-to-maturity securities: Fixed term deposit account 1,667 222 — — 1,889 Certificates of deposit 1,791 — — — 1,791 3,458 222 — — 3,680 Total long-term investments 157,783 222 (688) (105) 157,212 Total investments $400,486 $227 $(920) $(373) $399,420 Realized gains and losses on the sales and maturities of marketable securities, which were identified using the specific identification method, were asfollows: Year Ended December 31, (In thousands) 2018 2017 2016 Proceeds from the sales and maturities of marketable securities $444,456 $464,494 $560,805 Realized gains $4 $9 $206 Realized losses $268 $3 $28F-22Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s available‑for‑sale and held‑to‑maturity securities at December 31, 2018 had contractual maturities in the following periods: Available-for-sale Held-to-maturity Amortized Estimated Amortized Estimated (In thousands) Cost Fair Value Cost Fair Value Within 1 year $184,841 $184,304 $2,312 $2,312 After 1 year through 5 years 164,938 164,858 1,667 1,803 Total $349,779 $349,162 $3,979 $4,115 At December 31, 2018, the Company believed that the unrealized losses on its available-for-sale investments were temporary. The investments withunrealized losses consisted of U.S. government and agency debt securities, corporate debt securities and international government agency debt securities.The unrealized losses are a result of market conditions related to increasing interest rates. In making the determination that the decline in fair value of thesesecurities was temporary, the Company considered various factors, including, but not limited to: the length of time each security was in an unrealized lossposition; the extent to which fair value was less than cost; financial condition and near-term prospects of the issuers; and the Company’s intent not to sellthese securities and the assessment that it is more likely than not that the Company would not be required to sell these securities before the recovery of theiramortized cost basis.In February 2016, the Company entered into a collaboration and license option agreement with Synchronicity Pharma, Inc. (“Synchronicity”) formerlyReset Therapeutics, Inc. (“Reset”), a related party. The Company made an upfront, non-refundable payment of $10.0 million in partial consideration of thegrant to the Company of the rights and licenses included in such agreement, which was included in R&D expense in the three months ended March 31, 2016,and simultaneously made a $15.0 million investment in exchange for shares of Synchronicity’s Series B Preferred Stock. The Company was accounting for itsinvestment in Synchronicity under the equity method based on its percentage of ownership, its seat on the board of directors and its belief that it could exertsignificant influence over the operating and financial policies of Synchronicity.In September 2017, the Company recorded an other-than-temporary impairment charge of $10.5 million within “Other (expense) income, net” in theaccompanying consolidated statements of operations and comprehensive loss, which represented the Company’s remaining investment in Synchronicity, asthe Company believed that Synchronicity was unable to generate future earnings that justify the carrying amount of the investment. In November 2017, thecollaboration and license option agreement with Synchronicity was terminated. During the year ended December 31, 2017, the Company recorded areduction in its investment in Synchronicity of $2.8 million, which represented the Company’s proportional share of Synchronicity’s net loss for the period.In May 2014, the Company entered into an agreement whereby it is committed to provide up to €7.4 million to a partnership, Fountain HealthcarePartners II, L.P. of Ireland (“Fountain”), which was created to carry on the business of investing exclusively in companies and businesses engaged in thehealthcare, pharmaceutical and life sciences sectors. As of December 31, 2018, the Company’s total contribution in Fountain was equal to €5.2 million, andits commitment represents approximately 7% of the partnership’s total funding. The Company is accounting for its investment in Fountain under the equitymethod. During the year ended December 31, 2018 the Company recorded an increase in its investment in Fountain of $0.5 million and during the yearsended December 31, 2017 and 2016, the Company recorded a reduction in its investment in Fountain of $0.1 million and $0.4 million, respectively, whichrepresented the Company’s proportional share of Fountain’s net gains (losses) for the period, respectively. The Company’s $5.5 million and $3.7 million netinvestment in Fountain at December 31, 2018 and 2017, respectively, was included within “Other assets” in the accompanying consolidated balance sheets.F-23Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)5. FAIR VALUEThe following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicatesthe fair value hierarchy and the valuation techniques the Company utilized to determine such fair value: December 31, (In thousands) 2018 Level 1 Level 2 Level 3 Assets: Cash equivalents $54,590 $54,590 $— $— U.S. government and agency debt securities 98,513 60,107 38,406 — Corporate debt securities 173,637 — 173,145 492 International government agency debt securities 77,504 — 77,504 — Contingent consideration 65,200 — — 65,200 Common stock warrants 1,205 — — 1,205 Total $470,649 $114,697 $289,055 $66,897 December 31, 2017 Level 1 Level 2 Level 3 Assets: Cash equivalents $1,889 $1,889 $— $— U.S. government and agency debt securities 198,918 124,958 73,960 — Corporate debt securities 140,087 — 140,087 — International government agency debt securities 56,735 — 56,735 — Contingent consideration 84,800 — — 84,800 Common stock warrants 1,395 — — 1,395 Total $483,824 $126,847 $270,782 $86,195 The Company transfers its financial assets and liabilities, measured at fair value on a recurring basis, between the fair value hierarchies at the end ofeach reporting period.There were no transfers of any securities from Level 1 to Level 2 or from Level 2 to Level 1 during the year ended December 31, 2018. The followingtable is a rollforward of the fair value of the Company’s investments whose fair value was determined using Level 3 inputs at December 31, 2018: (In thousands) Fair Value Balance, January 1, 2018 $86,195 Purchase of corporate debt security 492 Change in the fair value of contingent consideration (19,600)Decrease in the fair value of warrants (190)Balance, December 31, 2018 $66,897 The Company’s investments in U.S. government and agency debt securities, international government agency debt securities and corporate debtsecurities classified as Level 2 within the fair value hierarchy were initially valued at the transaction price and subsequently valued, at the end of eachreporting period, utilizing market-observable data. The market-observable data included reportable trades, benchmark yields, credit spreads, broker/dealerquotes, bids, offers, current spot rates and other industry and economic events. The Company validated the prices developed using the market-observabledata by obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.On December 20, 2018, the Company entered into a Second Amendment to the Purchase and Sale Agreement (“Purchase and Sale AgreementAmendment”) dated March 7, 2015 with Recro and Recro Gainesville LLC and a Second Amendment to the Asset Transfer and License Agreement datedApril 10, 2015 with Recro Gainesville LLC (the “License Agreement Amendment” and, together with the Purchase and Sale Agreement Amendment, the“Amendments”).Under the terms of the Amendments, the milestone payment of $45.0 million previously due to the Company upon approval of an NDA for IV/IM andparenteral forms of Meloxicam or any other product with the same active ingredient as Meloxicam IV/IM that is discovered or identified using certain of theCompany’s IP to which Recro was provided a right of use, through license or transfer (the “Meloxicam Product(s)”) was amended and replaced with (i) a$5.0 million payment due within 30 days of signing of the Amendments; (ii) a $5.0 million payment due by April 23, 2019; (iii) a $5.0 million payment duewithin 180 days following approval of an NDA for injectable Meloxicam; and (iv) an additional $45.0 million following approval of an NDA for MeloxicamProduct(s), payable in seven equal annual payments of approximately $6.4 million beginning on the first anniversary of such approval.F-24Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)At December 31, 2018, the Company determined the value of the contingent consideration receivable using the following valuation approaches: •Based upon the terms of the Amendments, the fair value of the regulatory milestone was estimated based on the likelihood of achieving thisregulatory milestone and applying a discount rate from the expected time the milestone occurs to the balance sheet date. The Companyreceived the first $5.0 million milestone payment in January 2019 and expects to receive the second $5.0 million in April 2019. Additionally,the Company expects the regulatory milestone event to occur in the first quarter of 2019 and to receive milestone payments on the subsequentseven anniversary years thereafter. A discount rate of 15.8% was utilized in this analysis; •The Company is entitled to receive future royalties on net sales of Meloxicam Products. To estimate the fair value of the future royalties, theCompany assessed the likelihood of a Meloxicam Product being approved for sale and estimated the expected future sales of such MeloxicamProduct assuming approval and IP protection. The Company then discounted these expected payments using a discount rate of 16.0%, which itbelieves captures a market participant’s view of the risk associated with the expected payments; and •The Company is entitled to receive payments of up to $80.0 million upon achieving certain sales milestones on future sales of the MeloxicamProducts. The fair value of the sales milestones were determined through the use of a real options approach, where net sales are simulated in arisk-neutral world. To employ this methodology, the Company used a risk-adjusted expected growth rate based on its assessments of expectedgrowth in net sales of the approved Meloxicam Product, adjusted by an appropriate factor capturing their respective correlation with themarket. A resulting expected (probability-weighted) milestone payment was then discounted at a cost of debt, which was 15.8%.At December 31, 2018 and 2017, the Company determined that the value of the contingent consideration was $65.2 million and $84.8 million,respectively. The Company recorded a decrease of $19.6 million and increases of $21.6 million and $7.9 million during the years ended December 31, 2018,2017 and 2016, respectively, within “Change in the fair value of contingent consideration” in the accompanying consolidated statements of operations andcomprehensive loss.In addition to the signing of the Amendments, as described above, on December 20, 2018, the Company and Recro entered into a First Amendment tothe Warrant to Purchase Stock (the “Warrant Amendment”), pursuant to which the exercise price of the warrant to purchase 350,000 shares of Recro’scommon stock, was decreased to a per share exercise price of $8.26 from $19.46, subject to adjustment as set forth therein. The Company used a Black-Scholes model with the following assumptions to determine the fair value of these warrants at December 31, 2018: Closing stock price at December 31, 2018 $7.10 Warrant strike price $8.26 Expected term (years) 3.27 Risk-free rate 2.46 %Volatility 75.0 % The decrease of $0.2 million, the increase of less than $0.1 million and the decrease of $0.4 million in the fair value of the warrants during the yearsended December 31, 2018, 2017 and 2016, respectively, was recorded within “Other (expense) income, net” in the accompanying consolidated statements ofoperations and comprehensive loss.The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, contract assets, other currentassets, accounts payable and accrued expenses approximate fair value due to their short-term nature.In March 2018, the Company amended and refinanced its existing term loan, referred to as Term Loan B-1 (as so amended and refinanced, the “2023Term Loans”), in order to, among other things, extend the due date of the loan from September 25, 2021 to March 26, 2023, reduce the interest payable fromLIBOR plus 2.75% with a LIBOR floor of 0.75% to LIBOR plus 2.25% with a 0% LIBOR floor and increase covenant flexibility (the “Refinancing”).The estimated fair value of the 2023 Term Loans, which was based on quoted market price indications (Level 2 in the fair value hierarchy) and whichmay not be representative of actual values that could have been, or will be, realized in the future, was $274.7 million and $285.7 million at December 31,2018 and 2017, respectively. Please refer to Note 10, Long-Term Debt within these “Notes to Consolidated Financial Statements” in this Annual Report. F-25Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)6. INVENTORYInventory consists of the following: December 31, December 31, (In thousands) 2018 2017 Raw materials $31,824 $29,883 Work in process 38,019 38,964 Finished goods(1) 20,353 24,428 Total inventory $90,196 $93,275 (1)At December 31, 2018 and 2017, the Company had $11.0 million and $8.7 million, respectively, of finished goods inventory located at its third‑partywarehouse and shipping service provider.7. PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment consist of the following: December 31, December 31, (In thousands) 2018 2017 Land $6,486 $6,293 Building and improvements 157,053 155,198 Furniture, fixtures and equipment 314,831 289,455 Leasehold improvements 20,105 19,578 Construction in progress 88,983 54,270 Subtotal 587,458 524,794 Less: accumulated depreciation (277,471) (240,058)Total property, plant and equipment, net $309,987 $284,736 Depreciation expense was $38.5 million, $36.5 million and $33.