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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-35299
ALKERMES PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland
(State or other jurisdiction of incorporation or organization)
Connaught House
1 Burlington Road
Dublin 4, Ireland
(Address of principal executive offices)
98-1007018
(I.R.S. Employer Identification No.)
D04 C5Y6
(Zip code)
+353-1-772-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Ordinary shares, $0.01 par value
Trading Symbol(s)
ALKS
Name of each exchange on which registered
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate 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 the preceding
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 past 90 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 whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large Accelerated Filer ☒
Non-Accelerated Filer ☐
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 revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 in such
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 completed second
fiscal quarter was $4,838,408,388.
As of February 10, 2023, 164,389,123 ordinary shares were outstanding.
Portions of the definitive proxy statement for our 2023 Annual General Meeting of Shareholders are incorporated by reference into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
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ALKERMES PLC AND
SUBSIDIARIES
ANNUAL REPORT ON FORM 10‑K
FOR THE YEAR ENDED DECEMBER 31, 2022
INDEX
PART I
PART II
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART III
PART IV
Item 15.
Item 16.
SIGNATURES
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
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CAUTIONARY NOTE CONCERNING FORWARD‑LOOKING STATEMENTS
This 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, these
statements 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
of operations or of financial condition, or state trends and known uncertainties or other forward-looking information. Forward‑looking statements in this
Annual Report on Form 10‑K (this “Annual Report”) include, without limitation, statements regarding:
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our expectations regarding our financial performance, including revenues, expenses, liquidity, capital expenditures and income taxes;
our expectations regarding our products, including expectations related to product development; regulatory filings, approvals and timelines;
therapeutic and commercial value, scope and potential; and the costs and expenses related to such activities and expectations;
our expectations regarding the initiation, timing and results of clinical trials of our products;
our expectations regarding the competitive, payer, legislative, regulatory and policy landscape, and changes therein, related to our products,
including competition from generic forms of our products or competitive products and development programs, barriers to access or coverage of
our products and potential changes in reimbursement of our products, and legislation, regulations, executive orders, guidance or other measures
that may impact pricing and reimbursement of, and access to, our products;
our expectations regarding the financial impact of currency exchange rate fluctuations and valuations;
our expectations regarding future amortization of intangible assets;
our expectations regarding collaborations, licensing arrangements and other significant agreements with third parties relating to our products and
our development programs;
our expectations regarding the impact of new legislation, rules and 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 with
respect to managing such exposures;
our expectations regarding 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 expenditures for our operations and our ability to finance such capital requirements
and expenditures;
our expectations regarding the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our products and
intellectual property (“IP”), including our patents;
our expectations regarding the impact of the ongoing novel coronavirus (“COVID-19”) pandemic on our business and operations;
our expectations regarding the potential separation of our neuroscience business and oncology business, including anticipated timing, effects,
costs, benefits and tax treatment; and
other expectations 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
statements are subject to risks, assumptions and uncertainties. In light of these risks, assumptions and uncertainties, the forward‑looking expectations
discussed in this Annual Report might not occur. You are cautioned not to place undue reliance on the forward‑looking statements in this Annual Report,
which speak only as of the date of this Annual Report. All subsequent written and oral forward‑looking statements concerning the matters addressed in this
Annual Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. 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. For information about the risks, assumptions and
uncertainties of our business, see “Item 1A—Risk Factors” in this Annual Report.
This Annual Report may include data that we obtained from industry publications and third-party research, surveys and studies. Industry
publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable,
although they do not guarantee the accuracy or completeness of such information. While we believe
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that any industry publications and third-party research, surveys and studies from which data is included in this Annual Report are reliable, we have not
independently verified any such data. This Annual Report may also include data based on our own internal estimates and research. Our internal estimates
and research have not been verified by any independent source and are necessarily subject 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. These and other factors could cause our results to differ materially
from those expressed or implied in this Annual Report.
SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous material and other risks and uncertainties that you should be aware of. These risks and uncertainties are
described more fully in “Item 1A—Risk Factors” in this Annual Report, and include, but are not limited to, the following:
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the potential separation of our neuroscience and oncology businesses, including a potential separation of our oncology business into an
independent, publicly-traded company, is subject to various risks and uncertainties and may not be completed on the timeline currently
contemplated or at all, and will involve significant time, effort and expense, which could disrupt or adversely affect our business and our
financial condition, results of operations and cash flows;
we may fail to realize some or all of the anticipated benefits of the potential separation of our neuroscience and oncology businesses and the
market price of our ordinary shares may fluctuate significantly in connection with the potential separation;
we continue to assess the tax consequences of potential structures for the separation of our oncology business from our neuroscience business,
including a potential separation of the oncology business into an independent, publicly-traded company. If such a separation does not qualify as a
transaction that is generally tax-free for U.S. federal and Irish tax purposes, we and/or our shareholders could be subject to significant tax
liabilities;
our business, financial condition and results of operations have been, and may continue to be, adversely affected by the ongoing COVID-19
pandemic or other similar outbreaks of contagious diseases;
we receive substantial revenue from our key proprietary products, and our success depends on our ability to successfully manufacture and
commercialize such products;
we rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue and, if our
licensees are not effective, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected;
we face competition in the biopharmaceutical industry;
our revenues from sales of our products may decrease or grow at a slower than expected rate due to many factors;
revenues generated by sales of our products depend, in part, 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 cost-control measures
imposed, and any reductions in payment rate or reimbursement or increases in our or in patients’ financial obligation to payers could result in
decreased sales of our products and/or decreased revenues;
clinical trials for our product candidates are expensive, may take several years to complete, and their outcomes are uncertain;
preliminary, topline or interim data from our clinical trials that we may announce, publish or report from time to time may change as more patient
data become available or based on subsequent audit and verification procedures, and may not be indicative of final data from such trials, data
from future trials or real-world results;
the United States Food and Drug Administration (the “FDA”) or other regulatory agencies may not agree with our regulatory approval strategies
or components of our filings for our products, including our clinical trial designs, conduct and methodologies and the adequacy of the data and
other information included in our submissions, and may not approve, or may delay approval of, our products;
the FDA or other regulatory agencies may impose limitations or post-approval requirements on approvals for our products;
we are subject to risks related to the manufacture of our products;
we rely on third parties to provide goods and services in connection with the manufacture and distribution of the products we manufacture;
our success largely depends upon our ability to attract, recognize and retain key personnel, and the loss of key personnel may materially impact
our business;
patent and other IP protection for our products is key to our business and our competitive position but is uncertain;
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uncertainty over IP in the biopharmaceutical industry has been the source of litigation, which is inherently costly and unpredictable, could
significantly delay or prevent approval or negatively impact commercialization of our products, and could adversely affect our business;
we or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers;
litigation or arbitration filed against us, including securities litigation, or actions (such as citizens petitions) filed against regulatory agencies in
respect of our products, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our
products, or otherwise negatively impact our business;
if there are changes in, or we fail to comply with, the extensive legal and regulatory requirements affecting the healthcare industry, we could face
costs, penalties and business losses;
we may not become profitable on a sustained basis;
our level of indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business;
the business combination of Alkermes, Inc. and the drug technology business of Elan Corporation, plc may limit our ability to use our tax
attributes to offset taxable income, if any, generated from such business combination;
the market price of our ordinary shares has been volatile and may continue to be volatile in the future, and could decline significantly;
our business could be negatively affected as a result of the actions of activist shareholders; and
information security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business
and reputation to suffer.
The material and other risks and uncertainties summarized above should be read together with the text of the full risk factors in “Item 1A—Risk
Factors” in this Annual Report and the other information set forth in this Annual Report, including our consolidated financial statements and the related
notes, and in other documents that we file with the United States (“U.S.”) Securities and Exchange Commission (“SEC”). If any such material and other
risks and uncertainties actually occur, our business, financial condition, cash flows or results of operations could be materially and adversely affected. The
risks and uncertainties summarized above or described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not
currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows or
results of operations.
NOTE REGARDING COMPANY AND PRODUCT REFERENCES
Use of terms such as “us,” “we,” “our,” “Alkermes” or the “Company” in this Annual Report is meant to refer to Alkermes plc and its consolidated
subsidiaries. Except as otherwise suggested by the context, (a) references to “products” or “our products” in this Annual Report include our marketed
products, marketed products using our proprietary technologies, our licensed products, our product candidates and product candidates using our proprietary
technologies (b) references to the “biopharmaceutical industry” in this Annual Report are intended to include reference to the “biotechnology industry”
and/or the “pharmaceutical industry” and (c) references to “licensees” in this Annual Report are used interchangeably with references to “partners.”
NOTE REGARDING TRADEMARKS
We are the owner of various U.S. federal trademark registrations (“®”) and other trademarks (“TM”), including ALKERMES®, ARISTADA®,
ARISTADA INITIO®, LinkeRx®, LYBALVI®, NanoCrystal®, and VIVITROL®.
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The following are trademarks of the respective companies listed: ABILIFY® and ABILIFY MAINTENA®—Otsuka Pharmaceutical Co., Ltd.
(“Otsuka Pharm. Co.”); AMPYRA® and FAMPYRA®—Acorda Therapeutics, Inc. (“Acorda”); ANJESO®—Baudax Bio, Inc.; ANTABUSE®—Teva
Women’s Health, Inc.; AUBAGIO® and LEMTRADA®—Sanofi Societe Anonyme France; AVONEX®, PLEGRIDY®, TECFIDERA®, TYSABRI® and
VUMERITY®—Biogen MA Inc. (together with its affiliates, “Biogen”); BETASERON®—Bayer Pharma AG; BRIUMVITM—TG Therapeutics, Inc.;
BUNAVAILTM—BioDelivery Sciences; CAMPRAL®—Merck Sante; CAPLYTA®—Intra-Cellular Therapies, Inc.; COPAXONE®—Teva Pharmaceutical
Industries Ltd.; EXTAVIA®, GILENYA®, and MAYZENT®—Novartis AG; BYANNLI®, INVEGA®, INVEGA HAFYERA®, INVEGA SUSTENNA®,
INVEGA TRINZA®, PONVORY®, RISPERDAL CONSTA®, TREVICTA® and XEPLION®—Johnson & Johnson or its affiliated companies;
KEYTRUDA®—Merck Sharp & Dohme Corp.; LATUDA®—Sumitomo Dainippon Pharma Co., Ltd.; MAVENCLAD®—Merck KGaA, REBIF®—Ares
Trading S.A.; OCREVUS®—Genentech, Inc. (“Genentech”); REXULTI®—H. Lundbeck A/S plc; PERSERIS®, SUBOXONE®, SUBUTEX® and
SUBLOCADE®—Indivior plc (or its affiliates); RYKINDO®—Luye Pharma Group; VRAYLAR®— Forest Laboratories, LLC; ZEPOSIA®—Bristol-
Myers Squibb Company; ZUBSOLV®—Orexo US, Inc.; and ZYPREXA® and ZYPREXA RELPREVV®—Eli Lilly and Company (“Lilly”). Other
trademarks, trade names and service marks appearing in this Annual Report are the property of their respective owners. Solely for convenience, the
trademarks and trade names in this Annual Report 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.
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Item 1.
Business
PART I
The following discussion contains forward‑looking statements. Actual results may differ significantly from those expressed or implied in the
forward‑looking statements. See “Cautionary Note Concerning Forward‑Looking Statements” on page 3 of this Annual Report. Factors that might cause
future 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.
Overview
Alkermes 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 in
major therapeutic areas. Alkermes has a portfolio of proprietary commercial products focused on alcohol dependence, opioid dependence, schizophrenia
and bipolar I disorder, and a pipeline of product candidates in development for neurological disorders and cancer. 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 a
manufacturing facility in Wilmington, Ohio.
Marketed Products
The key marketed products discussed below have generated, or are expected to generate, significant revenues for us. See “Patents and Proprietary
Rights” in “Item 1—Business” in this Annual Report for information with respect to the IP protection for these marketed products.
The following provides summary information regarding our proprietary products that we commercialize:
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Proprietary Products
Product
Indication(s)
Initiation or re-initiation of
ARISTADA for the treatment of
Schizophrenia
Territory
U.S.
Schizophrenia
U.S.
U.S.
U.S.
Schizophrenia;
Bipolar I disorder
Alcohol dependence;
Opioid dependence
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The following provides summary information regarding our key licensed product, and certain key third-party products using our proprietary
technologies under license, that are commercialized by our licensees:
Key Third-Party Products Using Our Proprietary Technologies
Product
Indication(s)
Licensee
Licensed Territory
RISPERDAL CONSTA
Schizophrenia; Bipolar I
disorder
Janssen
Worldwide
Pharmaceuticals, Inc.