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. Also,during the years ended December 31, 2018, 2017 and 2016, the Company wrote off furniture, fixtures and equipment that had a carrying value of $0.5million, $0.1 million and $0.9 million, respectively, at the time of disposition.Amounts included as construction in progress in the consolidated balance sheets primarily include capital expenditures at the Company’smanufacturing facility in Wilmington, Ohio. The Company continues to evaluate its manufacturing capacity based on expectations of demand for itsproducts and will continue to record such amounts within construction in progress until such time as the underlying assets are placed into service. TheCompany continues to periodically evaluate whether facts and circumstances indicate that the carrying value of its long‑lived assets to be held and used maynot be recoverable.In 2016, the Company began an expansion of its Wilmington, Ohio manufacturing facility to meet forecasted manufacturing demand for VIVITROL.The original expansion project included constructing a separate facility adjacent to the existing Wilmington, Ohio facility. In December 2018, the Companydetermined that it could expand its existing facility rather than build a separate facility and wrote-off to SG&A expense $5.7 million of design and othermiscellaneous costs that had been capitalized but it was determined had no future value. 8. GOODWILL AND INTANGIBLE ASSETSGoodwill and intangible assets consist of the following: December 31, 2018 December 31, 2017 (In thousands) WeightedAmortizableLife (Years) GrossCarryingAmount AccumulatedAmortization Net CarryingAmount GrossCarryingAmount AccumulatedAmortization Net CarryingAmount Goodwill $92,873 $— $92,873 $92,873 $— $92,873 Finite-lived intangible assets: Collaboration agreements 12 $465,590 $(319,311) $146,279 $465,590 $(269,392) $196,198 NanoCrystal technology 13 74,600 (38,942) 35,658 74,600 (31,283) 43,317 OCR technologies 12 42,560 (33,496) 9,064 42,560 (25,907) 16,653 Total $582,750 $(391,749) $191,001 $582,750 $(326,582) $256,168 F-26Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company’s finite‑lived intangible assets consist of collaborative agreements and the NanoCrystal and OCR technologies acquired as part of theEDT acquisition. The Company recorded $65.2 million, $62.1 million and $61.0 million of amortization expense related to its finite‑lived intangible assetsduring the years ended December 31, 2018, 2017 and 2016, respectively. Based on the Company’s most recent analysis, amortization of intangible assetsincluded within its consolidated balance sheets at December 31, 2018 is expected to be approximately $40.0 million, $40.0 million, $40.0 million,$35.0 million and $35.0 million in the years ending December 31, 2019 through 2023, respectively. Although the Company believes such availableinformation and assumptions are reasonable, given the inherent risks and uncertainties underlying its expectations regarding such future revenues, there isthe potential for the Company’s actual results to vary significantly from such expectations. If revenues are projected to change, the related amortization of theintangible assets will change in proportion to the change in revenues. The Company performed its annual goodwill impairment test as of October 31, 2018. The Company elected to perform a quantitative impairment testand determined that the fair value of the reporting unit exceeded its carrying value. 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSESAccounts payable and accrued expenses consist of the following: December 31, December 31, (In thousands) 2018 2017 Accounts payable $39,767 $55,526 Accrued compensation 67,613 54,568 Accrued sales discounts, allowances and reserves 152,911 111,137 Accrued other 73,471 64,935 Total accounts payable and accrued expenses $333,762 $286,166 10. LONG‑TERM DEBTLong‑term debt consists of the following: December 31, December 31, (In thousands) 2018 2017 2023 Term Loans, due March 26, 2023 $279,308 $281,436 Less: current portion (2,843) (3,000)Long-term debt $276,465 $278,4362023 Term LoansThe Refinancing involved multiple lenders who were considered members of a loan syndicate. In determining whether the Refinancing was to beaccounted for as a debt extinguishment or a debt modification, the Company considered whether creditors remained the same or changed and whether thechanges in debt terms were substantial. A change in the debt terms was considered to be substantial if the present value of the remaining cash flows under thenew terms of the 2023 Term Loans was at least 10% different from the present value of the remaining cash flows under the former Term Loan B-1 (commonlyreferred to as the “10% Test”). The Company performed a separate 10% Test for each individual creditor participating in the loan syndication. With theexception of one lender, who owned 1% of the total outstanding principal amount of Term Loan B-1 at the date of the Refinancing and was accounted for asa debt extinguishment, the Refinancing was accounted for as a debt modification.The Refinancing resulted in a $2.3 million charge in the three months ended March 31, 2018, which was included in “Interest expense” in theaccompanying consolidated statement of operations and comprehensive loss.Scheduled maturities with respect to the 2023 Term Loans are as follows (in thousands): Year Ending December 31: 2019 $2,843 2020 2,843 2021 2,843 2022 2,843 2023 270,746 Total $282,118F-27Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Beginning on January 1, 2014, the Company became subject to mandatory prepayments of principal if certain excess cash flow thresholds, as definedin the 2023 Term Loans, were met.The 2023 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional amounts as long as the Company meetscertain conditions, including a specified leverage ratio. The 2023 Term Loans include a number of restrictive covenants that, among other things and subjectto certain exceptions and baskets, impose operating and financial restrictions on the Company and certain of its subsidiaries. The 2023 Term Loans alsocontain customary affirmative covenants and events of default. The Company was in compliance with its debt covenants at December 31, 2018.At December 31, 2018, the Company’s balance of unamortized deferred financing costs and unamortized original issue discount costs were$0.8 million and $2.0 million, respectively. These costs are being amortized to interest expense over the estimated repayment period of the 2023 Term Loansusing the effective interest method. During the years ended December 31, 2018, 2017 and 2016, the Company had amortization expense of $0.7 million, $0.8million and $0.9 million, respectively, related to deferred financing costs and original issue discount.11. LOSS PER SHAREBasic loss per ordinary share is calculated based upon net loss available to holders of ordinary shares divided by the weighted average number ofshares outstanding. For the years ended December 31, 2018, 2017 and 2016, as the Company was in a net loss position, the diluted loss per share did notassume conversion or exercise of stock options and awards as they would have an anti-dilutive effect on loss per share.The following potential ordinary equivalent shares were not included in the net loss per ordinary share calculation because the effect would have beenanti-dilutive: Year Ended December 31, (In thousands) 2018 2017 2016 Stock options 11,331 9,540 10,166 Restricted stock units 2,592 2,119 1,320 Total 13,923 11,659 11,486 12. SHAREHOLDERS’ EQUITYShare Repurchase ProgramOn September 16, 2011, the board of directors authorized the continuation of the Alkermes, Inc. share repurchase program to repurchase up to$215.0 million of the Company’s ordinary shares at the discretion of management from time to time in the open market or through privately negotiatedtransactions. At December 31, 2018, approximately $101.0 million was available to repurchase ordinary shares pursuant to the repurchase program. All sharesrepurchased are recorded as treasury stock. The repurchase program has no set expiration date and may be suspended or discontinued at any time. During theyears ended December 31, 2018 and 2017, the Company did not acquire any ordinary shares under the repurchase program.13. SHARE‑BASED COMPENSATIONShare‑based Compensation ExpenseThe following table presents share‑based compensation expense included in the Company’s consolidated statements of operations and comprehensiveloss: Year Ended December 31, (In thousands) 2018 2017 2016 Cost of goods manufactured and sold $9,174 $7,596 $8,633 Research and development 32,943 22,635 24,023 Selling, general and administrative 63,240 53,686 61,740 Total share-based compensation expense $105,357 $83,917 $94,396 During the years ended December 31, 2018, 2017 and 2016, $2.7 million, $0.4 million and $1.1 million, respectively, of share‑based compensationexpense was capitalized and recorded as “Inventory” in the accompanying consolidated balance sheets.F-28Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Share‑Based Compensation PlansThe Company has one share-based compensation plan pursuant to which awards are currently being made: the 2011 Stock Option and Incentive Plan(the “2011 Plan”). The Company has one share-based compensation plan pursuant to which awards are eligible to be made, but from which no awards havebeen made to date: the 2018 Stock Option and Incentive Plan (the “2018 Plan”). The Company has one share‑based compensation plan pursuant to whichoutstanding awards have been made, but from which no further awards can or will be made: the 2008 Stock Option and Incentive Plan. The 2018 Plan and the2011 Plan provide for the issuance of non-qualified and incentive stock options, restricted stock, restricted stock units, cash-based awards and performanceshares to employees, officers and directors of, and consultants to, the Company in such amounts and with such terms and conditions as may be determined bythe compensation committee of the Company's board of directors, subject to provisions of the 2018 Plan and the 2011 Plan.At December 31, 2018, there were 11.1 million ordinary shares authorized for issuance under the Company’s stock plans. The 2018 Plan and the 2011Plan provide that awards other than stock options will be counted against the total number of shares available under the plan in a 1.8-to‑1 ratio.Stock OptionsA summary of stock option activity is presented in the following table: Number of Weighted Average Shares Exercise Price Outstanding, January 1, 2018 14,773,412 $36.64 Granted 2,269,830 $61.45 Exercised (1,087,815) $19.19 Forfeited (924,343) $51.88 Expired (178,627) $59.83 Outstanding, December 31, 2018 14,852,457 $40.48 Exercisable, December 31, 2018 10,506,897 $34.26 The weighted average grant date fair value of stock options granted during the years ended December 31, 2018, 2017 and 2016 was $30.47, $25.81and $17.11, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and 2016 was $35.5million, $40.4 million and $35.0 million, respectively.At December 31, 2018, there were 4.2 million stock options expected to vest with a weighted average exercise price of $55.46 per share, a weightedaverage contractual remaining life of 8.3 years with no aggregate intrinsic value. At December 31, 2018, the aggregate intrinsic value of stock optionsexercisable was $64.8 million with a weighted average remaining contractual term of 4.5 years. The number of stock options expected to vest was determinedby applying the pre‑vesting forfeiture rate to the total outstanding options. The intrinsic value of a stock option is the amount by which the market value ofthe underlying stock exceeds the exercise price of the stock option.At December 31, 2018, there was $51.4 million of unrecognized compensation cost related to unvested stock options, which is expected to berecognized over a weighted average period of 2.0 years. Cash received from option exercises under the Company’s award plans during the years endedDecember 31, 2018, 2017 and 2016 was $20.9 million, $23.5 million and $20.3 million, respectively.Time‑Vested Restricted Stock UnitsA summary of time‑vested RSU activity is presented in the following table: Weighted Average Number ofShares Grant DateFair Value Unvested, January 1, 2018 1,936,808 $46.72 Granted 1,367,710 $63.01 Vested (723,473) $47.72 Forfeited (314,759) $53.09 Unvested, December 31, 2018 2,266,286 $55.32F-29Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The weighted average grant date fair value of time‑vested RSUs granted during the years ended December 31, 2018, 2017 and 2016 were $63.01,$54.85 and $32.27, respectively. The total fair value of time‑vested RSUs that vested during the years ended December 31, 2018, 2017 and 2016, was $34.5million, $31.5 million and $26.0 million, respectively.At December 31, 2018, there was $57.5 million of total unrecognized compensation cost related to unvested time‑vested RSUs, which will berecognized over a weighted average remaining contractual term of 2.0 years.Performance-Based Restricted Stock UnitsIn February 2017, the compensation committee of the Company’s board of directors approved awards of RSUs to all employees employed by theCompany during 2017, in each case subject to vesting on the achievement of the following performance criteria: (i) FDA approval of the NDA for ALKS5461, (ii) the achievement of the pre-specified primary efficacy endpoints in each of two phase 3 studies of ALKS 3831, and (iii) revenues equal to or greaterthan a pre-specified amount for the year ending December 31, 2019. These performance criteria are being assessed over a performance period of three yearsfrom the date of the grant.In December 2018, the Company achieved the pre-specified primary efficacy endpoints on its second of the two phase 3 studies of ALKS 3831,resulting in the vesting of a portion of the granted performance-based RSUs and the recognition of $17.1 million in share-based compensation expenserelated to these awards. The Company recognized $2.1 million, $6.7 million and $8.3 million of this expense in cost of goods manufactured and sold; R&Dexpense; and SG&A expense, respectively.A summary of performance-based RSU activity is presented in the following table: Weighted Average Number ofShares Grant DateFair Value Unvested, January 1, 2018 1,108,653 $54.72 Granted 6,065 $55.89 Forfeited (176,637) $54.64 Vested (311,913) $54.74 Unvested, December 31, 2018 626,168 $54.75 The grant date fair value of the performance-based RSUs was equal to the market value of the Company’s stock on the date of grant. At December 31,2018, the Company does not consider it probable that the performance criteria will be met on the remaining two performance obligations and has notrecognized any additional share-based compensation expense related to these performance-based RSUs. At December 31, 2018, there was $34.3 million ofunrecognized compensation cost related to the remaining unvested portion of the performance-based RSUs, which would be recognized in accordance withthe terms of the award when the Company deems it probable that the performance criteria will be met. The unvested awards will expire if the performanceconditions have not been met on or before the three-year anniversary of the grant date.14. COLLABORATIVE ARRANGEMENTSThe Company has entered into several collaborative arrangements to develop and commercialize products and, in connection with such arrangements,to access technologies, financial, marketing, manufacturing and other resources. Refer to the “Patents and Proprietary Rights” section in “Part I, Item 1—Business” of this Annual Report for information with respect to intellectual property protection for these products. The collaboration revenue the Companyhas earned in the years ended December 31, 2018, 2017 and 2016 is summarized in Note 3, Revenue from Contracts with Customers within the notes to theconsolidated financial statements in this Annual Report.The Company’s significant collaborative arrangements are described below:JanssenINVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTAUnder its license agreement with Janssen Pharmaceutica N.V., the Company granted Janssen a worldwide exclusive license under its NanoCrystaltechnology to develop, commercialize and manufacture INVEGA SUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA and related products.F-30Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Under this license agreement, the Company received milestone payments upon the achievement of certain development goals from Janssen; there areno further milestones to be earned under this agreement. The Company receives tiered royalty payments between 5% and 9% of INVEGASUSTENNA/XEPLION and INVEGA TRINZA/TREVICTA end-market net sales in each country where the license is in effect, with the exact royaltypercentage determined based on aggregate worldwide net sales. The tiered royalty payments consist of a patent royalty and a know‑how royalty, both ofwhich are determined on a country‑by‑country basis. The patent royalty, which equals 1.5% of net sales, is payable in each country until the expiration of thelast of the patents claiming the product in such country. The know‑how royalty is a tiered royalty of 3.5%, 5.5% and 7.5% on aggregate worldwide net salesof below $250 million, between $250 million and $500 million, and greater than $500 million, respectively. The know‑how royalty is payable for the later of15 years from first commercial sale of a product in each individual country or March 31, 2019, subject in each case to the expiry of the license agreement.These royalty payments may be reduced in any country based on patent litigation or on competing products achieving certain minimum sales thresholds. Thelicense agreement expires upon the later of (i) March 31, 2019 or (ii) the expiration of the last of the patents subject to the agreement. After expiration,Janssen retains a non‑exclusive, royalty‑free license to develop, manufacture and commercialize the products.Janssen may terminate the license agreement in whole or in part upon three months’ notice to the Company. The Company and Janssen have the rightto terminate the agreement upon a material breach of the other party, which is not cured within a certain time period, or upon the other party’s bankruptcy orinsolvency.RISPERDAL CONSTAUnder a product development agreement, the Company collaborated with Janssen on the development of RISPERDAL CONSTA. Under thedevelopment agreement, Janssen provided funding to the Company for the development of RISPERDAL CONSTA and Janssen is responsible for securing allnecessary regulatory approvals for the product.Under two license agreements, the Company granted Janssen and an affiliate of Janssen exclusive worldwide licenses to use and sell RISPERDALCONSTA. Under its license agreements with Janssen, the Company receives royalty payments equal to 2.5% of Janssen’s end-market net sales of RISPERDALCONSTA in each country where the license is in effect based on the quarter when the product is sold by Janssen. This royalty may be reduced in any countrybased on lack of patent coverage and significant competition from generic versions of the product. Janssen can terminate the license agreements upon30 days’ prior written notice to the Company. Either party may terminate the license agreements by written notice following a breach which continues for90 days after the delivery of written notice thereof or upon the other party’s insolvency. The licenses granted to Janssen expire on a country‑by‑country basisupon the later of: (i) the expiration of the last patent claiming the product in such country; or (ii) 15 years after the date of the first commercial sale of theproduct in such country, provided that in no event will the license granted to Janssen expire later than the twentieth anniversary of the first commercial saleof the product in each such country, with the exception of Canada, France, Germany, Italy, Japan, Spain and the United Kingdom, in each case where thefifteen‑year minimum shall pertain regardless. After expiration, Janssen retains a non‑exclusive, royalty‑free license to manufacture, use and sell RISPERDALCONSTA.The Company exclusively manufactures RISPERDAL CONSTA for commercial sale. Under its manufacturing and supply agreement with Janssen, theCompany records manufacturing revenues when product fully manufactured and approved for shipment, based on a percentage of Janssen’s net unit salesprice for RISPERDAL CONSTA for the applicable calendar year. This percentage is determined based on Janssen’s unit demand for such calendar year andvaries based on the volume of units shipped, with a minimum manufacturing fee of 7.5%. Either party may terminate the manufacturing and supplyagreement upon a material breach by the other party, which is not resolved within 60 days after receipt of a written notice specifying the material breach orupon written notice in the event of the other party’s insolvency or bankruptcy. Janssen may terminate the agreement upon six months’ written notice to theCompany. In the event that Janssen terminates the manufacturing and supply agreement without terminating the license agreements, the royalty rate payableto the Company on Janssen’s net sales of RISPERDAL CONSTA would increase from 2.5% to 5.0%.AcordaUnder an amended and restated license agreement, the Company granted Acorda an exclusive worldwide license to use and sell and, solely inaccordance with its supply agreement, to make or have made AMPYRA/FAMPYRA. The Company receives certain commercial and development milestonepayments, license revenues and a royalty of approximately 10% based on net sales of AMPYRA (including the authorized generic version ofAMPYRA)/FAMPYRA by Acorda and its sub‑licensee, Biogen. This royalty payment may be reduced in any country based on lack of patent coverage,competing products achieving certain minimum sales thresholds and whether Alkermes manufactures the product.F-31Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)In June 2009, the Company entered into an amendment of the amended and restated license agreement and the supply agreement with Acorda and,pursuant to such amendment, consented to the sublicense by Acorda to Biogen of Acorda’s rights to use and sell FAMPYRA in certain territories outside ofthe U.S. (to the extent that such rights were to be sublicensed to Biogen pursuant to its separate collaboration and license agreement with Acorda). Under thisamendment, the Company agreed to modify certain terms and conditions of the amended and restated license agreement and the supply agreement withAcorda to reflect the sublicense by Acorda