(“Janssen, Inc.”) and Janssen
Pharmaceutica International,
a division of Cilag
International AG (“Janssen
International”)
INVEGA SUSTENNA* / XEPLION
INVEGA SUSTENNA:
Schizophrenia;
Schizoaffective disorder
Janssen Pharmaceutica N.V.
(together with Janssen, Inc.,
Janssen International and
their affiliates “Janssen”)
Worldwide
XEPLION:
Schizophrenia
INVEGA TRINZA* / TREVICTA
Schizophrenia
Janssen
Worldwide
INVEGA HAFYERA* / BYANNLI
Schizophrenia
Janssen
Worldwide
* Janssen partially terminated its license agreement related to these products, effective February 2022. See the section entitled “Products Using Our
Proprietary Technologies” below and Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual
Report for more information with respect to this partial termination and the arbitration proceedings related to this partial termination and other matters in
respect of these products.
Our Key Licensed Product
Product
Indication(s)
Licensee
Licensed Territory
VUMERITY
Multiple sclerosis
Biogen
Worldwide
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Proprietary Products
We have developed and now commercialize products designed to help address the unmet needs of people living with opioid dependence, alcohol
dependence, schizophrenia and bipolar I disorder. See the “Patents and Proprietary Rights” section in “Item 1—Business” in this Annual Report for
information with respect to the IP protection for our proprietary products.
ARISTADA
ARISTADA (aripiprazole lauroxil) is an extended-release intramuscular injectable suspension approved in the U.S. for the treatment of
schizophrenia. ARISTADA utilizes our proprietary LinkeRx technology. ARISTADA is a prodrug; once in the body, ARISTADA is likely converted by
enzyme-mediated hydrolysis to N-hydroxymethyl aripiprazole, which is then hydrolyzed to aripiprazole. ARISTADA is available in four dose strengths
with once-monthly dosing options (441 mg, 662 mg and 882 mg), a six-week dosing option (882 mg) and a two-month dosing option (1064 mg).
ARISTADA is packaged in a ready-to-use, pre-filled syringe product format. We exclusively manufacture and commercialize ARISTADA in the U.S.
ARISTADA INITIO
ARISTADA INITIO (aripiprazole lauroxil) leverages our proprietary LinkeRx and NanoCrystal technologies and provides an extended-release
formulation of aripiprazole lauroxil in a smaller particle size compared to ARISTADA, thereby enabling faster dissolution and more rapid achievement of
relevant levels of aripiprazole in the body. ARISTADA INITIO, combined with a single 30 mg dose of oral aripiprazole, is indicated for the initiation of
ARISTADA when used for the treatment of schizophrenia in adults. The first ARISTADA dose may be administered on the same day as the ARISTADA
INITIO regimen or up to 10 days thereafter. We exclusively manufacture and commercialize ARISTADA INITIO in the U.S.
In December 2022, U.S. Patent No. 11,518,745 relating to ARISTADA and ARISTADA INITIO was granted. The patent has claims to the synthesis
of aripiprazole lauroxil and expires in 2030.
What is schizophrenia?
Schizophrenia is a serious brain disorder marked by positive symptoms (hallucinations and delusions, disorganized speech and thoughts, and
agitated or repeated movements) and negative symptoms (depression, blunted emotions and social withdrawal). Schizophrenia affects approximately 1.1%
of the U.S. population.
LYBALVI
LYBALVI (olanzapine and samidorphan) is a once-daily, oral atypical antipsychotic drug approved in the U.S. for the treatment of adults with
schizophrenia and for the treatment of adults with bipolar I disorder, as a maintenance monotherapy or for the acute treatment of manic or mixed episodes,
as monotherapy or an adjunct to lithium or valproate. LYBALVI is composed of olanzapine, an established antipsychotic agent, co-formulated with
samidorphan, a new chemical entity, in a single bilayer tablet. LYBALVI was launched commercially in October 2021 and is available in fixed dosage
strengths composed of 10 mg of samidorphan and 5 mg, 10 mg, 15 mg or 20 mg of olanzapine. We exclusively manufacture and commercialize LYBALVI
in the U.S.
What is bipolar I disorder?
Bipolar I disorder is a brain disorder that is marked by extreme changes in a person’s mood, energy and ability to function. Individuals with this
brain disorder may experience debilitating changes in mood from extreme highs (mania) to extreme lows (depression). Bipolar I disorder is characterized
by the occurrence of at least one manic episode, with or without the occurrence of a major depressive episode, and affects approximately 1% of the
American adult population in any given year.
VIVITROL
VIVITROL (naltrexone for extended-release injectable suspension) is a once-monthly, non-narcotic, injectable medication approved in the U.S. for
the treatment of alcohol dependence in patients able to abstain from alcohol in an outpatient setting prior to initiation of treatment with VIVITROL and for
the prevention of relapse to opioid dependence, following opioid detoxification. VIVITROL uses our polymer-based microsphere injectable extended-
release technology to deliver and maintain therapeutic medication levels in the body through one intramuscular injection every four weeks. We exclusively
manufacture and commercialize VIVITROL in the U.S.
For a discussion of legal proceedings related to VIVITROL, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated
Financial Statements” in this Annual Report, and for information about risks relating to such legal proceedings, see “Item 1A—Risk Factors” in this
Annual Report and specifically the sections entitled “Patent and other IP protection for our products is key to our business and our competitive position but
is uncertain,” “Uncertainty over IP in the biopharmaceutical industry has been the source of litigation, which is inherently costly and unpredictable, could
significantly delay or prevent approval or negatively impact commercialization of our products, and could adversely affect our business” and “Litigation or
arbitration filed against
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Alkermes, including securities litigation, or actions (such as citizens petitions) filed against regulatory agencies in respect of our products, may result in
financial losses, harm our reputation, divert management resources, negatively impact the approval of our products, or otherwise 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
not used for a medical purpose. According to the 2020 U.S. National Survey on Drug Use and Health, an estimated 2.6 million people aged 18 or older in
the U.S. had an opioid use disorder in the prior year. Alcohol dependence is a serious and chronic brain disease characterized by cravings for alcohol, loss
of control over drinking, withdrawal symptoms and an increased tolerance for alcohol. According to the 2020 U.S. National Survey on Drug Use and
Health, an estimated 27.8 million people aged 18 or older in the U.S. had an alcohol use disorder in the prior year. Adherence to medication is particularly
challenging with these patient populations.
In 2013, with the publication of the Diagnostic Statistical Manual (“DSM”) 5, the DSM IV diagnoses of substance use disorders as either
dependence or abuse (i.e., opioid dependence or alcohol dependence), which reflects the approved indications of VIVITROL, were subsumed under a new
diagnostic category of “substance use disorders” (i.e., opioid use disorder or alcohol use disorder) with three categories of disorder severity—mild,
moderate or severe. In determining the applicability of treatments for DSM-IV conditions to persons diagnosed according to DSM-5, one study found
agreement between the DSM-IV diagnoses of alcohol dependence and opioid dependence and moderate to severe alcohol use disorder and opioid use
disorder, respectively, under DSM-5.
Licensed Products and Products Using Our Proprietary Technologies
We have licensed products to third parties for commercialization and have licensed our proprietary technologies to third parties to enable them to
develop, commercialize and/or manufacture products. See the “Proprietary Technology Platforms” and “Patents and Proprietary Rights” sections in “Item 1
—Business” in this Annual Report for information with respect to our proprietary technologies and the IP protection for these products. We receive
royalties and/or manufacturing and other revenues from the commercialization of these products under our collaborative arrangements with these third
parties. Such arrangements include the following:
Products Using Our Proprietary Technologies
INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI
In November 2021, we received notice of partial termination of an exclusive license agreement with Janssen. Under this license agreement, we
provided Janssen with rights to, and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound technology,
known as NanoCrystal technology, which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, and INVEGA
HAFYERA/BYANNLI. When the partial termination became effective in February 2022, Janssen ceased paying royalties related to sales of INVEGA
SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. In April 2022, we commenced binding arbitration proceedings related to, among
other things, Janssen’s partial termination of this license agreement and Janssen’s royalty and other obligations under the agreement. On December 21,
2022, we received an interim award (the “Interim Award”) in these proceedings from the arbitral tribunal (the “Tribunal”), in which the Tribunal agreed
with our position that, while Janssen may terminate the agreement, it may not continue to sell Products (as defined in the agreement) developed during the
term of the agreement without paying royalties pursuant to the terms of the agreement. This award is not yet final. We will engage with Janssen and the
Tribunal in additional proceedings prior to the Tribunal’s issuance of a final award. For additional information about these proceedings, see Note 17,
Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report and for information about risks relating
to this notice of partial termination and our collaborative arrangements more broadly, see “Item 1A—Risk Factors” in this Annual Report and specifically
that section entitled “We rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue
and, if our licensees are not effective, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected”.
INVEGA SUSTENNA/XEPLION (paliperidone palmitate), INVEGA TRINZA/TREVICTA (paliperidone palmitate) and INVEGA
HAFYERA/BYANNLI (paliperidone palmitate) (collectively, the “long-acting INVEGA products”) are long-acting atypical antipsychotics owned and
commercialized worldwide by Janssen. We believe that these products incorporate our technologies.
INVEGA SUSTENNA is approved in the U.S. for the treatment of schizophrenia and for the treatment of schizoaffective disorder as either a
monotherapy or adjunctive therapy. Paliperidone palmitate extended-release injectable suspension is approved in the European Union (“EU”) and other
countries outside of the U.S. for the treatment of schizophrenia and is marketed and sold under the trade name XEPLION. INVEGA
SUSTENNA/XEPLION is manufactured by Janssen.
INVEGA TRINZA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA
SUSTENNA for at least four months. TREVICTA is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically
stable on XEPLION. INVEGA TRINZA/TREVICTA is manufactured by Janssen.
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INVEGA HAFYERA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA
SUSTENNA for at least four months or INVEGA TRINZA for at least three months. BYANNLI is approved in the EU for the maintenance treatment of
schizophrenia in adult patients who are clinically stable on XEPLION or TREVICTA. INVEGA HAFYERA/BYANNLI is manufactured by Janssen.
For a discussion of legal proceedings related to certain of the patents covering INVEGA SUSTENNA and INVEGA TRINZA, see Note 17,
Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report and for information about risks relating
to such legal proceedings, see “Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “We or our licensees may face claims
against IP rights covering our products and competition from generic drug manufacturers.”
What is schizoaffective disorder?
Schizoaffective disorder is a condition in which a person experiences a combination of schizophrenia symptoms, such as delusions, hallucinations or
other symptoms characteristic of schizophrenia, and mood disorder symptoms, such as mania or depression. Schizoaffective disorder is a serious mental
illness that affects about one in 300 people.
RISPERDAL CONSTA
RISPERDAL CONSTA (risperidone long-acting injection) is a long-acting atypical antipsychotic owned and commercialized worldwide by Janssen
that incorporates our proprietary technologies. RISPERDAL CONSTA is approved in the U.S. for the treatment of schizophrenia and as both monotherapy
and adjunctive therapy to lithium or valproate in the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA is approved in numerous
countries outside of the U.S. for the treatment of schizophrenia and the maintenance treatment of bipolar I disorder. RISPERDAL CONSTA uses our
polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levels in the body through just one
intramuscular injection every two weeks. RISPERDAL CONSTA microspheres are exclusively manufactured by us.
Licensed Product
VUMERITY
VUMERITY (diroximel fumarate) is a novel, oral fumarate with a distinct chemical structure that is approved in the U.S., the EU and several other
countries for the treatment of relapsing forms of multiple sclerosis in adults, including clinically isolated syndrome, relapsing-remitting disease and active
secondary progressive disease.
Under our license and collaboration agreement with Biogen, Biogen holds the exclusive, worldwide license to develop and commercialize
VUMERITY. For more information about the license and collaboration agreement with Biogen, see “Collaborative Arrangements—Biogen” in “Item 1—
Business” in this Annual Report.
What is multiple sclerosis?