to Biogen.Acorda has the right to terminate the amended and restated license agreement upon 90 days’ written notice. The Company has the right to terminatethe amended and restated license agreement for countries in which Acorda fails to launch a product within a specified time after obtaining the necessaryregulatory approval or fails to file regulatory approvals within a commercially reasonable time after completion of and receipt of positive data from all pre-clinical and clinical studies required for filing a marketing authorization application. Either party has the right to terminate the amended and restated licenseagreement by written notice following a material breach of the other party, which is not cured within a certain time period, or upon the other party’s entry intobankruptcy or dissolution proceedings. If the Company terminates Acorda's license in any country, the Company is entitled to a license from Acorda of itspatent rights and know-how relating to the product as well as the related data, information and regulatory files, and to market the product in the applicablecountry, subject to an initial payment equal to Acorda's cost of developing such data, information and regulatory files and to ongoing royalty payments toAcorda. Subject to the termination of the amended and restated license agreement, licenses granted under the license agreement terminate on a country-by-country basis upon the expiration of the last to expire of our patents or the existence of a threshold level of competition in the marketplace.Under its commercial manufacturing supply agreement with Acorda, the Company manufactures and supplies AMPYRA/FAMPYRA for Acorda (andits sub‑licensee, Biogen). Under the terms of the agreement, Acorda may obtain up to 25% of its total annual requirements of product from a second‑sourcemanufacturer. The Company receives manufacturing royalties equal to 8% of net selling price for all product manufactured by it and a compensatingpayment for product manufactured and supplied by a third party. The Company may terminate the commercial manufacturing supply agreement upon12 months’ prior written notice to Acorda and either party may terminate the commercial manufacturing supply agreement following a material and uncuredbreach of the commercial manufacturing supply agreement or amended and restated license agreement or the entry into bankruptcy or dissolutionproceedings by the other party. In addition, subject to early termination of the commercial manufacturing supply agreement noted above, the commercialmanufacturing supply agreement terminates upon the expiry or termination of the amended and restated license agreement.The Company is entitled to receive the following milestone payments under its amended and restated license agreement with Acorda for each of thethird and fourth new indications of the product developed thereunder: •initiation of a phase 3 clinical trial: $1.0 million; •acceptance of a New Drug Application (“NDA”) by the FDA: $1.0 million; •approval of the NDA by the FDA: $1.5 million; and •the first commercial sale: $1.5 million.BiogenUnder a license and collaboration agreement, the Company granted Biogen a worldwide, exclusive, sublicensable license to develop, manufacture andcommercialize BIIB098 and other products covered by patents licensed to Biogen under the agreement.Upon entering into this agreement in November 2017, the Company received an up-front cash payment of $28.0 million. The Company also receiveda $50.0 million option payment upon Biogen’s decision to continue the collaboration after having reviewed certain data from our long-term safety clinicaltrial and part A of the head-to-head phase 3 gastrointestinal tolerability clinical trial comparing BIIB098 to TECFIDERA in 2018. The Company is alsoeligible to receive a $150.0 million payment upon an approval by the FDA on or before December 31, 2021 of a 505(b)(2) NDA (or, in certain circumstances,a 505(b)(1) NDA) for BIIB098. The Company is also eligible to receive additional payments upon achievement of milestones with respect to the first twoproducts, other than BIIB098, covered by patents licensed to Biogen under the agreement.F-32Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)In addition, the Company will receive a mid-teens percentage royalty on worldwide net sales of BIIB098, subject to, under certain circumstances,minimum annual payments for the first five years following FDA approval of BIIB098. The Company will also receive royalties on net sales of products,other than BIIB098, covered by patents licensed to Biogen under the agreement, at tiered royalty rates calculated as percentages of net sales ranging fromhigh-single digits to sub-teen double digits. All royalties are payable on a product-by-product and country-by-country basis until the later of (i) the last-to-expire patent right covering the applicable product in the applicable country and (ii) a specified period of time from the first commercial sale of theapplicable product in the applicable country. Royalties for all products and the minimum annual payments for BIIB098 are subject to customary reductions.Except in certain limited circumstances, until FDA approval of an NDA for BIIB098, the Company is responsible for the development of BIIB098 forthe treatment of MS. Biogen paid a portion of the BIIB098 development costs the Company incurred in 2017 and, since January 1, 2018, Biogen isresponsible for all BIIB098 development costs the Company incurs, subject to annual budget limitations. After the date of FDA approval of an NDA forBIIB098 for the treatment of MS, Biogen will be responsible for all development and commercialization activities, as well as the costs of all such activities,for BIIB098 and all other products covered by patents licensed to Biogen under the agreement. The Company has retained the right to manufacture clinicalsupplies and commercial supplies of BIIB098 and all other products covered by patents licensed to Biogen under the agreement, subject to Biogen’s right tomanufacture or have manufactured commercial supplies as a back-up manufacturer and subject to good faith agreement by the parties on the terms of suchmanufacturing arrangements.If BIIB098 discontinuations due to gastrointestinal adverse events in BIIB098’s long-term safety clinical trial exceed a certain pre-defined threshold,or, if in part B of the head-to-head phase 3 gastrointestinal tolerability clinical trial, BIIB098 demonstrates a greater rate of discontinuations as compared toTECFIDERA and TECFIDERA demonstrates statistical superiority to BIIB098 on the primary endpoint, then “GI Inferiority” shall be deemed to exist, and (i)Biogen shall have the right to recapture from the Company its $50.0 million option payment through certain temporary reductions in royalty rates, (ii) theminimum annual payments Biogen owes to the Company shall terminate, and (iii) there shall be no reversion of BIIB098 to the Company in the event thatBiogen terminates the agreement and does not commercialize BIIB098.Unless earlier terminated, the agreement will remain in effect until the expiry of all royalty obligations. Biogen has the right to terminate theagreement at will, on a product-by-product basis or in its entirety. Either party has the right to terminate the agreement following any governmentalprohibition of the transactions effected by the agreement, or in connection with an insolvency event involving the other party. Upon termination of theagreement by either party, if, prior to such termination (i) GI Inferiority was not deemed to exist or (ii) GI Inferiority was deemed to exist but Biogencommercialized BIIB098, then, at the Company’s request, the BIIB098 program will revert to the Company.15. INCOME TAXESThe Company’s provision (benefit) for income taxes is comprised of the following: Year Ended December 31, (In thousands) 2018 2017 2016 Current income tax provision: U.S. federal $(53) $6,964 $3,163 U.S. state 1,774 350 480 Rest of world — 123 103 Deferred income tax provision (benefit): U.S. federal 10,624 8,188 (9,278)U.S. state 62 (933) (269)Ireland (63) (21) (142)Total tax provision (benefit) $12,344 $14,671 $(5,943) F-33Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The income tax provision in 2018 and 2017 and the income tax benefit in 2016 was primarily due to U.S. federal and state taxes. The favorablechange in income taxes in 2018, as compared to 2017, was due to the one-off nature of a $21.5 million tax expense in 2017 from the enactment of the TaxCuts and Jobs Act (The “Act” or “Tax Reform”), partially offset by increased taxes on income earned in the U.S. The unfavorable change in income taxes in2017, as compared to 2016, was primarily due to the enactment of Tax Reform and an increase in income earned in the U.S., partially offset by therecognition of excess tax benefits related to share-based compensation. A $4.2 million benefit was recorded to additional paid-in capital in the year endedDecember 31, 2016 with a corresponding reduction to current taxes payable. This was primarily due to the utilization of current year tax benefits and NOLcarryforwards derived from the exercise of employee stock options and vesting of restricted stock units.No provision for income tax has been provided on undistributed earnings of the Company's foreign subsidiaries because such earnings are indefinitelyreinvested in the foreign operations or may be repatriated to Ireland without incurring any tax liability. Cumulative unremitted earnings of overseassubsidiaries totaled approximately $327.1 million at December 31, 2018. In the event of a repatriation of those earnings in the form of dividends orotherwise, the Company may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreigntax authorities. The Company estimates that approximately $8.3 million of income taxes would be payable on the repatriation of the unremitted earnings toIreland.The distribution of the Company’s loss before the provision (benefit) for income taxes by geographical area consisted of the following: Year Ended December 31, (In thousands) 2018 2017 2016 Ireland $(180,195) $(172,363) $(212,198)U.S. 53,287 2,414 (18,935)Rest of world (59) 26,675 16,746 Loss before provision (benefit) for income taxes $(126,967) $(143,274) $(214,387) The components of the Company’s net deferred tax assets (liabilities) were as follows: December 31, December 31, (In thousands) 2018 2017 Deferred tax assets: Irish NOL carryforwards $198,633 $177,435 Tax credits 52,395 71,366 Share-based compensation 44,873 40,048 Other 24,561 13,239 Less: valuation allowance (219,093) (172,797)Total deferred tax assets 101,369 129,291 Deferred tax liabilities: Intangible assets — (18,184)Property, plant and equipment (14,533) (12,040)Other (1,274) (818)Total deferred tax liabilities (15,807) (31,042)Net deferred tax assets $85,562 $98,249 As of December 31, 2017, a deferred tax asset of $13.3 million was recorded as a provisional amount in respect of performance-based compensationprovided to covered employees prior to November 2, 2017. The Company has since completed its review of the Act and has determined that the performance-based compensation was provided pursuant to binding arrangements and should be deductible. The Company concluded that it had met the requirements forrecognition of the tax benefit, and no longer considers this item a provisional amount in the financial statements under Staff Accounting Bulletin 118 (“SAB118”). In March 2016, the FASB issued guidance as part of its simplification initiative that involves several aspects of the accounting for share-basedpayment transactions including the requirement that all future excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in theincome statement. On January 1, 2017, the Company adopted this standard on a modified retrospective basis, which resulted in a $57.8 million increase to itsdeferred tax assets, a $3.7 million decrease in liabilities and a $61.5 million favorable cumulative-effect adjustment to accumulated deficit due to the changein the accounting treatment of excess tax benefits.F-34Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The activity in the valuation allowance associated with deferred taxes consisted of the following: (In thousands) Balance atBeginning ofPeriod Additions (1) Balance atEnd of Period Deferred tax asset valuation allowance for the year ended December 31, 2016 $(106,746) $(35,113) $(141,859)Deferred tax asset valuation allowance for the year ended December 31, 2017 $(141,859) $(30,938) $(172,797)Deferred tax asset valuation allowance for the year ended December 31, 2018 $(172,797) $(46,296) $(219,093) (1)The additions in each of the periods presented relate primarily to Irish NOL’s.At December 31, 2018, the Company maintained a valuation allowance of $11.7 million against certain U.S. state deferred tax assets and $207.4million against certain Irish deferred tax assets as the Company has determined that it is more-likely-than-not that these net deferred tax assets will not berealized. If the Company demonstrates consistent profitability in the future, the evaluation of the recoverability of these deferred tax assets could change andthe remaining valuation allowances could be released in part or in whole. If the Company incurs losses in the U.S. in the future, or experiences significantexcess tax benefits arising from the future exercise of stock options and/or the vesting of RSUs, the evaluation of the recoverability of the U.S. deferred taxassets could change and a valuation allowance against the U.S. deferred tax assets may be required in part or in whole.As of December 31, 2018, the Company had $1.4 billion of Irish NOL carryforwards, $2.5 million of state NOL carryforwards, $44.8 million of federalR&D credits, $2.0 million of alternative minimum tax (“AMT”) credits and $14.8 million of state tax credits which will either expire on various dates through2038 or can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and taxand, in the case of the AMT credits, may be refundable. These loss and credit carryforwards are subject to review and possible adjustment by the appropriatetaxing authorities. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based upon changes in theownership of the Company's ordinary shares.In addition to deferred tax assets and liabilities, the Company recorded deferred charges related to certain intercompany asset transfers. Deferredcharges are included in the following accounts: December 31, December 31, (In thousands) 2018 2017 Prepaid expenses and other current assets $— $188 Other assets — long-term — 686 Total deferred charges $— $874 The Company adopted ASU 2016-16 effective January 1, 2018 requiring an unfavorable cumulative-effect adjustment of $0.9 million recorded toaccumulated deficit to write-off the unamortized deferred tax charge at December 31, 2017. In addition, the Company recorded a $17.8 million deferred taxasset to take account of certain basis differences on intangible assets, with a corresponding adjustment to valuation allowance.F-35Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)A reconciliation of the Company’s statutory tax rate to its effective tax rate is as follows: Year Ended December 31, (In thousands, except percentage amounts) 2018 2017 2016 Statutory tax rate 12.5 % 12.5 % 12.5 % Income tax provision at statutory rate $(15,871) $(17,909) $(26,798) Change in valuation allowance 28,371 26,771 35,290 Federal tax law change(1) — 21,453 — Impairment on equity method investment — 1,662 — Foreign rate differential(2) 5,405 (682) 2,723 Share-based compensation 1,163 (1,205) 2,072 U.S. state income taxes, net of U.S. federal benefit 1,732 (558) (2) Intercompany amounts(3) (751) (5,041) (5,209) Irish rate differential(4) (2,350) (2,675) (5,231) R&D credit (7,698) (9,326) (10,572) Other permanent items(5) 2,343 2,181 1,784 Income tax provision (benefit) $12,344 $14,671 $(5,943) Effective tax rate (9.7)% (10.2)% 2.8 % (1)Represents a $21.5 million deferred tax expense recorded as a discrete item during the three months ended December 31, 2017, as a result of thereduction in the U.S. federal tax rate from 35% to 21%.(2)Represents income or losses of non-Irish subsidiaries, including U.S. subsidiaries, subject to tax at a rate other than the Irish statutory rate.(3)Intercompany amounts include cross-territory eliminations, the pre-tax effect of which has been eliminated in arriving at the Company's consolidatedloss before taxes.(4)Represents income or losses of Irish companies subject to tax at a rate other than the Irish statutory rate.(5)Other permanent items include, but are not limited to, non-deductible meals and entertainment expenses, non-deductible lobbying expenses and non-deductible compensation of senior officers of the Company.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Unrecognized (In thousands) Tax Benefits Balance, December 31, 2015 $3,778 Reductions based on tax positions related to prior periods (7)Additions based on tax positions related to the current period 917 Balance, December 31, 2016 $4,688 Reductions based on tax positions related to prior periods (47)Additions based on tax positions related to the current period 877 Balance, December 31, 2017 $5,518 Additions based on tax positions related to prior periods 4 Additions based on tax positions related to the current period 559 Balance, December 31, 2018 $6,081 The unrecognized tax benefits at December 31, 2018, if recognized, would affect the Company's effective tax rate. The Company does not anticipatethat the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company has elected to includeinterest and penalties related to uncertain tax positions as a component of its provision for taxes. For the years ended December 31, 2018, 2017 and 2016, theCompany's accrued interest and penalties related to uncertain tax positions were not material.The Company’s major taxing jurisdictions include Ireland and the U.S. (federal and state). These jurisdictions have varying statutes of limitations. Inthe U.S., the 2015 through 2018 fiscal years remain subject to examination by the respective tax authorities. In Ireland, the years 2014 to 2018 remain subjectto examination by the Irish tax authorities. Additionally, because of the Company’s Irish and U.S. loss carryforwards and credit carryforwards, certain taxreturns from fiscal years 1999 onward may also be examined. These years generally remain open for three to four years after the loss carryforwards and creditcarryforwards have been utilized.F-36Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The years ended December 31, 2015 and 2014 for Alkermes U.S. Holdings, Inc. are currently under examination by the State of Illinois.16. COMMITMENTS AND CONTINGENT LIABILITIESLease CommitmentsThe Company leases certain of its offices, research laboratories and manufacturing facilities under operating leases that expire through the year 2029.Certain of the leases contain provisions for extensions of up to ten years. These lease commitments are primarily related to the Company’s corporateheadquarters in Ireland and its corporate office and R&D facility in Massachusetts. As of December 31, 2018, the total future annual minimum lease paymentsunder the Company’s non‑cancelable operating leases are as follows: Payment (In thousands) Amount Years Ending December 31, 2019 $9,394 2020 10,717 2021 4,706 2022 2,455 2023 2,389 Thereafter 23,940 $53,601 Rent expense related to operating leases charged to operations was $10.8 million, $9.4 million and $8.1 million for the years ended December 31,2018, 2017 and 2016, respectively. In addition to its lease commitments, the Company had open purchase orders totaling $530.3 million at December 31,2018.LitigationFrom time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. On a quarterly basis, the Companyreviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim, asserted or unasserted, or legalproceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss. Because ofuncertainties related to claims and litigation, accruals are based on the Company’s best estimates based on available information. On a periodic basis, asadditional information becomes available, or based on specific events such as the outcome of litigation or settlement of claims, the Company may reassessthe potential liability related to these matters and may revise these estimates, which could result in material adverse adjustments to the Company’s operatingresults. At December 31, 2018, there were no potential material losses from claims, asserted or unasserted, or legal proceedings that the Company determinedwere probable of occurring.INVEGA SUSTENNA ANDA LitigationIn January 2018, Janssen Pharmaceuticals NV and Janssen Pharmaceuticals, Inc. initiated a patent infringement lawsuit in the U.S. District Court forthe District of New Jersey against Teva Pharmaceuticals USA, Inc. (“Teva”), who filed an abbreviated new drug application (“ANDA”) seeking approval tomarket a generic version of INVEGA SUSTENNA before the expiration of U.S. Patent No. 9,439,906. Requested judicial remedies included recovery oflitigation costs and injunctive relief. The Company is not a party to these proceedings.For information about risks relating to the INVEGA SUSTENNA Paragraph IV litigation, see “Part I, Item 1A—Risk Factors” of this Annual Report andspecifically the section entitled “—We or our licensees may face claims against intellectual property rights covering our products and competition fromgeneric drug manufacturers.”F-37Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AMPYRA ANDA LitigationEleven separate Paragraph IV Certification Notices have been received by the Company and/or its partner Acorda from: Accord Healthcare, Inc.(“Accord”); Actavis Laboratories FL, Inc. (“Actavis”); Alkem Laboratories Ltd. (“Alkem”); Apotex Corporation and Apotex, Inc. (collectively, “Apotex”);Aurobindo Pharma Ltd. (“Aurobindo”); MicroLabs Limited (“MicroLabs”); Mylan Pharmaceuticals, Inc. (“Mylan”); Par Pharmaceutical, Inc. (“Par”); RoxaneLaboratories, Inc. (“Roxane”); Sun Pharmaceutical Industries Limited and Sun Pharmaceuticals Industries Inc. (collectively, “Sun”); and Teva (collectivelywith Accord, Actavis, Alkem, Apotex, Aurobindo, MicroLabs, Mylan, Par, Roxane and Sun, the “ANDA Filers”) advising that each of the ANDA Filers hadsubmitted an ANDA to the FDA seeking marketing approval for generic versions of AMPYRA (dalfampridine) Extended-Release Tablets, 10 mg. The ANDAFilers challenged the validity of one or more of the Orange Book-listed patents for AMPYRA, and they also asserted that their generic versions do notinfringe certain claims of these patents. In response, the Company and/or Acorda filed lawsuits against the ANDA Filers asserting infringement of one or moreof the Orange Book-listed patents for AMPYRA. Requested judicial remedies included recovery of litigation costs and injunctive relief. All lawsuits were filed within 45 days from the date of receipt of each of the Paragraph IV Certification Notices from the ANDA Filers. As a result, a 30-month statutory stay of approval period applied to each of the ANDA Filers’ ANDAs under the U.S. Drug Price Competition and Patent Term Restoration Actof 1984 (the “Hatch-Waxman Act”). The first 30-month stay restricted the FDA from approving the ANDA Filers’ ANDAs until July 2017 at the earliest,unless a Federal district court issued a decision adverse to all of the asserted Orange Book-listed patents prior to that date. Lawsuits with eight of the ANDAFilers have been consolidated into a single case.The Company and/or Acorda entered into a settlement agreement with each of Accord, Actavis, Alkem, Apotex, Aurobindo, MicroLabs, Par and Sun toresolve the patent litigation that the Company and/or Acorda brought against these settling ANDA Filers. The settlements with these settling ANDA Filersdid not impact the patent litigation that the Company and Acorda brought against the remaining ANDA Filers, including as described below.In March 2017, after a bench trial, the U.S. District Court for the District of Delaware (the “Delaware Court”) issued an opinion (the “Delaware CourtDecision”), which, among other things, invalidated U.S. Patent Nos. 8,007,826; 8,354,437; 8,440,703; and 8,663,685. The Delaware Court also upheld thevalidity of the U.S. Patent No. 5,540,938, which pertains to the formulation of AMPYRA, but that patent expired on July 30, 2018. In May 2017, Acorda filedan appeal with the