Multiple sclerosis, or MS, is an unpredictable, often disabling disease of the central nervous system (“CNS”), which interrupts the flow of
information within the brain, and between the brain and body. MS symptoms can vary over time and from person to person. Symptoms may include
extreme fatigue, impaired vision, problems with balance and walking, numbness or pain and other sensory changes, bladder and bowel symptoms, tremors,
problems with memory and concentration and mood changes, among others. Approximately 2.5 million people worldwide have MS, and most are
diagnosed between the ages of 15 and 50.
Key Development Program
Our R&D is focused on the development of innovative medicines in the fields of neuroscience and oncology that are designed to address unmet
patient needs. As part of our ongoing R&D efforts, we have devoted, and will continue to devote, significant resources to conducting preclinical work and
clinical studies to advance the development of new pharmaceutical products. The discussion below highlights our current key development program. Drug
development involves a high degree of risk and investment, and the status, timing and scope of our development programs are subject to change. Important
factors that could adversely affect our drug development efforts are discussed in “Item 1A—Risk Factors” in this Annual Report. See the “Patents and
Proprietary Rights” section in “Item 1—Business” in this Annual Report for information with respect to the IP protection for our key development
program.
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nemvaleukin alfa
Nemvaleukin alfa (“nemvaleukin”) is an investigational, novel, engineered fusion protein comprised of modified interleukin-2 (“IL-2”) and the high
affinity IL-2 alpha receptor chain, designed to preferentially expand tumor-killing immune cells while avoiding the activation of immunosuppressive cells
by selectively binding to the intermediate-affinity IL-2 receptor complex. The selectivity of nemvaleukin is designed to leverage the proven anti-tumor
effects of existing IL-2 therapy while mitigating certain limitations.
ARTISTRY is our clinical development program evaluating nemvaleukin as a potential immunotherapy for cancer. The ARTISTRY program is
comprised of multiple clinical trials evaluating intravenous (“IV”) and subcutaneous (“SC”) dosing of nemvaleukin, both as a monotherapy and in
combination with the anti-PD-1 therapy KEYTRUDA (pembrolizumab) in patients with advanced solid tumors. ARTISTRY-6 is an ongoing phase 2 study
evaluating the anti-tumor activity, safety and tolerability of IV nemvaleukin monotherapy in patients with mucosal melanoma and SC nemvaleukin
monotherapy in patients with advanced cutaneous melanoma. ARTISTRY-7 is an ongoing phase 3 study evaluating the efficacy, safety and tolerability of
IV nemvaleukin as monotherapy and in combination with pembrolizumab compared to investigator’s choice chemotherapy in patients with platinum-
resistant ovarian cancer.
In March 2021 and August 2021, we announced that the FDA granted Orphan Drug Designation and Fast Track designation, respectively, to
nemvaleukin for the treatment of mucosal melanoma. In October 2021, we announced that the FDA granted Fast Track designation to nemvaleukin in
combination with pembrolizumab for the treatment of platinum-resistant ovarian cancer. In January 2023, we announced that the Medicines and Healthcare
products Regulatory Agency (MHRA), the regulatory body of the United Kingdom (UK), granted nemvaleukin an Innovation Passport for the treatment of
mucosal melanoma under the Innovative Licensing and Access Pathway (ILAP).
Collaborative Arrangements
We have entered into several collaborative arrangements to develop and commercialize products and, in connection with such arrangements, to
access technological, financial, marketing, manufacturing and other resources.
Janssen
INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI
In November 2021, we received notice of partial termination of an exclusive license agreement with Janssen. Under this license agreement, we
provided Janssen with rights to, and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound technology,
known as NanoCrystal technology, which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, and INVEGA
HAFYERA/BYANNLI. When the partial termination became effective in February 2022, Janssen ceased paying royalties related to sales of INVEGA
SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. and we stopped recognizing royalty revenue related to net sales of these products.
In April 2022, we commenced binding arbitration proceedings related to, among other things, Janssen’s partial termination of this license agreement and
Janssen’s royalty and other obligations under the agreement. On December 21, 2022, we received the Interim Award in these proceedings from the
Tribunal, in which the Tribunal agreed with our position that, while Janssen may terminate the agreement, it may not continue to sell Products (as defined
in the agreement) developed during the term of the agreement without paying royalties pursuant to the terms of the agreement. This award is not yet final.
We will engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal’s issuance of a final award. For additional information about
these proceedings, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report and for
information about risks relating to this notice of partial termination and our collaborative arrangements more broadly, see “Item 1A—Risk Factors” in this
Annual Report and specifically those sections entitled “We rely heavily on our licensees in the commercialization and continued development of products
from which we receive revenue and, if our licensees are not effective, or if disputes arise in respect of our contractual arrangements, our revenues could be
materially adversely affected.”
Under this license agreement, we granted Janssen a worldwide exclusive license under our NanoCrystal technology to develop, commercialize and
manufacture injectable pharmaceutical products containing paliperidone palmitate, which include the long-acting INVEGA products, and we received
milestone payments from Janssen upon the achievement of certain development goals; there are no further milestones to be earned under this agreement.
The agreement also provides for tiered royalty payments between 3.5% and 9% of net sales of products subject to the agreement in each country where the
license is in effect, with the exact royalty percentage determined based on aggregate worldwide 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-country basis. The patent royalty, which equals 1.5% of net sales, is payable
in each country until the expiration of the last of the royalty-bearing patents with valid claims applicable to the product in such country. The know how
royalty is a tiered royalty of 3.5% on calendar year net sales up to $250 million, 5.5% on calendar year net sales of between $250 million and $500 million
and 7.5% on calendar year net sales exceeding $500 million. The know how royalty rate resets to 3.5% at the beginning of each calendar year and is
payable until 15 years from the first commercial sale of a product in each individual country, subject to expiry of the agreement. These royalty payments
may be reduced in any country based on patent litigation or on competing products achieving certain minimum sales thresholds. The license agreement,
unless earlier terminated, terminates upon 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 subject to certain surviving obligations.
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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 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 or insolvency.
RISPERDAL CONSTA
Under a product development agreement, we collaborated with Janssen on the development of RISPERDAL CONSTA. Under the development
agreement, Janssen provided funding to us for the development of RISPERDAL CONSTA, and Janssen is responsible for securing all necessary regulatory
approvals 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
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 country based on
lack of patent coverage and significant competition from generic versions of the product. Janssen can terminate the license agreements upon 30 days’ prior
written notice to us. Either party may terminate the license agreements by written notice following a breach which continues for 90 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 basis upon 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 the product in such country,
provided that in 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 pertain regardless. After expiration, Janssen retains a non‑exclusive, royalty‑free license to manufacture, use and sell RISPERDAL CONSTA.
We exclusively manufacture RISPERDAL CONSTA for commercial sale. Under our manufacturing and supply agreement with Janssen, we receive
manufacturing revenue based on a percentage of Janssen’s net unit sales price for RISPERDAL CONSTA for the applicable calendar year. This percentage
is determined based on Janssen’s unit demand for such calendar year and varies based on the volume of units shipped, with a minimum manufacturing fee
of 7.5%. Either party may terminate the manufacturing and supply agreement 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 or upon written notice in the event of the other party’s insolvency or bankruptcy.
Janssen may terminate the agreement upon six months’ written notice to us. In the event that Janssen terminates the manufacturing and supply agreement
without terminating the license agreements, the royalty rate payable to us on Janssen’s net sales of RISPERDAL CONSTA would increase from 2.5% to
5.0%.
Revenues from our collaborative arrangements with Janssen accounted for approximately 15%, 30% and 33% of our consolidated revenues for the
years ended December 31, 2022, 2021 and 2020, respectively.
Biogen
Under a license and collaboration agreement with Biogen, we granted Biogen a worldwide, exclusive, sublicensable license to develop, manufacture
and commercialize VUMERITY and other products covered by patents licensed to Biogen under that agreement.
Under this license and collaboration agreement, we received an upfront cash payment and milestone payments related to the achievement of certain
milestones, including FDA approval of the NDA for VUMERITY and amendment of the license and collaboration agreement. We are also eligible to
receive additional payments upon achievement of certain milestones, including milestones relating to the first two products other than VUMERITY
covered by patents licensed to Biogen under the license and collaboration agreement.
In addition, we receive a 15% royalty on worldwide net sales of VUMERITY, subject to increases for VUMERITY manufactured and/or packaged
by Biogen or its designees, and subject to, under certain circumstances, minimum annual payments for the first five years following FDA approval of
VUMERITY. We are also entitled to receive royalties on net sales of products other than VUMERITY covered by patents licensed to Biogen under the
license and collaboration agreement, at tiered royalty rates calculated as percentages 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-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 the applicable product in the applicable country.
Royalties for all products and the minimum annual payments for VUMERITY are subject to customary reductions, as set forth in the license and
collaboration agreement.
Except in limited circumstances, we were responsible for the development of VUMERITY until it was approved by the FDA. Following FDA
approval of VUMERITY and except for the manufacturing responsibilities discussed below, Biogen is now responsible for all development and
commercialization activities for VUMERITY and all other products covered by the patents that we licensed to Biogen.
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Under the license and collaboration agreement, Biogen appointed us as the toll manufacturer of clinical and commercial supplies of VUMERITY,
subject to Biogen’s right to manufacture or have manufactured commercial supplies as a back-up manufacturer and subject to good faith agreement by the
parties on the terms of such manufacturing arrangements. In October 2019, we entered into a commercial supply agreement with Biogen for the
commercial supply of VUMERITY, an amendment to such commercial supply agreement and an amendment to the license and collaboration agreement
with Biogen, pursuant to which Biogen has elected to conduct a technology transfer and, subject to agreement in respect of a manufacturing transition
period, assume responsibility for the manufacture (itself or through a designee) of clinical supplies of VUMERITY and up to 100% of commercial supplies
of VUMERITY in exchange for an increase in the royalty rate to be paid by Biogen to us on net sales of that portion of product that is manufactured by
Biogen or its designee.
Unless earlier terminated, the license and collaboration agreement will remain in effect until the expiry of all royalty obligations. Biogen has the
right to terminate the license and collaboration agreement at will, on a product-by-product basis or in its entirety upon 180 days’ prior notice to us. Either
party has the right to terminate the license and collaboration agreement following any governmental prohibition of the transactions effected by the
agreement, or in connection with an insolvency event involving the other party. Upon termination of the license and collaboration agreement by either
party, then, at our request, the VUMERITY program will revert to us.
Revenues from Biogen related to this license and collaboration agreement accounted for approximately 10%, 7% and 2% of our consolidated
revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Proprietary Technology Platforms
We have used our proprietary technology platforms, which include technologies owned and exclusively licensed to us, to establish drug
development, clinical development and regulatory expertise and in the development of our products.
Injectable Extended‑Release Microsphere Technology
Our injectable extended‑release microsphere technology allows us to encapsulate small‑molecule pharmaceuticals, peptides and proteins in
microspheres 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
biodegradation of the polymer. These processes can be modulated through a number of formulation and fabrication variables, including drug substance and
microsphere particle sizing and choice of polymers and excipients.
LinkeRx Technology
Our long‑acting LinkeRx technology platform is designed to enable the creation of extended‑release injectable versions of antipsychotic therapies
and may also be useful in other disease areas in which extended duration of action may provide therapeutic benefits. The technology uses proprietary
linker‑tail chemistry to create new molecular entities derived from known agents.
NanoCrystal Technology
Our NanoCrystal technology is applicable to poorly water‑soluble compounds and involves formulating and stabilizing drugs into particles that are
nanometers in size. A drug in NanoCrystal form can be incorporated into a range of common dosage forms, 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 Technology
Our oral controlled release (“OCR”) technologies are used to formulate, develop and manufacture oral dosage forms of pharmaceutical products
with varied drug release profiles.
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Manufacturing and Product Supply
We own and occupy an R&D and manufacturing facility in Athlone, Ireland and a manufacturing facility in Wilmington, Ohio. We either purchase
active pharmaceutical ingredient (“API”) from third parties or receive it from our third‑party licensees to formulate products using our technologies. The
manufacture of our products for clinical trials and commercial use is subject to Current Good Manufacturing Practices (“cGMP”) regulations and other
regulations. Our manufacturing and development capabilities include formulation through process development, scale‑up and full‑scale commercial
manufacturing and specialized capabilities for the development and manufacturing of controlled substances.
Although some materials and related services for our products are currently only available from a single source or a limited number of qualified
sources, we attempt to acquire an adequate inventory of such materials, establish alternative sources for such materials and related services and/or negotiate
long‑term supply arrangements. However, we cannot be certain that we will continue to be able to obtain long‑term supplies of our manufacturing materials
or long-term provision of related services.