Federal Circuit of the Delaware Court Decision with respect to the findings on U.S. Patent Nos. 8,007,826; 8,354,437; 8,440,703; and8,663,685. On July 27, 2018, Acorda and the Company entered into a settlement agreement with Mylan, pursuant to which, among other things, Mylan waspermitted to market an authorized generic version of AMPYRA in the U.S. in the event of an affirmance by the Federal Circuit of the Delaware CourtDecision. On September 10, 2018, the Federal Circuit affirmed the Delaware Court Decision, which invalidated U.S. Patent Nos. 8,007,826; 8,354,437;8,440,703; and 8,663,685. On October 24, 2018, Acorda filed a petition for rehearing and rehearing en banc of the Federal Circuit’s decision. On January 4,2019, the Federal Circuit denied Acorda’s petition. Acorda has until April 4, 2019 to file a petition for writ of certiorari to the Supreme Court of the UnitedStates.For information about risks relating to the AMPYRA Paragraph IV litigations and other proceedings see “Part I, Item 1A—Risk Factors” of this AnnualReport and specifically the section entitled “—We or our licensees may face claims against intellectual property rights covering our products andcompetition from generic drug manufacturers.”VIVITROL IPR ProceedingOn April 20, 2018, Amneal Pharmaceuticals LLC filed a petition with the Patent Trial and Appeal Board (the “PTAB”) of the U.S. Patent andTrademark Office seeking an inter partes review (“IPR”) of U.S. Patent Number 7,919,499 (the “’499 Patent”), which is an Orange Book-listed patent forVIVITROL, challenging the validity of the ’499 Patent. On November 7, 2018, the PTAB issued an order instituting an IPR of claims 1-13 of the ’499 Patent.On February 7, 2019, the Company filed its patent owner’s response. Amneal’s reply is due on May 7, 2019. A decision on the matter is expected byNovember 7, 2019. The Company will vigorously defend the ’499 Patent in the IPR proceedings. For information about risks relating to the ’499 Patent IPRproceedings see “Part I, Item 1A—Risk Factors” in this Annual Report and specifically the sections entitled “— Patent protection for our products isimportant and uncertain” and “— Uncertainty over intellectual property in the biopharmaceutical industry has been the source of litigation, which isinherently costly and unpredictable, could significantly delay or prevent approval or commercialization of our products, and could adversely affect ourbusiness.”F-38Table of ContentsALKERMES PLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)RISPERDAL CONSTA European Opposition ProceedingsIn December 2016, Nanjing Luye Pharmaceutical Co Ltd, Pharmathen SA, Teva Pharmaceutical Industries Ltd and Dehns Ltd (a law firm representingan unidentified opponent) filed notices of opposition with the European Patent Office (the “EPO”) in respect of EP 2 269 577 B (the “EP ’577” Patent), whichis a patent directed to certain risperidone microsphere compositions, including RISPERDAL CONSTA. Following a hearing on the matter on January 23,2019, the Opposition Division (the “OD”) of the EPO verbally advised the parties of its interlocutory decision to revoke the EP ‘577 Patent. The Companyexpects a written decision to be issued within a few months of the hearing date, following which the Company will have two months to appeal the decision tothe EPO’s Technical Boards of Appeal. The Company will vigorously defend the EP ’577 Patent in the opposition proceedings. For information about risksrelating to the EP ’577 Patent opposition proceedings see “Part I, Item 1A—Risk Factors” in this Annual Report and specifically the sections entitled “—Patent protection for our products is important and uncertain” and “— Uncertainty over intellectual property in the biopharmaceutical industry has been thesource of litigation, which is inherently costly and unpredictable, could significantly delay or prevent approval or commercialization of our products, andcould adversely affect our business.”Government MattersOn June 22, 2017 and January 17, 2019, the Company received a subpoena and a civil investigative demand, respectively, each from an Office of theU.S. Attorney for documents related to VIVITROL. The Company is cooperating with the government.Securities LitigationOn November 22, 2017, a purported stockholder of the Company filed a putative class action against the Company and certain of its officers(collectively, the “Defendants”) in the United States District Court for the Southern District of New York captioned Gagnon v. Alkermes plc, et al., No. 1:17-cv-09178. This complaint has been amended twice since its initial filing. The second amended complaint was filed on behalf of a putative class of purchasersof Alkermes securities during the period of February 24, 2015 through November 14, 2017 and alleges violations of Sections 10(b) and 20(a) of the SecuritiesExchange Act of 1934, as amended, based on allegedly false or misleading statements and omissions regarding the Company’s marketing practices related toVIVITROL. The lawsuit seeks, among other things, unspecified damages for alleged inflation in the price of securities, and reasonable costs and expenses,including attorneys’ fees. On June 29, 2018, Defendants filed a motion to dismiss the second amended complaint. Oral arguments on this motion were heardon October 23, 2018. For information about risks relating to this action, see “Part I, Item 1A—Risk Factors” of this Annual Report and specifically the sectionentitled “—Litigation or arbitration against Alkermes, including securities litigation, or citizen petitions filed with the FDA, may result in financial losses,harm our reputation, divert management resources, negatively impact the approval of our products, or otherwise negatively impact our business.”On December 27, 2018, a purported stockholder of the Company filed a putative class action against the Company and certain of its officers in theUnited States District Court for the Eastern District of New York captioned Karimian v. Alkermes plc, et al., No. 1:18-cv-07410. On January 31, 2019, apurported stockholder of the Company filed a similar putative class action against the Company and the same officers in the United States District Court forthe Eastern District of New York captioned McDermott v. Alkermes plc, et al., No. 1:19-cv-00624. The complaints were filed on behalf of putative classes ofpurchasers of Alkermes securities during the period of February 17, 2017 through November 1, 2018 and allege violations of Sections 10(b) and 20(a) of theSecurities Exchange Act of 1934, as amended, based on allegedly false or misleading statements and omissions regarding the Company’s regulatorysubmission for ALKS 5461 and the FDA’s review and consideration of that submission. The lawsuits seek, among other things, unspecified money damages,prejudgment and postjudgment interest, reasonable attorneys’ fees, expert fees and other costs. For information about risks relating to these actions, see “PartI, Item 1A—Risk Factors” of this Annual Report and specifically the section entitled “—Litigation or arbitration against Alkermes, including securitieslitigation, or citizen petitions filed with the FDA, may result in financial losses, harm our reputation, divert management resources, negatively impact theapproval of our products, or otherwise negatively impact our business.” F-39Exhibit 2.1.2 SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENTThis Second Amendment to Purchase and Sale Agreement (this “Amendment”), dated December 20, 2018 (the“Amendment Effective Date”) by and among Alkermes Pharma Ireland Limited, a private company limited by shares and incorporatedin Ireland (“APIL”), Daravita Limited, a private company limited by shares and incorporated in Ireland (“Daravita”), Alkermes USHoldings, Inc. (as successor in interest to Eagle Holdings USA, Inc.), a Delaware corporation (together with APIL, “Sellers”), RecroPharma, Inc., a Pennsylvania corporation (“Recro”) and Recro Gainesville LLC (as successor to Recro Pharma LLC), a Massachusettslimited liability company and wholly-owned subsidiary of Recro (“Recro Gainesville” and, together with Recro, “Purchasers”),amends that certain Purchase and Sale Agreement, dated as of March 7, 2015 and amended on December 8, 2016, by and amongSellers, Daravita and Purchasers (as amended, the “Agreement”).ARTICLE IAMENDMENT 1.1Exhibit E. Section 2.1(a) of Exhibit E is hereby deleted in its entirety and replaced with the following: “(a)Development Milestone Earn-Out Consideration. (i)The following amounts (“Development Milestone Earn-Out Consideration”) shall be payablein accordance with Section 2.8 of the Agreement and this Exhibit E upon achievement of the following events(“Development Milestones”) by Purchaser and its Affiliates, licensees and sublicensees, and shall be non-refundable and non-creditable and not subject to deduction or set-off:(A)Within thirty (30) calendar days following December 20, 2018, Purchaser shall pay to APILFive Million U.S. Dollars (US$5,000,000.00) and within thirty (30) calendar days following March 24, 2019, Purchasershall pay to APIL Five Million U.S. Dollars (US$5,000,000.00); and (B) the following amounts: Development MilestoneAmount of DevelopmentMilestone Earn-OutConsideration (U.S. Dollars)Approval of an NDA for the first Earn-Out Product (the “First Approval”)$5,000,000.00First anniversary of the First Approval$6,429,000.00Second anniversary of the First Approval$6,429,000.00Third anniversary of the First Approval$6,429,000.00Fourth anniversary of the First Approval$6,429,000.00Fifth anniversary of the First Approval$6,429,000.00Sixth anniversary of the First Approval$6,429,000.00Seventh anniversary of the First Approval$6,429,000.00  (ii)Purchaser shall notify and pay to APIL (A) the Development Milestone Earn-OutConsideration payable upon the First Approval within one hundred eighty (180) calendar days following theoccurrence of the First Approval and (B) each Development Milestone Earn-Out Consideration payment otherthan the First Approval payment within thirty (30) calendar days after the occurrence of the correspondingDevelopment Milestone. Each payment made pursuant to Section 2.1(a) of this Exhibit E shall be made by wiretransfer of immediately available funds to such account or accounts as are designated in writing by APIL.”ARTICLE IIWARRANT AMENDMENT2.1Warrant Amendment In connection with, and concurrently with the execution of, this Amendment, Recro shallamend that certain Warrant to Purchase Stock, issued by Recro to APIL pursuant to the Agreement on April 10, 2015 (the “Warrant”),so as to modify the Warrant Price (as defined in the Warrant) set forth therein from the current Warrant Price to a warrant price that isequal to 1.2 times the closing price of the common stock of Recro on the trading day immediately prior to the Amendment EffectiveDate (the Warrant as so amended and re-issued, the “Amended Warrant”) and deliver such Amended Warrant to APIL. Recro andAPIL hereby acknowledge and agree that the Amended Warrant, and any shares of common stock of Recro issued upon cashlessexercise of the Amended Warrant (together, the “Exchanged Securities”), will be issued to APIL in reliance on the exemption providedby Section 3(a)(9) of the Securities Act of 1933, as amended, and as such, the Exchanged Securities shall assume the characteristics ofthe Warrant, including without limitation that any holding period applicable to any such Exchanged Securities will be deemed to havestarted on the original issuance date of the Warrant.ARTICLE IIIGENERAL3.1Effect of Amendment. The Agreement is hereby amended as set forth in this Amendment. Except as specificallyprovided for in this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. Each referencein the Agreement to “hereof,” “hereunder” and “this Agreement” shall, from and after the date of this Amendment, refer to theAgreement, as amended by this Amendment. Each reference in the Agreement to the “date of the Agreement” or similar references(such as “to the date hereof”) shall refer to March 7, 2015.