Our supply chain includes an external network of third‑party service providers involved in the manufacture of our products who are subject to
inspection by the FDA or comparable agencies in other jurisdictions. Any delay, interruption or other issues that arise in the acquisition of API, raw
materials, or components, or in the manufacture, fill‑finish, packaging, or storage of our marketed or development products, including as a result of a
failure of our facilities or the facilities or operations of third parties to pass any regulatory agency inspection, could significantly impair our ability to sell
our products or advance our development efforts, as the case may be. For information about risks relating to the manufacture of our marketed products and
product candidates, see “Item 1A—Risk Factors” in this Annual Report and specifically those sections entitled “We rely on third parties to provide services
in connection with the manufacture and distribution of the products we manufacture” and “We are subject to risks related to the manufacture of our
products.”
Marketed Products
We manufacture ARISTADA, ARISTADA INITIO, LYBALVI, VIVITROL and microspheres for RISPERDAL CONSTA at our Wilmington, Ohio
facility. We outsource our packaging operations for ARISTADA, ARISTADA INITIO, LYBALVI and VIVITROL to third‑party contractors. Janssen is
responsible for packaging operations for RISPERDAL CONSTA. Our Wilmington, Ohio facility has been inspected by U.S., European (including the UK
Medicines and Healthcare products Regulatory Agency), Chinese, Japanese, Brazilian, Turkish, Russian and Saudi Arabian regulatory authorities for
compliance with required cGMP standards for continued commercial manufacturing.
We manufacture several products in our Athlone, Ireland facility that are marketed by third parties, including FAMPYRA and VUMERITY. This
facility has been inspected by U.S., Irish, Brazilian, Turkish, Gulf Health States, including Saudi Arabia, Korean, Belarusian, Russian and Chinese
regulatory authorities for compliance with required cGMP standards for continued commercial manufacturing.
For more information about our manufacturing facilities, see “Item 2—Properties” in this Annual Report.
Clinical Products
We have established, and are operating, facilities with the capability to manufacture clinical supplies of injectable extended‑release products and
solid dosage form products at our Wilmington, Ohio facility and solid dosage form products at our Athlone, Ireland facility. We have also contracted with
third‑party manufacturers to formulate certain products for clinical use. We require that our contract manufacturers adhere to cGMP in the manufacture of
products for clinical use.
Research & Development
We 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‑up and drug optimization/delivery. Please see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
this Annual Report for additional information relating to our R&D expenditures.
Permits and Regulatory Approvals
We hold various licenses in respect of our manufacturing activities conducted in Wilmington, Ohio and Athlone, Ireland. The primary licenses held
in this regard are FDA Registrations of Drug Establishment and Drug Enforcement Administration of the U.S. Department of Justice (“DEA”). We also
hold a Manufacturers Authorization (No. M1067), an Investigational Medicinal Products Manufacturers Authorization (No. IMP074) and Certificates of
Good Manufacturing Practice Compliance of a Manufacturer (Ref. 2014/7828/IMP074 and 2014/7828/M1067) from the Health Products Regulatory
Authority in Ireland (“HPRA”) in respect of our
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Athlone, Ireland facility, and a number of Controlled Substance Licenses granted by HPRA. Due to certain U.S. state law requirements, we also hold state
licenses to cover distribution activities conducted in certain states and not in respect of any manufacturing activities conducted in those states.
We do not generally act as the marketing authorization holder for products incorporating our drug delivery technologies that have been developed on
behalf of a licensee of such technologies. In such cases, our licensee usually holds the relevant marketing authorization from the FDA or other relevant
regulatory authority, and we would support this authorization by furnishing a copy of the product’s Drug Master File, or chemistry, manufacturing and
controls data, to the relevant regulator. We generally update this information annually with the relevant regulator. In other cases where we have developed
proprietary products, such as VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI, we hold the marketing authorization and related regulatory
documentation ourselves.
Marketing, Sales and Distribution
We are responsible for the marketing of VIVITROL, ARISTADA, ARISTADA INITIO, and LYBALVI in the U.S. We focus our sales and
marketing efforts on physicians in private practice and in public treatment systems. We believe that we use customary pharmaceutical company practices to
market our products, including through advertisements, professional symposia, selling initiatives and other methods, and to educate individual physicians,
nurses, social workers, counselors and other stakeholders involved in the treatment of opioid dependence, alcohol dependence, schizophrenia and bipolar I
disorder. We provide, and contract with third‑party vendors to provide, customer services and other related programs for our products, such as
product‑specific websites, insurance research services and order, delivery and fulfillment services.
Our sales force for VIVITROL in the U.S. consists of approximately 110 individuals. VIVITROL is primarily sold to pharmaceutical wholesalers,
pharmacies, specialty distributors and treatment providers. Product sales of VIVITROL during the year ended December 31, 2022 to Cardinal Health,
McKesson Corporation and AmerisourceBergen Corporation (“AmerisourceBergen”) represented approximately 25%, 22% and 16%, respectively, of total
VIVITROL gross sales.
Our sales force for ARISTADA, ARISTADA INITIO and LYBALVI in the U.S. consists of approximately 315 individuals. ARISTADA,
ARISTADA INITIO and LYBALVI are primarily sold to pharmaceutical wholesalers. Product sales of ARISTADA and ARISTADA INITIO during the
year ended December 31, 2022 to Cardinal Health, McKesson Corporation and AmerisourceBergen represented approximately 47%, 23% and 23%,
respectively, of total ARISTADA and ARISTADA INITIO gross sales. Product sales of LYBALVI during the year ended December 31, 2022 to Cardinal
Health, McKesson Corporation and AmerisourceBergen represented approximately 38%, 30% and 27%, respectively, of total LYBALVI gross sales.
ICS, a division of AmerisourceBergen, provides warehousing, shipping and administrative services for VIVITROL, ARISTADA, ARISTADA
INITIO and LYBALVI.
Under our license agreements with Janssen, Biogen and other licensees and sublicensees, the licensees and sublicensees are typically responsible for
the commercialization of any products developed under their respective agreements if and when regulatory approval is obtained.
Competition
We face intense competition in the development, manufacture, marketing and commercialization of our products from many and varied sources,
such as research institutions and biopharmaceutical companies, including other companies with similar technologies. Some of these competitors are also
our licensees, who control the commercialization of products from which we receive manufacturing and royalty revenues. These competitors are working
to develop and market other products, systems, and other methods of preventing or reducing disease, and new small‑molecule and other classes of drugs.
The biopharmaceutical industry is characterized by intensive research, development and commercialization efforts and rapid and significant
technological change. In many cases, there are already products on the market that may be in direct competition with our commercial products or products
in development. In addition, there are many companies developing products for use in similar indications or with similar technologies to ours with whom
we and our licensees compete, many of whom are larger and have significantly greater financial and other resources than we do. Other smaller or earlier
stage companies may also prove to be significant competitors, particularly through focused development programs and collaborative arrangements with
large, established companies. Some of the products being developed by our competitors are being designed to work differently than our products and may
turn out to be safer or more effective than our products, which may render our products or technology platforms obsolete or noncompetitive. With respect
to our products, we believe that our ability to successfully compete will depend on, among other things, the existence of competing or alternative products
in the marketplace, including generic competition, and the relative price of those products; the efficacy, safety and reliability of our products compared to
competing or alternative products; product acceptance by, and preferences of, physicians, other healthcare providers and patients; our ability to comply
with applicable laws, regulations and regulatory requirements with respect to the commercialization of our products, including any changes or increases to
regulatory
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restrictions; protection of our proprietary rights relating to our products; our ability to obtain reimbursement for our products; our ability to complete
clinical development and obtain regulatory approvals for our products, and the timing and scope of any such regulatory approvals; our ability to
successfully manufacture and provide a reliable supply 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
systems for pharmaceutical products, including but not limited to, technology from MedinCell S.A., which underpins Teva Pharmaceuticals Industries
Ltd.’s development of a risperidone extended-release injectable suspension for subcutaneous use, technology from Pharmathen S.A., which underpins
aripiprazole formulations in development, and technology underpinning Teva Pharmaceuticals Industries Ltd.’s once every two weeks injectable
microsphere formulation, each for the treatment of schizophrenia, and Teva Pharmaceuticals USA, Inc.’s Abbreviated New Drug Application (“ANDA”)
seeking approval to commercialize a generic version of VIVITROL (naltrexone for extended-release injectable suspension).
In the treatment of schizophrenia, ARISTADA, the long-acting INVEGA products and RISPERDAL CONSTA compete with each other and a
number of other injectable 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) developed by Otsuka Pharm. Co.; PERSERIS (risperidone for extended release injectable suspension), a once-monthly formulation of
risperidone marketed by Indivior plc; generic versions of branded injectable products; and, once it launches in the U.S., RYKINDO (risperidone), a once-
every-two-weeks injectable formulation of risperidone developed by Luye Pharma Group.
In the treatment of schizophrenia, LYBALVI competes with other oral antipsychotic products, including CAPLYTA (lumateperone) developed and
marketed by Intra-Cellular Therapies, Inc.; LATUDA, which is marketed and sold by Sunovion Pharmaceuticals Inc.; REXULTI, which is co-marketed by
Otsuka Pharm Co. and H. Lundbeck A/S plc; VRAYLAR, which is marketed and sold by Abbvie Inc.; other oral compounds currently on the market; and
generic versions of branded oral products.
In the treatment of bipolar disorder, LYBALVI and RISPERDAL CONSTA compete with antipsychotics such as oral aripiprazole; REXULTI;
LATUDA; VRAYLAR; ABILIFY MAINTENA; CAPLYTA; RYKINDO; risperidone; quetiapine; olanzapine; ziprasidone and clozapine.
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 companies are 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-monthly
buprenorphine extended-release injection), each of which is marketed and sold by Indivior plc; BUNAVAIL buccal film (buprenorphine and naloxone)
marketed by BioDelivery Sciences; and ZUBSOLV (buprenorphine and naloxone) marketed by Orexo US, Inc. VIVITROL also competes with methadone,
oral naltrexone and generic versions of SUBUTEX and SUBOXONE sublingual tablets. Other pharmaceutical companies are developing products that
have shown promise in treating opioid dependence that, if approved by the FDA, would compete with VIVITROL.
In the treatment of MS, VUMERITY competes with AVONEX, TYSABRI, TECFIDERA, and PLEGRIDY from Biogen; OCREVUS from
Genentech; BETASERON from Bayer HealthCare Pharmaceuticals; COPAXONE from Teva Pharmaceutical Industries Ltd.; REBIF and MAVENCLAD
from EMD Serono, Inc.; GILENYA, EXTAVIA and MAYZENT from Novartis AG; AUBAGIO and LEMTRADA from Sanofi-Aventis; ZEPOSIA from
Bristol-Myers Squibb Company; PONVORY from Janssen; and, once it launches in the U.S., BRIUMVITM (ublituximab-xiiy) from TG Therapeutics, Inc.
With respect to our NanoCrystal technology, we are aware that other technology approaches similarly address poorly water‑soluble drugs. These
approaches include nanoparticles, cyclodextrins, lipid‑based self‑emulsifying drug delivery systems, dendrimers and micelles, among others, any of which
could limit the potential success and growth prospects of products incorporating our NanoCrystal technology. In addition, there are many competing
technologies to our OCR technology, some of which are owned by large pharmaceutical companies with drug delivery divisions and other, smaller
drug‑delivery‑specific companies.
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Patents and Proprietary Rights
Our success depends, in part, on our ability to obtain and maintain patent protection for our products, including those marketed and sold by our
licensees, to maintain trade secret protection and to operate without infringing upon the proprietary rights of others. We have a proprietary portfolio of
patent rights and exclusive licenses to patents and patent applications, which includes numerous patents in the U.S. and in other countries directed to
compositions of matter, methods of treatment and formulations, as well as processes of preparation. In the future, we plan to file additional patent
applications in the U.S. and in other countries directed to new or improved products and processes, and we intend to continue 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 we receive royalties.
ARISTADA and ARISTADA INITIO
We have several U.S. patents and patent applications, and a number of corresponding non-U.S. counterparts, that cover ARISTADA and/or
ARISTADA INITIO. Our principal U.S. patents for ARISTADA and/or ARISTADA INITIO and their expiration dates are as follows:
U.S. Patent No.
8,431,576
8,796,276
10,112,903
10,023,537
10,351,529
11,518,745
11,273,158
9,034,867
10,226,458
9,193,685
9,861,699
10,342,877
10,639,376
11,097,006
9,452,131
9,526,726
10,064,859
10,238,651
10,478,434
10,813,928
10,973,816
11,406,632
10,016,415
10,688,091
10,849,894
11,115,552
Product(s) Covered
ARISTADA;
ARISTADA INITIO
ARISTADA;
ARISTADA INITIO
ARISTADA;
ARISTADA INITIO
ARISTADA
ARISTADA;
ARISTADA INITIO
ARISTADA;
ARISTADA INITIO
ARISTADA;
ARISTADA INITIO
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA
ARISTADA INITIO
ARISTADA INITIO
ARISTADA INITIO
ARISTADA INITIO
Expiration Date
2030
2030
2030
2030
2030
2030
2039
2032
2032
2033
2033
2033
2033
2033
2035
2035
2035
2035
2035
2035
2035
2035
2035
2035
2035
2035
VIVITROL and RISPERDAL CONSTA
We have a number of patents and 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 RISPERDAL CONSTA expired in the U.S. in January 2023 and
expired in the EU in 2021.
We own one unexpired Orange-Book listed U.S. patent covering VIVITROL, which expires in the U.S. in 2029 and expired in the EU in 2021.
Under the terms of a settlement and license agreement entered into in July 2019 with Amneal Pharmaceuticals LLC (“Amneal”), we granted Amneal a non-
exclusive license under certain patents covering VIVITROL, including the remaining patent covering VIVITROL in the U.S., to market and sell a generic
formulation of VIVITROL in the U.S. beginning sometime in 2028 or earlier under certain circumstances. For a discussion of legal proceedings related to
the U.S. patent covering VIVITROL, see Note 17, Commitments and Contingent Liabilities, in the “Notes to Consolidated Financial Statements” in this
Annual Report.
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INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI
Our NanoCrystal technology patent portfolio, licensed to Janssen, 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. The latest to expire of the patents subject to our license agreement expires in 2030 in
the U.S., the EU and certain other countries. In addition, Janssen has other patents not subject to our license agreement, including one that covers INVEGA
SUSTENNA in the U.S. and expires in 2031, one that covers INVEGA TRINZA in the U.S. and expires in 2036 and two that cover INVEGA HAFYERA
in the U.S. and expire in 2041. For a discussion of legal proceedings related to patents covering INVEGA SUSTENNA, INVEGA TRINZA and INVEGA
HAFYERA, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report.
VUMERITY
We have U.S. patents and patent applications, and a number of corresponding non-U.S. counterparts, that cover VUMERITY. U.S. Patent
Nos. 8,669,281, 9,090,558 and 10,080,733, each expiring in 2033, cover compositions of, or methods of treatment for, VUMERITY.
LYBALVI
We own or have a license to U.S. and worldwide patents and patent applications that cover a class of compounds that includes the opioid modulators
in LYBALVI. In addition, we own U.S. and worldwide patents and patent applications that claim formulations and methods of treatment that cover
LYBALVI. The principal owned or licensed U.S. patents for LYBALVI and their expiration dates are as follows:
U.S. Patent No.
7,262,298
8,680,112
9,119,848
10,005,790
8,778,960
9,126,977
9,517,235
9,943,514
10,300,054
10,716,785
11,185,541
11,241,425
11,351,166
Product Covered
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
LYBALVI
Expiration Date
2025
2030
2031
2031
2032
2031
2031
2031
2031
2031
2031
2031
2031
We also have a portfolio of patents and patent applications covering our Key Development Program.
nemvaleukin alfa
We have U.S. patents and patent applications, and a number of corresponding non-U.S. counterparts, that cover nemvaleukin. U.S. Patent
Nos. 9,359,415 and 10,407,481, each expiring in 2033, cover compositions of nemvaleukin. U.S. Patent No. 11,246,906, expiring in 2040, covers
subcutaneous dosing regimens of nemvaleukin. U.S. Patent No. 11,248,050, expiring in 2040, covers certain combination therapies utilizing nemvaleukin.
Protection of Proprietary Rights and Competitive Position
We have exclusive rights through licensing agreements with third parties to issued U.S. patents, pending patent applications and corresponding
patents 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 by
such patents and patent applications. Under certain licensing agreements, we are responsible for patent expenses, and we pay annual license fees and/or
minimum annual royalties. In addition, under these licensing agreements, we are typically obligated to pay royalties on future sales of products, if any,
covered by the licensed patents.
There may be patents issued to third parties that relate to our products or technologies. The manufacture, use, offer for sale, sale or import of some
of our products might 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 is likely 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 products if 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 infringement of patents may be resolved differently in different countries.
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If patents exist or are issued that cover our products or technologies, we or our licensees may not be able to manufacture, use, offer for sale, sell or
import some of our 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 refuse to 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 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 involves
complex legal and factual questions, enforceability of patents cannot be predicted with certainty. The ultimate degree of patent protection that will be
afforded to products and processes, including ours, 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 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
file in 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
protection or competitive advantages against competitors with similar technology. Furthermore, others may independently develop similar technologies or
duplicate any technology that we have developed outside the scope of our patents. The laws of certain countries do not protect our intellectual property
rights to the same extent as the laws of the U.S.
We also rely on trade secrets, know‑how and inventions, which are not protected by patents, to maintain our competitive position. We try to protect
this information by entering into confidentiality agreements with parties that have access to it, such as our corporate partners, collaborators, licensees,
employees and consultants. However, any of these parties may breach such agreements and may disclose our confidential information or our competitors
might learn of the information in some other way. If any trade secret, know‑how or other invention not protected by a patent were to be disclosed to, or
independently developed by, a competitor, such event could materially adversely affect our business, financial condition, cash flows and results of
operations. For more information, see “Item 1A—Risk Factors” in this Annual Report.
Our trademarks, including VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI, are important to us and are generally covered by
trademark applications or registrations with the U.S. Patent and Trademark Office and the patent or trademark offices of other countries. Our licensed
products and products using our proprietary technologies also use trademarks that are owned by our licensees, such as the trademarks for INVEGA
SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, INVEGA HAFYERA/BYANNLI and RISPERDAL CONSTA, which are registered trademarks
of Johnson & Johnson or its affiliated companies, VUMERITY, which is a registered trademark of Biogen (and used by us under license) and FAMPYRA,
which is a registered trademark of Acorda. Trademark protection 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 the trademark is registered. Trademark registrations generally are for fixed but renewable terms.
Regulatory
Regulation of Pharmaceutical Products
United States
Our current and contemplated activities, and the products and processes that result from such activities, are subject to substantial government
regulation. Before new pharmaceutical products may be sold in the U.S., preclinical studies and clinical trials of the products must be conducted and the
results submitted to the FDA for approval. Clinical trial programs must determine an appropriate dose and regimen, establish substantial evidence of
effectiveness and define the conditions for safe use. This is a high‑risk process that requires stepwise clinical studies in which the product must successfully
meet pre‑specified endpoints.
Preclinical Testing: Before beginning testing of any compounds with potential therapeutic value in human subjects in the U.S., stringent
government requirements for preclinical data must be satisfied. Preclinical testing includes both in vitro, or in an artificial environment outside of a living
organism, 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: Preclinical testing results obtained from in vivo studies in several animal species, as well as from in vitro
studies, are submitted to the FDA, as part of an Investigational New Drug Application (“IND”), and are reviewed by the FDA prior to the commencement
of human clinical trials. The preclinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical
studies in human volunteers.
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Clinical Trials: Clinical trials involve the administration of a drug to healthy human volunteers or to patients under the supervision of a qualified
investigator pursuant to an FDA‑reviewed protocol. Human clinical trials are typically conducted in three sequential phases, although the phases may
overlap with one another and, depending upon the nature of the clinical program, a specific phase or phases may be skipped altogether. Clinical trials must
be 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 be
evaluated. Each protocol must be submitted to the FDA as part of the applicable IND.
•
•
•
Phase 1 clinical trials—test for safety, dose tolerability, absorption, bio‑distribution, metabolism, excretion and clinical pharmacology and, if
possible, 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 drug
for specific targeted indications, to determine dose‑response and the optimal dose range and to gather additional information relating to safety
and potential adverse effects.
Phase 3 clinical trials—consist of expanded, large‑scale studies of patients with the target disease or disorder to obtain definitive statistical
evidence of the efficacy and safety of the proposed product and dosing regimen.
In the U.S., the results of the preclinical and clinical testing of a product are then submitted to the FDA in the form of an NDA or a Biologics
License Application (“BLA”). The NDA or BLA also include information pertaining to the preparation of the product, analytical methods, details of the
manufacture of finished products and proposed product packaging and labeling. The submission of an application is not a guarantee that the FDA will find
the application complete 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 the applicant 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 (for
some applications, the review process is longer than 10 months). For drugs that, if approved, would represent a significant improvement in the safety or
effectiveness 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 six months. The FDA has additional review pathways to expedite development and review of new
drugs that are intended 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 in a
timely manner or at all.
As part of its review, the FDA may refer the application to an advisory committee for independent advice on questions related to the development of
the drug, recommendation as to whether the application should be approved or other guidance that the FDA may seek. The FDA is not bound by the
recommendation of an advisory committee; however, historically, it has often followed such recommendations. The FDA may determine that a Risk
Evaluation and Mitigation Strategy (“REMS”) is necessary to ensure that the benefits of a new product outweigh its risks. If required, a REMS may include
various elements, such as publication of a medication guide, a patient package insert, a communication plan to educate health care providers of the drug’s
risks, limitations on who may prescribe or dispense the drug, or other measures that the FDA deems necessary to support the safe use of the drug.
In reviewing an NDA or BLA, the FDA may grant marketing approval, or issue a complete response letter to communicate to the applicant the
reasons the application cannot be approved in its then-current form and provide input on the additional information that the FDA requires and/or changes
that must be made before an application can be approved. Even if such additional information is submitted to the FDA or such changes made, the FDA may
ultimately decide that the NDA or BLA still does not satisfy the FDA’s criteria for approval. The receipt of regulatory approval often takes a number of
years, involves the expenditure of substantial resources and depends on a number of factors, including the severity of the disease in question, the
availability of alternative treatments, efficacy and potential safety signals observed in preclinical tests or clinical trials, and the risks and benefits
demonstrated in clinical trials. It is impossible to predict with any certainty whether and when the FDA will grant marketing approval for a given product.
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, expedited reporting of certain adverse events,
pre‑approval of promotional materials or restrictions on direct‑to‑consumer advertising, any of which could negatively impact the commercial success of a
drug. The FDA may also require a sponsor to conduct additional post‑marketing studies as a condition of approval to provide data on safety and
effectiveness. In addition, prior to commercialization, products that may be deemed controlled substances are subject to review and scheduling by the DEA.
The FDA tracks information on side effects and adverse events reported during clinical studies and after marketing approval. Non‑compliance with
safety reporting requirements may result in civil or criminal penalties. Side effects or adverse events that are identified during clinical trials can delay,
impede or prevent marketing approval. Based on new safety information that emerges after approval, the FDA can mandate product labeling changes,
impose a REMS or the addition of elements to an existing REMS, require new post‑marketing studies (including additional clinical trials), or suspend or
withdraw approval of the product.
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If we seek to make certain types of changes to an approved product, such as adding a new indication, making certain manufacturing changes, or
changing manufacturers or suppliers of certain ingredients or components, the FDA will need to review and approve such changes in advance. In the case
of adding a new indication, we would be required to demonstrate with additional clinical data that the product is safe and effective for the new intended
use. Such regulatory reviews can result in denial or modification of the planned changes, or requirements to conduct additional tests or evaluations that can
substantially delay or increase 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 claims
relating to safety and efficacy that are consistent with FDA regulation and guidance. However, physicians may prescribe legally available drugs for uses
that are 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 the
off‑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 FDA
regulations do impose stringent restrictions on manufacturers’ communications regarding off‑label uses. Failure to comply with applicable FDA
requirements may subject a company to adverse publicity, enforcement action by the FDA and the U.S. Department of Justice, corrective advertising and
the full range of civil 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 that
appear on one of the five schedules promulgated and administered by the DEA under the Controlled Substances Act (the “CSA”). The CSA governs,
among other things, the inventory, distribution, recordkeeping, handling, security and disposal of controlled substances. For example, pharmaceutical
products that act on the CNS are often evaluated for abuse potential; if a product is then classified as a controlled substance, it must undergo scheduling by
the DEA, which is a separate process that may delay the commercial launch of such product even after FDA approval of the NDA for such product.