-2- 3.2Related Agreement.The Parties acknowledge and agree that (i) Recro Gainesville and APIL are parties to acertain Asset Transfer and License Agreement, dated as of April 10, 2015, as amended (the “Related Agreement”), pursuant to whichRecro Gainesville is obligated to pay APIL the Earn-Out Consideration set forth in Exhibit E to the Agreement, as amended by thisAmendment, which payment obligation is replicated in Exhibit D to the Related Agreement, (ii) on or about the Amendment EffectiveDate, Recro Gainesville and APIL shall amend Exhibit D to the Related Agreement such that the amendments to the Earn-OutConsideration set forth in this Amendment are mirrored in Exhibit D to the Related Agreement and (iii) the Earn-Out Consideration(set forth in Exhibit E to the Agreement, as amended by this Amendment, and Exhibit D to the Related Agreement, as amended) is tobe paid by the Purchasers to APIL only once.3.3Miscellaneous Provisions. The provisions of Article XI of the Agreement shall apply mutatis mutandis to thisAmendment and to the Agreement as modified by this Amendment.[Signature Page Follows] -3- IN WITNESS WHEREOF, this Amendment has been signed by or on behalf of each of the parties set forth below as of theday first above written. ALKERMES PHARMA IRELAND LIMITED By:/s/ Richie Paul Name:Richie Paul Title:Director DARAVITA LIMITED By:/s/ Richie Paul Name:Richie Paul Title:Director ALKERMES US HOLDINGS, INC. By:/s/ James Frates Name:James Frates Title:Director RECRO PHARMA, INC. By:/s/ Ryan D. Lake Name:Ryan D. Lake Title:Chief Financial Officer RECRO GAINESVILLE LLC By:/s/ Ryan D. Lake Name:Ryan D. Lake Title:Treasurer [Signature Page to Second Amendment to Purchase and Sale Agreement]Exhibit 10.1.5 FIFTH AMENDMENT TO LEASETHIS FIFTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of October 31, 2018,between GI TC 850 WINTER STREET, LLC, a Delaware limited liability company (“Landlord”), and ALKERMES,INC., a Pennsylvania corporation (“Tenant”).RECITALSA.Landlord (as successor in interest to PDM Unit 850, LLC, a Delaware limited liability company (“Prior Landlord”)) andTenant are parties to that certain Lease dated April 22, 2009 (the “Original Lease”), which Original Lease has beenpreviously amended by (i) that certain First Amendment to Lease dated June 15, 2009, between Prior Landlord and Tenant(the “First Amendment”), (ii) that certain Second Amendment to Lease dated November 12, 2013, between Prior Landlordand Tenant (the “Second Amendment”), (iii) that certain Third Amendment to Lease dated May 15, 2014, between PriorLandlord and Tenant (the “Third Amendment”), and (iv) that certain Fourth Amendment to Lease dated December 30, 2014,between Landlord and Tenant (the “Fourth Amendment”; the Original Lease, as amended by the First Amendment, theSecond Amendment, the Third Amendment, and the Fourth Amendment is hereinafter referred to as the “CurrentLease”). Pursuant to the Current Lease, Landlord has leased to Tenant space currently containing approximately 159,994rentable square feet and approximately 353 square feet of storage space (as more particularly described in the Lease, the“Current Premises”) in the building located at 850 and 852 Winter Street, Waltham, Massachusetts (the “Building”).B.Pursuant to that certain Lease dated August 7, 2009 by and between Landlord (as successor in interest to Prior Landlord) andMassachusetts High Technology Council, Inc., a Massachusetts nonprofit corporation (“MHTC”) (as amended, the “MHTCLease”), MHTC leases approximately 3,387 rentable square feet located on the first (1st) floor of the Building, which space isshown on Exhibit A hereto (the “Fifth Amendment Expansion Space”). C.On or about the date hereof, Tenant will enter into a separate agreement with MHTC, whereby MHTC will agree to terminatethe MHTC Lease and to deliver the Fifth Amendment Expansion Space to Tenant (the “MHTC Agreement”).D.Tenant has requested that upon termination of the MHTC Lease, the Fifth Amendment Expansion Space be added to theCurrent Premises and that the Current Lease be appropriately amended. Landlord is willing to accept the early termination ofthe MHTC Lease and add the Fifth Amendment Expansion Space to the Current Premises on the terms and conditions setforth herein.NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree asfollows:1.Recitals Incorporated; Certain Defined Terms. The Recitals set forth above are incorporated herein by this reference andshall be deemed terms and provisions hereof with the same force and effect as if fully set forth in this Section. Terms whichare not otherwise defined herein shall be deemed to have the same meanings herein as are ascribed to such terms in theCurrent Lease.1 2.Expansion. 2.1Addition of Fifth Amendment Expansion Space. Effective as of November 1, 2018 (the “Fifth AmendmentExpansion Space Commencement Date”), the Current Premises shall be expanded to include the FifthAmendment Expansion Space and the rentable square area of the Current Premises shall be increased fromapproximately 159,994 rentable square feet in the Building to approximately 163,381 rentable square feet in theBuilding. From and after the Fifth Amendment Expansion Space Commencement Date, the Current Premises andthe Fifth Amendment Expansion Space shall collectively be deemed to constitute the Premises (as defined in theOriginal Lease). The term for the Fifth Amendment Expansion Space shall commence on the Fifth AmendmentExpansion Space Commencement Date and end on the Expiration Date (as defined in Section 3 of the SecondAmendment) unless sooner terminated in accordance with the terms of the Current Lease, as amended hereby. TheFifth Amendment Expansion Space is subject to all the terms and conditions of the Current Lease except asexpressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements orother financial concessions granted with respect to the Current Premises or the performance of any work therein byLandlord. 2.2Delay in Delivery of Fifth Amendment Expansion Space. Tenant agrees that Landlord shall not be responsiblefor, or liable for any damages due to, MHTC’s failure to deliver the Fifth Amendment Expansion Space to Tenanton the Fifth Amendment Expansion Space Commencement Date or any delay in Tenant’s occupation of the FifthAmendment Expansion Space resulting therefrom.3.Base Rent for the Fifth Amendment Expansion Space. In addition to Tenant’s obligation to pay Base Rent for the CurrentPremises pursuant to the Current Lease, Tenant shall pay Landlord Base Rent for the Fifth Amendment Expansion Spacebeginning on the Fifth Amendment Expansion Space Commencement Date and for the remainder of the term of the CurrentLease as follows: PeriodRentableSquareFootageAnnualBase RentRate PerSquareFootAnnual BaseRentMonthlyBase Rent11/1/18 – 10/31/193,387$30.52$103,384.69$8,615.3911/1/19 – 2/28/213,387$31.56$106,907.17$8,908.93 All such Base Rent shall be payable by Tenant in accordance with the terms of the Current Lease.4.Tenant’s Pro Rata Share. Tenant's Pro Rata Share for the Fifth Amendment Expansion Space is 1.88% of theBuilding. Accordingly, Tenant’s Pro Rata Share (as expanded by the Fifth Amendment Expansion Space) is increased withrespect to the entire Building is increased from 88.87% to 90.75%.5.Additional Rent. Effective as of the Fifth Amendment Expansion Space Commencement Date, Tenant shall pay allAdditional Rent payable under the Current Lease, including Tenant’s Pro Rata Share of Operating Expenses and Taxesapplicable to the Fifth Amendment Expansion Space in accordance with the terms of the Current Lease. Effective as of theFifth Amendment Expansion Space Commencement Date, any electricity for the Fifth Amendment Expansion Space shall bepayable pursuant to Section 3.01 of the Original Lease.2 6.Condition of Fifth Amendment Expansion Space. Tenant has inspected the Fifth Amendment Expansion Space and agreesto accept the same “as is” without any agreements, representations, understandings or obligations on the part of Landlord toperform any alterations, repairs, or improvements. Tenant acknowledges that immediately preceding Tenant’s occupation ofthe Fifth Amendment Expansion Space, such space will be occupied by MHTC. Upon the expiration or earlier termination ofthe Current Lease, Tenant shall remove all personal property from the Fifth Amendment Expansion Space and surrender theFifth Amendment Expansion Space in accordance with the terms of the Current Lease including, without limitation, Section15.01 of the Original Lease.7.Extension Options. Each of Landlord and Tenant acknowledges and agrees that Tenant’s right to extend the term of theCurrent Lease set forth in Article 22 of the Original Lease applies to the Current Premises (but excluding the FourthExpansion Space) and to the Fifth Amendment Expansion Space, and that Tenant’s right to extend the term of the CurrentLease with regard to the Fourth Expansion Space only is governed by Section 9 of the Fourth Amendment. 8.Other Pertinent Provisions. Landlord and Tenant agree that the Current Lease shall be amended in the following additionalrespects: 8.1Parking. Effective as of the Fifth Amendment Expansion Space Commencement Date, Tenant shall have the rightto use eleven (11) additional non-designated parking spaces (based on a parking ratio of 3.3 parking spaces per1,000 rentable square feet of the Fifth Amendment Expansion Space) in the parking areas shown on Exhibit“20.10” to the Original Lease. Accordingly, effective as of the Fifth Amendment Expansion SpaceCommencement Date, Tenant’s non-designated parking spaces shall be increased from five hundred forty-six(546) non-designated parking spaces to five hundred fifty-seven (557) non-designated parking spaces. Includedwithin the foregoing five hundred fifty-seven (557) non-designated parking spaces are sixty-three (63) non-designated parking spaces located in the parking garage on the lower level of the Building, with direct access tothe Building lobby serving the Premises. Notwithstanding the foregoing, forty-four (44) of such five hundred fifty-seven (557) non-designated parking spaces (including six (6) located in the parking garage on the lower level ofthe Building, with direct access to the Building lobby serving the Premises) are available to Tenant during the termof the Current Lease and for the duration of the Fourth Expansion Space Extended Term (as defined in the FourthAmendment) thereafter. Except as modified herein, the use of such non-designated parking spaces shall be subjectto the terms of the Current Lease, as amended hereby. 8.2Section 12.01 of Original Lease - General Indemnity. The following language is hereby added as the thirdparagraph in Section 12.01 of the Original Lease:“Notwithstanding anything to the contrary set forth in the Lease: (i) no officer, director, manager, employee,trustee, member, partner, shareholder, investor, beneficiary, internal investment contractor, investment manager oragent of Landlord or any of its Affiliates (as defined below) shall be personally liable for any of the obligations ofLandlord under the Lease, and Tenant shall look solely to Landlord for the enforcement of any claims against itarising under the Lease; (ii) Landlord shall not be liable under any circumstances for a loss of, or injury to,property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, orconsequential or punitive damages, however occurring; (iv) Landlord shall not be liable for any damages or injuryto person or property or resulting from the loss of use thereof, which damage or injury is sustained by Tenant or byanyone claiming by or through Tenant, based on, arising out of, or resulting from, any cause whatsoever,including any due to the Property becoming out of repair, or due to the occurrence of any accident or event in orabout the Property, or due to any act or neglect of any tenant or3 occupant of the Property or any other person; and (v) all personal property (including equipment) owned, leasedand/or operated by Tenant or any other party claiming by or though Tenant located in or on Property shall be at therisk of Tenant only, and Landlord shall not be liable for any loss or damage thereto or theft thereof. For purposesof this paragraph, “Affiliate” means, with respect to any party, any person or entity that directly, or indirectlythrough one or more intermediaries, controls, is controlled by or is under common control with such party. Forpurposes of this definition, “control” (including, with correlative means, the term “controlled by” or “undercommon control with”) means the possession by any person or entity, directly or indirectly, of the power to director cause the direction of the management and policies of another person or entity, whether through the ownershipof voting securities, by contract or otherwise.” 