Further, companies with a scheduled pharmaceutical product are subject to periodic and ongoing inspections by the DEA and similar state drug
enforcement authorities to assess ongoing 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 States
Certain of our products are commercialized by our licensees in numerous jurisdictions outside the U.S. Most of these jurisdictions have product
approval 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 European
Medicines Agency (“EMA”). The marketing application is similar to the NDA in the U.S. and is evaluated by the Committee for Medicinal Products for
Human Use (“CHMP”), the expert scientific committee of the EMA. If the CHMP determines that the marketing application fulfills the requirements for
quality, safety, and efficacy, it will submit a favorable opinion to the European Commission (“EC”). The CHMP opinion is not binding, but is typically
adopted by the EC. A marketing application 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 approval
determination by, each country; (ii) a decentralized procedure, whereby applicants submit identical applications to several countries and receive
simultaneous approval; and (iii) a mutual recognition procedure, where applicants submit an application to one country for review and other countries may
accept or reject the initial decision. Regardless of the approval process employed, various parties share responsibilities for the monitoring, detection and
evaluation of adverse events post‑approval, including national authorities, the EMA, the EC, other relevant regulatory authorities and the marketing
authorization holder.
Good Manufacturing Practices
The FDA, the EMA, the competent authorities of the EU member states and other regulatory agencies regulate and inspect equipment, facilities and
processes used in the manufacturing of pharmaceutical and biologic products prior to approving a product. Since 2020 and 2021, the COVID-19 pandemic
has in some instances impacted the FDA’s and other regulatory agencies’ ability to conduct on-site inspections and has resulted in such agencies either
delaying planned inspections or collecting the requisite information through review of written records in lieu of an on-site inspection. Once approval from a
regulatory agency is obtained, if 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 and other regulatory agencies both
in the manufacture of clinical product and following product approval. The FDA, the EMA and other regulatory agencies also conduct regular, periodic
visits to re-inspect equipment, facilities and processes following the initial approval of a product and may also request that certain information or records be
provided in writing for review in lieu of an on-site visit. If, as a result of these inspections or records reviews, it is determined that our equipment, facilities
or processes do not comply with applicable regulations and conditions of product approval, regulatory agencies may seek civil, criminal or administrative
sanctions and/or remedies against us, including the suspension of our manufacturing operations.
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Good Clinical Practices
The FDA, the EMA and other regulatory agencies promulgate regulations and standards, commonly referred to as Good Clinical Practices (“GCP”),
for designing, conducting, monitoring, auditing and reporting the results of clinical trials to ensure that the data and results are accurate and that the trial
participants are adequately protected. The FDA, the EMA and other regulatory agencies enforce GCP through periodic inspections of trial sponsors,
principal investigators, trial sites, contract research organizations (“CROs”) and institutional review boards. If our studies fail to comply with applicable
GCP, patient safety and well-being could be impacted, the clinical data generated in our clinical trials may be deemed unreliable, and relevant regulatory
agencies may require us to perform additional clinical trials before approving our marketing applications. Noncompliance can also result in civil or criminal
sanctions. We rely 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 likewise result in rejection of our clinical trial data or other sanctions.
Hatch‑Waxman Act
Under the U.S. Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch‑Waxman Act”), Congress created an abbreviated FDA
review 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 approved
products may benefit from periods of non‑patent‑related marketing exclusivity in addition to any patent protection the drug product may have. The
Hatch‑Waxman Act provides five years of new chemical entity (“NCE”) marketing exclusivity to the first applicant to gain approval of an NDA for a
product that contains an active ingredient, known as the active drug moiety, not found in any other approved product. The FDA is prohibited from
accepting any 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 years in
the case of an ANDA or 505(b)(2) application containing a patent challenge, and in both cases may not approve such generic drug or 505(b)(2) application
until expiration of NCE marketing exclusivity. A 505(b)(2) application is an NDA in which the applicant relies, in part, on data and the FDA’s findings of
safety and efficacy from studies not conducted by or for the applicant 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 than
bioavailability studies, essential to the FDA’s approval of new uses of approved products, such as new indications, dosage forms, strengths, or conditions of
use. However, this exclusivity only protects against the approval of ANDAs and 505(b)(2) applications for the protected use and will not prohibit the FDA
from 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 the
FDA’s Approved Drugs Product List, commonly referred to as the Orange Book. ANDA and 505(b)(2) applicants must then certify regarding each of the
patents 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’s product is called a “Paragraph IV certification.” If the ANDA or 505(b)(2) applicant provides such a notification of patent invalidity or
noninfringement, then the 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 ANDA or 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 to the NDA holder and patent owner stating that the application has been submitted and providing the factual and legal
basis for the applicant’s opinion that the 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 is done 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 that the 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 not infringed, or if the court shortens the period because the parties have failed to cooperate in
expediting the litigation.
Sales and Marketing
We 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, the
referral 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
of guidance in the form of regulations, and few court decisions addressing industry practices, it is possible that our practices might be challenged under
anti‑kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to
third‑party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not
provided as claimed or claims for medically unnecessary items or services. Activities relating to the sale and marketing of our
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products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including
fines and civil monetary penalties, as well as the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid). In addition,
federal and state authorities are paying increased attention to enforcement of these laws within the pharmaceutical industry and private individuals have
been active in alleging violations of the laws and bringing suits on behalf of the U.S. government under the False Claims Act. If we were subject to
allegations concerning, or were convicted of violating, these laws, our business could be harmed. See “Item 1A—Risk Factors” in this Annual Report and
specifically those sections entitled “If there are changes in, or we fail to comply with, the extensive legal and regulatory requirements affecting the
healthcare industry, we could face costs, penalties and business losses,” “Revenues 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 cost-control measures imposed, and any reductions in payment rate or reimbursement or increases in our or in patients’ financial
obligation to payers could result in decreased sales of our products and/or decreased revenues” and “The clinical study or commercial use of our products
may cause unintended side effects or adverse reactions, or incidents of misuse may occur, which could adversely affect our products, business and share
price.”
Laws and regulations have been enacted by the U.S. federal government and various states to regulate the sales and marketing practices of
pharmaceutical manufacturers. The laws and regulations generally limit financial interactions between manufacturers and healthcare providers and require
disclosure to the government and public of such interactions. The laws include federal “sunshine”, or open payments, provisions enacted in 2010 as part of
the comprehensive federal healthcare reform legislation and supplemented as part of the Substance Use-Disorder Prevention that Promotes Opioid
Recovery and Treatment for Patients and Communities Act. Such provisions apply to pharmaceutical manufacturers with products reimbursed under certain
government programs and require those manufacturers to disclose annually to the federal government (for re‑disclosure to the public) certain payments
made to, or at the request of, or on behalf of, physicians or to teaching hospitals and, commencing for information to be submitted as of January 1, 2022,
certain payments made to physicians assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-
midwives. Certain state laws also require disclosure of pharmaceutical pricing information and marketing expenditures. Given the ambiguity found in many
of these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent U.S. federal and state laws and
regulations.
Pricing and Reimbursement
United States
In 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
significant part, 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
examining the 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 rebate
program, 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
set by 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
commercial or 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 for increases 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 is adjusted 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 to the Centers for Medicare & Medicaid Services (“CMS”). The terms of our participation in the rebate program impose a requirement
on us to report revisions to 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 the impact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. In addition, if
we were found to have knowingly submitted false information to the government, the statute provides for civil monetary penalties per item of false
information in addition to other penalties available to the government.
Medicare is a federal program that is administered by the federal government that covers individuals age 65 and over as well as those with certain
disabilities. Medicare Part B pays physicians who administer our products under a payment methodology using average sales price (“ASP”) information.
Manufacturers, including us, are required to provide ASP information to the CMS on a quarterly basis. This information is used to compute Medicare
payment rates, with rates for Medicare Part B drugs outside the hospital outpatient setting and in the hospital outpatient setting consisting of 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.
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Medicare Part D provides coverage to enrolled Medicare patients for self‑administered drugs (i.e. drugs that do not need to be injected or otherwise
administered by a physician) and certain physician-administered drugs reimbursed under a pharmacy benefit. Medicare Part D also covers the prescription
drug benefit for dual eligible beneficiaries. Medicare Part D is administered by private prescription drug plans approved by the U.S. government and each
drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time‑to‑time.
The prescription drug plans negotiate pricing with manufacturers and may condition formulary placement on the availability of manufacturer discounts.
Except for dual eligible Medicare Part D beneficiaries who qualify for low-income subsidies, manufacturers, including us, are required to provide a seventy
percent (70%) discount on our brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries reach the coverage gap in
their drug benefits.
Federal law also requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public Health Services’
(including the Indian Health Services, “PHS”) pharmaceutical pricing program (the “340B program”), in order for federal funds to be available for the
manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program, which is administered by the Health Resources and Services
Administration (“HRSA”) requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price”
for the manufacturer’s covered drugs used in an outpatient setting. These 340B covered entities include certain qualifying community health clinics, a
variety of entities that receive health services grants from the Public Health Service, and multiple categories of hospitals, including children’s hospitals,
critical access hospitals, free standing cancer hospitals and hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is
calculated using a statutory formula, which is based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated
under the Medicaid Drug Rebate Program. A regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties
on manufacturers that knowingly and intentionally overcharge covered entities became effective on January 1, 2019. The scope and implementation of the
340B program continue to be the subject of legislative and regulatory interest and ongoing litigation, the outcomes of which are difficult to predict.
We also make our products available for purchase by authorized users of the Federal Supply Schedule (“FSS”) of the General Services
Administration pursuant 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 offer deeply discounted FSS contract pricing to four federal agencies: the Department of Veterans Affairs; the Department of Defense; the
Coast Guard; and the PHS, in order for federal funding to be made available for reimbursement of any of our products by such federal agencies and certain
federal grantees. Coverage under Medicaid, the Medicare Part B program and the PHS pharmaceutical pricing program is also conditioned upon FSS
participation. FSS pricing is negotiated periodically with the Department of Veterans Affairs. FSS pricing is intended not to exceed the price 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 (“Tricare”) program), Coast Guard and PHS
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‑FAMP
increases more than inflation (measured by the Consumer Price Index—Urban). In addition, if we are found to have knowingly submitted false information
to the 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.
This regulation implements those changes made by the Patient Protection and Affordable Care Act (the “PPACA”) to the Medicaid drug rebate statute in
2010 and addresses a number of other issues with respect to the Medicaid program, including, but not limited to, the eligibility and calculation
methodologies for AMP and best price, and the expansion of Medicaid rebate liability to include Medicaid managed care organizations. The final Medicaid
covered outpatient drug regulation established two calculation methodologies for AMP: one for drugs generally dispensed through retail community
pharmacies (“RCP”) and one for so-called “5i drugs” (inhaled, infused, instilled, implanted or injectable drugs) “not generally dispensed” through RCPs.
The regulation further made clear that 5i drugs would qualify as “not generally dispensed” and, therefore, able to use the alternative AMP calculation, if not
more than thirty percent (30%) of their sales were to RCPs or to wholesalers for RCPs. The primary difference between the two AMP calculations is the
requirement to exclude from AMP, for those qualifying 5i drugs not generally dispensed through RCPs, certain payments, rebates and discounts related to
sales to non-RCPs; such exclusion often leads 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 the percentage of sales of such product to RCPs or to wholesalers for RCPs.
U.S. federal and state governments regularly consider reforming healthcare coverage and lessening healthcare costs. Such reforms may include price
controls, value-based pricing and changes to the coverage and reimbursement of our products, which may have a significant impact on our business. In
August 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law. The Inflation Reduction Act includes several
provisions that will impact our business to varying degrees, including those that impose new manufacturer financial liability on all drugs in Medicare Part
D beginning in 2025, allow the U.S. government to negotiate prices for some drugs covered under Medicare Part D beginning in 2026 and Medicare Part B
beginning in 2028, and require companies to pay rebates to Medicare beginning in 2023 for drug prices that increase faster than inflation. 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 by implementing coverage and reimbursement limitations through means including, but not limited to, formularies,
increased out of pocket obligations and various prior authorization requirements. Even if favorable coverage and reimbursement status is attained for one or
more products for which we have received regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the
future.
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Outside the United States
Within the EU, products are paid for by a variety of payers, with governments being the primary source of payment. Governments may determine or
influence reimbursement of products. Governments may also set prices or otherwise regulate pricing. Negotiating prices with governmental authorities can
delay 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).