8.3Section 2.03 of Original Lease - Payment of Rent. The address to which rent and other amounts payable byTenant to Landlord under the Current Lease shall be sent to Landlord at the following address or such otheraddress as Landlord shall specify in writing:GI TC 850 Winter Street125 High Street, Suite 211Boston, Massachusetts 02110 8.4Section 18 of Original Lease - Notices. The addresses for Landlord and Tenant for purposes of the delivery ofnotices under the Current Lease are as follows or such other address as Landlord or Tenant shall specify for it tothe other after the date of this Amendment. If to Landlord: GI TC 850 Winter Street LLC125 High Street, Suite 211Boston, Massachusetts 02110Attn: Property Manager With a copy to: GI TC 850 Winter Street LLCc/o GI Partners188 The Embarcadero, Suite 700San Francisco, California 94105Attn: Asset Manager for 850 Winter St., Waltham, MA With a copy to Seyfarth Shaw LLP 975 F Street, N.W. Washington, D.C. 20004 Attn: Tom Galli If to Tenant: Alkermes, Inc. 852 Winter Street Waltham, MA 02541 With a copy to Langer & McLaughlin, LLP 535 Boylston Street, Suite 300 Boston, MA 02116 Attn: Alkermes Leasing 9.Insurance. On or before the Fifth Amendment Expansion Space Commencement Date, Tenant shall provide Landlord with acertificate of insurance, in form and substance satisfactory to Landlord and otherwise in compliance with Section 4.02 of theOriginal Lease, evidencing that Tenant’s Insurance covers the Current Premises and the Fifth Amendment Expansion Space.4 10.Representations by Tenant. Tenant hereby represents and warrants to Landlord that the following are true as of datehereof: (a) Tenant is a corporation duly formed and existing in good standing under the laws of the state of its organization;(b) Tenant is registered and duly authorized to do business as a foreign entity in the state in which the Premises is located;(c) Tenant owns and holds the entire leasehold interest of the tenant under the Current Lease; (d) Tenant has not assigned orencumbered its interest in the Current Lease or any part thereof; (e) there exists no sublease, license or other agreementrelative to the use or occupancy of the Current Premises or any part thereof; and (f) Landlord has fulfilled all its obligations, ifany, under the Current Lease with respect to the construction of improvements in the Current Premises. The representationsand warranties set forth in this Section shall survive the expiration or earlier termination of the term of the Current Lease, asamended hereby. Tenant shall indemnify, protect, defend (with counsel approved by Landlord) and hold harmless Landlordfrom and against any and all losses, liabilities, damages, claims, demands, costs and expenses suffered or incurred byLandlord, directly or indirectly, in connection with any inaccuracy or breach of any representation or warranty of Tenant setforth in this Section.11.Miscellaneous. 11.1This Amendment, including Exhibit A (Outline and Location of Fifth Amendment Expansion Space) attachedhereto, sets forth the entire agreement between the parties with respect to the matters set forth herein. There havebeen no additional oral or written representations or agreements. 11.2Except as herein modified or amended, the provisions, conditions and terms of the Current Lease shall remainunchanged and in full force and effect. In the case of any inconsistency between the provisions of the CurrentLease and this Amendment, the provisions of this Amendment shall govern and control. The capitalized termsused in this Amendment shall have the same definitions as set forth in the Current Lease to the extent that suchcapitalized terms are defined therein and not redefined in this Amendment. 11.3Submission of this Amendment by Landlord is not an offer to enter into this Amendment. Landlord shall not bebound by this Amendment until Tenant and Guarantor (as defined below) have executed and delivered the same toLandlord. 11.4Within ten (10) days after the delivery to Tenant of Landlord’s request from time to time, Tenant shall reimburseLandlord for all costs (including reasonable attorneys’ fees) incurred by Landlord and its lender for the Building inconnection with this Amendment, the MHTC Agreement, and the MHTC Lease Term Amendment (as defined inSection 11.9 below). 11.5Landlord and Tenant hereby each represent and warrant to the other that it knows of no real estate broker, finder oragent who is entitled to a commission in connection with this Amendment. Landlord and Tenant each agree toindemnify, protect, defend and hold harmless the other from and against any and all losses, liabilities, damages,claims, demands, costs and expenses (including, without limitation, reasonable attorneys’ fees) suffered or incurredby the other in connection with any leasing commissions or equivalent compensation alleged to be owing onaccount of the indemnifying party's dealings with any real estate broker, finder or agent in connection with thisAmendment or the transaction contemplated hereby. 5 11.6At Landlord’s option, this Amendment shall be of no force and effect unless and until accepted by any guarantorsof the Current Lease, who by signing below shall agree that their guaranty shall apply to the Current Lease asamended herein, unless such requirement is waived by Landlord in writing. 11.7Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver thesame on behalf of the party hereto for which such signatory is acting. 11.8This Amendment specifically is contingent upon the execution and delivery by Landlord and MHTC of anamendment to the MHTC Lease to modify the term of the same to expire effective on the day preceding the FifthAmendment Expansion Space Commencement Date, in form and on terms satisfactory to Landlord and MHTC intheir respective sole discretion (the “MHTC Lease Term Amendment”). If Landlord and MHTC fail to enter intothe MHTC Lease Term Amendment, this Amendment shall be null and void and of no force or effect and theCurrent Lease shall continue in full force and effect as if this Amendment had not been executed. 11.9Redress for any claim against Landlord under the Current Lease and this Amendment shall be limited to andenforceable only against and to the extent of Landlord’s interest in the Building. The obligations of Landlordunder the Current Lease, as amended hereby, are not intended to and shall not be personally binding on, nor shallany resort be had to the private properties of, any of its trustees or board of directors and officers, as the case maybe, its investment manager, the general partners thereof, or any beneficiaries, stockholders, employees, or agentsof Landlord or the investment manager, and in no case shall Landlord be liable to Tenant hereunder for any lostprofits, damage to business, or any form of special, indirect or consequential damages. 11.10This Amendment may be executed in multiple counterparts, each of which it shall be deemed an original, but all ofwhich shall constitute one and the same instrument. 11.11The counterparts of this Amendment may be executed and delivered by facsimile or other electronic means and theparties may rely on the receipt of such counterpart so executed and delivered by facsimile or other electronicmeans as if the original had been received.[Signature Page Follows]6 IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day and year first above written. WITNESS: LANDLORD: GI TC 850 WINTER STREET, LLC, a Delaware limited liability company/s/ David Waller By: /s/ Tony Lin Print Name:David Waller Name:Tony Lin Title:Authorized Person WITNESS: TENANT: ALKERMES, INC., a Pennsylvania corporation /s/ Samuel G. Theodoss By:/s/ Michael Landine Print Name:Samuel G. Theodoss Name:Michael Landine Title:Senior Vice President7 The undersigned (“Guarantor”): (i) hereby consents and agrees to the modifications and all other matters contained in this Amendment;(ii) reaffirms to Landlord each of the representations, warranties, covenants and agreements of Guarantor set forth in that certainGuaranty dated May 15, 2014, executed by it in connection with the Current Lease (the “Guaranty”), with the same force and effect asif each were separately stated in this Amendment and made as of the date of this Amendment; and (iii) acknowledges and agrees thatthe Guaranty will continue in full force and effect with respect to the Current Lease, as amended by this Amendment, and that allreferences in the Guaranty to the “Lease” are hereby amended to refer to the Current Lease, as amended by this Amendment.Guarantor hereby notifies Landlord that the address for Guarantor’s agent for service of process listed in Section 10 of theGuaranty (i.e., Douglas McLaughlin) has been changed to c/o Langer & McLaughlin, LLP, 535 Boylston Street, 3rd Floor, Boston, MA02116. WITNESS: GUARANTOR: ALKERMES PLC, an Irish public limited company /s/ Paula Hamm By: /s/ Tom RiordanPrint Name:Paula Hamm Name:Tom Riordan Title:Assistant Company Secretary 8 EXHIBIT A - OUTLINE AND LOCATION OF FIFTH AMENDMENT EXPANSION SPACEattached to and made a part of the Amendment dated effective as of October 31, 2018, betweenGI TC 850 WINTER STREET, LLC, a Delaware limited liability company, as Landlord andALKERMES, INC., a Pennsylvania corporation, as TenantExhibit A is intended only to show the general layout of the Fifth Amendment Expansion Space as of the beginning of the FifthAmendment Expansion Space Commencement Date. It does not in any way supersede any of Landlord’s rights set forth in the CurrentLease with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/orlocations. It is not to be scaled; any measurements or distances shown should be taken as approximate. 47725112v.5 A-1 Initials  Exhibit 21.1SUBSIDIARIESName Jurisdiction Alkermes Ireland Holdings Limited Ireland Alkermes Pharma Ireland Limited Ireland Alkermes Finance Ireland Limited Ireland Daravita Pharma Ireland Limited Ireland Alkermes Finance Ireland (No. 3) Limited Ireland Alkermes Science Four Limited Ireland Alkermes Science Five Limited Ireland Alkermes Science Six Limited Bermuda Daravita Limited Ireland Alkermes Finance S.à r.l. Luxembourg Alkermes Finance Ireland (No. 2) Limited Ireland Alkermes US Holdings, Inc. Delaware Alkermes, Inc. Pennsylvania Alkermes Controlled Therapeutics, Inc. Pennsylvania Alkermes Europe, Ltd. United Kingdom Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S‑8 (Nos. 333‑179545, 333‑184621, 333‑200777,333-214952 and 333-226359) of Alkermes plc of our report dated February 15, 2019 relating to the financial statements and the effectiveness of internalcontrol over financial reporting, which appears in this Form 10‑K./s/ PricewaterhouseCoopers LLPBoston, MassachusettsFebruary 15, 2019 Exhibit 31.1CERTIFICATIONSI, Richard F. Pops, certify that: 1.I have reviewed this annual report on Form 10-K of Alkermes plc; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. By:/s/ Richard F. Pops Chairman and Chief Executive Officer (Principal Executive Officer) Date:February 15, 2019 Exhibit 31.2CERTIFICATIONSI, James M. Frates, certify that: 1.I have reviewed this annual report on Form 10-K of Alkermes plc; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. By:/s/ James M. Frates Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date:February 15, 2019 Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Alkermes plc (the "Company") for the period ended December 31, 2018 as filed with theSecurities and Exchange Commission on the date hereof (the "Report"), we, Richard F. Pops, Chairman and Chief Executive Officer of the Company, andJames M. Frates, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By:/s/ Richard F. Pops Richard F. Pops Chairman and Chief Executive Officer (Principal Executive Officer) By:/s/ James M. Frates James M. Frates Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date:February 15, 2019 

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