Recent budgetary 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
implement additional cost‑containment measures.
Other Regulations
Foreign Corrupt Practices Act: We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), which prohibits U.S. corporations and their
representatives 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 an
official capacity. In many countries, the healthcare professionals with whom we regularly interact may meet the FCPA’s definition of a foreign government
official. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and
maintain 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 and
regulations in the countries where we operate and, in particular, where we have manufacturing facilities, namely the U.S. and Ireland. Environmental and
health and safety authorities in the relevant jurisdictions, including the Environmental Protection Agency and the Occupational Safety and Health
Administration in the U.S. and the Environmental Protection Agency and the Health and Safety Authority in Ireland, administer laws which regulate,
among other matters, the emission of pollutants into the air (including the workplace), the discharge of pollutants into bodies of water, the storage, use,
handling and disposal of hazardous substances, the exposure of persons to hazardous substances, and the general health, safety and welfare of employees
and members of the 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 may result from the presence, investigation and remediation of contamination at properties currently or formerly owned, leased or
operated by us and/or off‑site locations, including where we have arranged for the disposal of hazardous substances or waste. In addition, we may be
subject to third‑party claims, including for natural resource damages, personal injury and property damage, in connection with such contamination.
The General Data Protection Regulation (“GDPR”): The GDPR became effective on May 25, 2018 and replaced the previous EU Data Protection
Directive (95/46). The GDPR, which governs the processing of personal data (including personal health data), applies to the Company and any of its
subsidiaries that are established in the EU to the extent that they process personal data as well as any of its subsidiaries that are established outside the EU
to the extent that they process personal data relating to EU residents for certain purposes, including any such data relating to clinical trial participants in the
EU. The GDPR imposes significant obligations on controllers and processors of personal data, including high standards for obtaining consent from
individuals to process their personal data, robust notification requirements to individuals about the processing of their personal data, a strong individual
data rights regime, mandatory data breach notifications, limitations on the retention of personal data, stringent requirements 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 also imposes 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 in order to introduce further conditions,
including limitations, with regard to 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-incorporated
company publicly-listed in the U.S., including laws relating to the oversight activities of the SEC, the Irish Companies Act 2014, and the regulations of the
Nasdaq Stock Market (“Nasdaq”), on which our shares are traded. We are also subject to various laws, regulations and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal of
hazardous or potentially hazardous substances used in connection with our research work.
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Human Capital Resources
As a global biopharmaceutical company focused on developing innovative medicines in the fields of neuroscience and oncology, we have built, and
continue to devote significant resources to further develop and enhance, a comprehensive cross-functional infrastructure designed to support product
development from discovery through commercialization and lifecycle management. We seek to attract, hire, develop, recognize and retain qualified and
highly skilled employees with experience in areas such as R&D, including early discovery, translational medicine, formulation and clinical development;
intellectual property prosecution, enforcement and defense; medical affairs; manufacturing operations; U.S. federal and state government affairs; sales and
marketing; and market access. Competition for such personnel in our industry and the geographic regions in which we operate is intense, with numerous
companies also developing, launching or marketing products, including products against which our products directly compete. We are committed to
supporting our employees’ well-being in a transparent, diverse, inclusive, and collaborative culture and to providing them with access to training, support
and resources intended to help them succeed professionally, while appropriately balancing their professional and personal lives.
As of February 10, 2023, we had approximately 2,280 full time employees, of which approximately 1,860 were based in the U.S. and 420 were
based in Ireland. Our 2022 global voluntary attrition rate of 9.5% was below industry benchmarks. None of our employees are covered by a collective
bargaining agreement, and we consider our relations with our employees to be good.
We are an equal opportunity employer and we are fundamentally committed to creating and maintaining a work environment in which employees
are treated with respect and dignity. All human resources policies, practices and actions related to hiring, promotion, compensation, benefits and
termination are administered in accordance with the principles of equal employment opportunity and other legitimate criteria without regard to race, color,
religion, sex, sexual orientation, gender expression or identity, ethnicity, national origin, ancestry, age, mental or physical disability, genetic information,
any veteran status, any military status or application for military service, or membership in any other category protected under applicable laws.
Recognizing the value of our employees and their important contributions to the achievement of our business objectives, we offer market-
competitive comprehensive total rewards packages, including bonus opportunities at all levels tied to individual and company performance, and for
employees at certain levels, company equity opportunities. We are committed to designing and managing our pay programs and decisions to support
equitable pay for all employees. We have established our compensation programs based on market and benchmark data and strive to pay all employees
equitably, taking into consideration factors such as their role, skills, abilities and relevant experience. We routinely monitor our pay programs in order to
respond to market trends and maintain equity within our workforce. We offer healthcare and retirement savings plan benefits, paid time off, tuition
reimbursement and other benefits designed to support healthy lifestyle choices, financial well-being and work-life balance.
Across our sites, we seek to cultivate a work environment that reflects our values of collaboration at our core, respect for each voice and unwavering
commitment. Over the past several years, we have continued to focus on fostering an environment that respects and celebrates Diversity, Inclusion &
Belonging (“DIB”) in our workplaces and our communities and have actively evolved our DIB strategy to reflect the needs of our employees and our
business. We have a robust DIB governance structure, consisting of our DIB Steering Committee, Employee Resource Groups (“ERGs”), and a DIB
Executive Committee. Our global cross-functional DIB Steering Committee, comprised of representatives from all of our locations, including field-based
employees, is focused on creating connections, fostering conversations, helping ensure our efforts are aligned with the diverse range of perspectives within
our organization and developing and advancing practices, tools and resources that can be used to strengthen the sense of belonging among our employees.
Our five ERGs include: Limitless, a network to support people impacted by disability or illness; Mosaic, a multicultural network; Operation Salute, a
veterans’ network; Pride@Work, an LGBTQ+ network; and Women Inspired Network (WIN), a women’s network. These ERGs share a common purpose
of supporting and enhancing the inclusiveness of our company culture and providing opportunities for professional development, networking and building
deeper connections within Alkermes. Our DIB Executive Committee, which includes our Chief Executive Officer and other senior leaders, is tasked with
continuing to refine our DIB strategy and championing its implementation and impact across the business. These groups work together to set goals,
establish and execute strategic initiatives, measure our progress and promote a culture of understanding and inclusion throughout our organization. In
2022, through the collaboration of these groups, we introduced an annual performance goal focused on DIB for all senior leaders (Vice President level and
above) at Alkermes with an emphasis on talent management, including recruiting and development. Additionally, as part of our increased focus on social
and racial justice, diversity and inclusion, we have held company-wide town hall conversations, sponsored recognition events and have enhanced our
Company’s diversity education and awareness training.
We remain focused on achieving greater representation of diverse talent through targeted recruitment and development efforts. In 2022, we achieved
a notable increase in the percentage of our Vice Presidents/Senior Vice Presidents who are female (from 29.0% to 38.8%). We also established a Women’s
Mentoring Circle to provide internal resources for the continued development of our female talent pool. Additionally, we have continued to focus on
increasing the representation of people of color (“POC”) across our workforce and have partnered with outside organizations such as The Partnership and
Connexion to support continued leadership development of POC within our organization.
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We encourage active employee engagement to help ensure that employees feel part of our mission and that they have a voice in the Alkermes
community. Since 2017, we have conducted periodic employee engagement surveys to understand employee sentiment regarding, and satisfaction with,
their work and experience at Alkermes and have used the data collected to help inform and evolve our human capital management strategy and initiatives.
In 2022, we conducted approximately 30 focus groups with more than 225 employees and managers across the organization as part of our efforts to
enhance key company processes related to “employee listening” and performance management. Also in 2022, we implemented function- and site-specific
mentoring programs, conducted open forums with leaders, and hosted various company events to foster connections and visibility between leadership and
employees and build strong peer-to-peer connections.
We are committed to the professional growth and development of our employees. We conduct a comprehensive on-boarding experience that
connects newly hired employees to our business, values, culture, and people. We encourage and support our employees in their adoption of Individual
Development Plans designed to identify professional development and growth opportunities to help support their career aspirations. We frequently offer
company-hosted trainings that cover topics including performance management, problem-solving, leadership development, diversity, communication and
mentorship, and as appropriate, more specialized skills-based programs. We also provide all employees access to our LinkedIn Learning platform, which
provides on-demand learning opportunities.
Our culture is one of collaboration and trust. We ask our employees to help us promote and sustain workplace environments that are safe and
protective of the health and well-being of our people and in compliance with applicable laws, rules and regulations. We maintain extensive environmental,
health, safety and security policies, adhere to all health and safety standards set by regulators in the locations in which we operate and routinely assess
workplace risks, conduct employee trainings and monitor our sites to reduce the risk of workplace accidents.
In 2022, employee health, safety and wellness continued to be of particular focus and importance for the Company. Since the emergence of the
COVID-19 pandemic, we have adjusted and enhanced our remote work policies and opportunities, and our communication strategies for keeping
employees connected and informed. We also enhanced employee resources, including wellness and stress-reduction resources, guidance on how to
effectively engage and work remotely, and increased childcare benefits. For additional information about actions taken by the Company to support its
employees and other stakeholders in response to the COVID-19 pandemic, see the “COVID-19 Update” included in “Item 7—Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of this Annual Report.
Available Information and Website Disclosure
Our principal executive offices are located at Connaught House, 1 Burlington Road, Dublin 4, Ireland D04 C5Y6. Our telephone number is
+353‑1‑772‑8000 and our website address is www.alkermes.com. Information found on, or accessible through, our website is not incorporated into, and
does not form 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, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K and all amendments to those reports as soon as reasonably practicable after
such material is electronically 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 Business Conduct and Ethics governing our directors, officers and employees. We intend to disclose on our website any amendments to, or waivers
from, our Code of Business 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 and
accessible on the Investors section of our website, available at www.alkermes.com. Investors are encouraged to review the Investors section of our website
because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed
through our website is not incorporated into, and does not form a part of, this Annual Report.
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Item 1A. Risk Factors
You should consider carefully the risks described below in addition to the financial and other information contained in this Annual Report, including our
financial statements and related notes hereto and the matters addressed under the caption “Cautionary Note Concerning Forward-Looking Statements,”
and in our other public filings with the SEC. If any events described by the following risks actually occur, they could materially adversely affect our
business, financial condition, cash flows or results of operations. This could cause the market price of our ordinary shares to decline.
Risks Related to the Potential Separation of Our Oncology Business
The potential separation of our neuroscience and oncology businesses, including a potential separation of our oncology business into an independent,
publicly-traded company, is subject to various risks and uncertainties and may not be completed on the timeline currently contemplated or at all, and
will involve significant time, effort and expense, which could disrupt or adversely affect our business and our financial condition, results of operations
and cash flows.
In November 2022, we announced our intent, as approved by our board of directors, to explore a separation of our neuroscience business and
oncology business. We are exploring a separation of the oncology business into an independent, publicly-traded company (referred to in this Annual Report
as “Oncology Co.”) as part of an ongoing review of strategic alternatives.
Our business may face significant risks and uncertainties as a result of the exploration and/or execution of the potential separation, including,
without limitation:
•
•
•
•
•
•
•
the diversion of management’s attention from operating our neuroscience and oncology businesses and the overall disruption of, and impact on,
our businesses;
potential difficulty in maintaining employee morale and retaining and/or recruiting key management and other employees;
potential difficulty in separating our oncology business from our neuroscience business, including allocation of operations, services, products and
personnel;
difficulty and/or delays in obtaining regulatory approvals related to the potential separation of the businesses, including any approvals needed to
effect the separation and/or those related to ongoing clinical trials of our oncology products;
the need to obtain third-party consents related to the potential separation of the businesses, which may be difficult to obtain and/or cause delay in
our intended timelines for the separation or disrupt third-party relationships that are important to our business;
foreseen and unforeseen dis-synergy costs, costs of restructuring transactions (including potential taxes) and other significant costs and expenses,
including costs related to the capitalization of Oncology Co.; and
potential negative reactions from the financial markets, including reactions related to the proposed structure or other details of the potential
separation or any potential delay or failure in completing the potential separation.
No assurance can be given as to whether we will be successful in managing these or any other significant risks that we may encounter in the
potential separation of our businesses, and any of these risks could have a material adverse effect on our businesses, financial condition, results of
operations, cash flows and/or the market price of our ordinary shares. We have already incurred certain expenses, and expect to incur significant additional
expenses, in connection with the exploration and potential consummation of a separation, and such costs and expenses may be greater than we anticipate,
and may not yield the benefits that we or others may anticipate.
Adverse market conditions or tax consequences, litigation or other legal proceedings that may arise as a result of the potential separation, or delays
or difficulties effecting the potential separation, including possible delays in obtaining any necessary stock exchange, regulatory or other approval or the
failure to obtain any such approvals, possible delays in obtaining any required tax opinions or rulings or the failure to obtain any such tax opinions or
rulings, changes in relevant law and other challenges, could delay, prevent or otherwise adversely impact the anticipated benefits of the potential
separation.
No assurance can be given as to whether we will complete any separation on our anticipated timeline or at all. Any of the foregoing may result in
our not achieving the operational, financial, strategic and other benefits we anticipate realizing as a result of the potential separation, and in each case, our
business, results of operations and financial condition and/or the market price of our ordinary shares could be adversely affected.
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We may fail to realize some or all of the anticipated benefits of the potential separation of our neuroscience and oncology businesses and the market
price of our ordinary shares may fluctuate significantly in connection with the potential separation.
Even if a separation of our neuroscience and oncology businesses is completed, the anticipated operational, financial, strategic and other benefits of
a potential separation may not be achieved. These anticipated benefits are based on a number of assumptions and uncertainties, which may prove to be
incorrect or incomplete. Furthermore, if separated, the two independent businesses will be smaller and less diversified than the combined company, with a
narrower business focus, and may be more vulnerable to changing market conditions.
In addition, the market price of our ordinary shares may experience volatility around the time of announcements of plans for the potential separation,
consummation of the potential separation and thereafter. We also cannot predict the effect of a completed separation on the market price of our ordinary
shares, which, following a separation, may be less than, equal to or greater than the market price of our ordinary shares prior to the separation. Further, the
combined value of our ordinary shares and those of Oncology Co. may not be equal to or greater than what the value of our ordinary shares would have
been had the separation not occurred. The combined value of the ordinary shares of the two companies could be lower than anticipated for a variety of
reasons, including, but not limited to, a failure of Oncology Co. to operate and compete effectively as an independent company.
We continue to assess the tax consequences of potential structures for the separation of our oncology business from our neuroscience business,
including a potential separation of the oncology business into an independent, publicly-traded company. If such a separation does not qualify as a
transaction that is generally tax-free for U.S. federal and Irish tax purposes, we and/or our shareholders could be subject to significant tax liabilities.
In connection with the potential separation, we may seek a private letter ruling from the IRS (the “IRS Ruling”) and/or an opinion from our U.S. tax
advisor (the “U.S. Tax Opinion”) regarding U.S. federal and state income tax consequences of the separation, including that, among other things, the
separation would generally qualify as tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the U.S. Internal Revenue Code
of 1986, as amended (the “Code”). The IRS Ruling and/or the U.S. Tax Opinion would be based on and rely on, among other things, certain facts,
assumptions, representations, and undertakings from us and Oncology Co., including those relating to past and future conduct of the companies’ respective
business operations and other matters. If any of these facts, assumptions, representations, statements or undertakings are, or become, inaccurate or
incomplete, or if we or Oncology Co. breach any of our respective covenants in the separation documents, the IRS Ruling and/or the U.S. Tax Opinion may
be invalid and the conclusions reached therein could be jeopardized. Notwithstanding a U.S. Tax Opinion or IRS Ruling, the U.S. Internal Revenue
Service, or the IRS, could determine that a distribution or any related transaction is taxable for U.S. federal income tax purposes if it determines that any of
these facts, assumptions, representations or undertakings are not correct or have been violated, or that the distribution should be taxable for other reasons,
including if the IRS were to disagree with the conclusions in the U.S. Tax Opinion. The U.S. Tax Opinion will not be binding on the IRS or the courts.
Accordingly, the IRS or the courts may challenge the conclusions stated in the U.S. Tax Opinion and such challenge could prevail. If the potential
separation transaction is ultimately determined to be taxable, we and/or our shareholders that are subject to U.S. federal income tax could incur significant
tax liabilities.
Furthermore, in connection with the potential separation, we may seek an opinion from our Irish tax advisor (the “Irish Tax Opinion”) regarding the
Irish tax consequences of the separation. The Irish Tax Opinion would be based on and rely on, among other things, certain facts, assumptions,
representations, and undertakings from us, including those relating to past and future conduct of our business operations and other matters. If any of these
facts, assumptions, representations, statements or undertakings are, or become, inaccurate or incomplete the Irish Tax Opinion may be invalid and the
conclusions reached therein could be jeopardized. The Irish Tax Opinion will not be binding on the Irish Tax Authority or the Irish courts. Accordingly, the
Irish Tax Authority or the Irish courts may challenge the conclusions stated in the Irish Tax Opinion and such challenge could prevail. In such an event, we
and/or our shareholders could incur significant tax liabilities.
Risks Related to Our Business and Our Industry
Our business, financial condition and results of operations have been, and may continue to be, adversely affected by the ongoing COVID-19 pandemic
or other similar outbreaks of contagious diseases.
Outbreaks of contagious diseases and other adverse public health developments affecting us and/or the third parties on which we rely, could have a
material and adverse effect on our business, financial condition and results of operations. The COVID-19 pandemic has impacted, and may continue to
impact, many aspects of society, including the operation of healthcare systems, global travel, supply and labor markets and other business and economic
activity worldwide. Ireland, all U.S. states, and many local jurisdictions and countries around the world have, at times during the pandemic, issued and
implemented quarantines, vaccine and masking mandates, executive orders and other similar government orders, restrictions and recommendations for their
residents to help control the spread of COVID-19. Such orders, mandates, restrictions and/or recommendations have, at times during the pandemic, resulted
in widespread interruptions and closures of businesses, including healthcare systems that serve people living with addiction and serious mental illness,
work stoppages, slowdowns and/or delays, remote work policies and travel restrictions, among other effects.
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The COVID-19 pandemic has had, and may continue to have, an adverse impact on our financial condition and results of operations. For example,
commercial sales of the medicines from which we derive revenue— including injectable medications administered by healthcare professionals—have been,
and we expect may continue to be, adversely impacted as a result of COVID-19-related restrictions, labor shortages and other developments that have
transpired, and may continue to transpire, many of which have contributed to limited access to, or reduced willingness to access, healthcare providers and
locations where injectable medications may be administered. Further, this pandemic has had, and may continue to have, an adverse effect on global
economic conditions, which could have an adverse effect on the demand for, and ability of patients to access, our and our licensees’ medicines,
reimbursement for our products and for services related to the use of our products, or our ability to obtain financing, if needed, on favorable terms or at all.
The COVID-19 pandemic has caused, and may continue to cause, varying degrees of disruption to our employees, our communities and our
business operations. While we have continued to operate our manufacturing facilities and to supply our medicines without interruption throughout the
pandemic, we have, at times during the pandemic, experienced labor or supply chain delays or disruptions at our manufacturing facilities, and may continue
to experience such delays or disruptions while the pandemic persists, which could impact our ability to manufacture our products and the third-party
products from which we receive revenue in a timely matter or at all. In addition, while we have continued to conduct our R&D activities, including our
ongoing clinical trials, the COVID-19 pandemic has, at times, impacted the timelines of certain of our early-stage discovery efforts and clinical trials, and
may continue to impact such timelines while the pandemic persists. We work with our internal teams, our clinical investigators, R&D vendors and critical
supply chain vendors to continually assess, and endeavor to mitigate, potential adverse impacts of COVID-19 on our manufacturing operations and R&D
activities.
In addition, we rely upon third parties for many aspects of our business, including the provision of goods and services related to the manufacture of
our clinical products and our and our partners’ marketed products, the conduct of our clinical trials, and the sale of our proprietary marketed products and
the marketed products of our licensees from which we receive manufacturing and/or royalty revenue. The COVID-19 pandemic has, to varying degrees,
disrupted the business operations of the third parties on which we rely, including our suppliers, packagers, distributors, contract research organizations,
customers, clinical site investigators, community advocacy partners, and others, and may continue to do so for so long as the pandemic and its impacts
persist. For example, the third-party sites and investigators involved in our clinical trials have experienced, and may continue to experience, interruptions
which have impacted, and may continue to impact, the conduct of our clinical trials, including with respect to enrollment rates, availability of investigators
and clinical trial sites, and monitoring of data, and our ability to complete them in a timely manner or at all. If our clinical programs are significantly
delayed as a result of such impacts, there could be adverse effects on our expected timelines for regulatory review and potential approval of our product
candidates. Any prolonged material disruption to these or other third parties on which we rely could negatively impact our ability to conduct business in the
manner and on the timelines presently planned, which could have a material adverse impact on our business, results of operations and financial condition.
The COVID-19 pandemic has also impacted, and may continue to impact, the regulatory agencies with which we interact in the development,
manufacture, regulatory review and commercialization of our medicines, including the FDA, the HPRA and other regulatory agencies, which may, in turn,
negatively impact expected timelines for regulatory interactions related to, and/or review and approval of, our product candidates, which could have an
adverse effect on our business and the market price of our ordinary shares.
The degree to which the ongoing COVID-19 pandemic may continue to impact our employees, business, financial condition and results of
operations will depend on the ultimate severity and duration of the pandemic and the manner in which it continues to evolve, including the emergence,
prevalence and severity of new COVID-19 variants, and future developments in response thereto, including developments in the labor market and market
practices related to remote work and our ability to attract and retain employees, which are highly uncertain and cannot be predicted as of the date of this
Annual Report.
We receive substantial revenue from our key proprietary products and our success depends on our ability to successfully manufacture and
commercialize such products.
Sales of our proprietary products comprise an increasingly significant portion of our revenues. We developed and exclusively manufacture
VIVITROL for the treatment of adults with alcohol dependence and opioid dependence, ARISTADA for the treatment of adults with schizophrenia,
ARISTADA INITIO for initiation onto ARISTADA for the treatment of adults with schizophrenia, and LYBALVI for the treatment of adults with
schizophrenia and for the treatment of adults with bipolar I disorder, and we exclusively commercialize these products in the U.S. Our success depends in
large part on our ability to continue to successfully manufacture and commercialize such products in the complex markets into which they are sold. Any
significant negative developments relating to these products could have a material adverse effect on our revenues from these products and, in turn, on our
business, financial condition, cash flows and results of operations and the market price of our ordinary shares.
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We rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue and, if our licensees
are not effective, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected.
Our arrangements with licensees are critical to bringing to market and/or successfully commercializing products using our proprietary technologies
and from which we receive manufacturing and/or royalty revenue. We rely on these licensees in various respects, including commercializing such products,
conducting development activities with respect to new formulations or new indications for such products, and/or managing the regulatory approval process
for such products.
We earn significant royalty and/or manufacturing revenue from sales by our licensees of our licensed products and third-party products
incorporating our proprietary technologies. The revenues we receive from such products depend primarily upon the success of our licensees in
commercializing such products. For example, we receive substantial revenue from Janssen’s sales of the long-acting INVEGA products and RISPERDAL
CONSTA and from Biogen’s sales of VUMERITY and FAMPYRA. We have no involvement in the commercialization efforts for these and other products
sold by third parties from which we receive revenue and cannot control the extent or effectiveness of such commercialization efforts.
Disputes may also arise between us and a licensee involving the ownership of technology developed under a license, the use of our technology,
including know-how, in third-party products, the terms and amounts of royalty payments to be paid under a license, or other issues arising out of any
licenses or other collaborative agreements. Such disputes may delay related development programs, impact commercialization or manufacturing activities
for the related products, impact the timing or amount of revenue that we receive in respect of such products, or result in expensive arbitration, litigation or
other dispute resolution, which may not be resolved in our favor and may adversely impact our financial condition.
Further, certain of our license agreements may be terminated, with or without cause, or assigned in connection with a change in control or other
event, and we cannot guarantee that any of these relationships will continue or that our licensees will be able or willing to continue to perform their
obligations, including development, commercialization or payment obligations, under such agreements. Any significant negative developments relating to
our relationships with our licensees or our collaborative arrangements could have a material adverse effect on our business, financial condition, cash flows
and results of operations and on the market price of our ordinary shares.
For example, in November 2021 we received notice of partial termination of an exclusive license agreement with Janssen. Under this license
agreement, we provided Janssen with rights to, and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound
technology, known as NanoCrystal technology, which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, and
INVEGA HAFYERA/BYANNLI. When the partial termination became effective in February 2022, Janssen ceased paying royalties related to sales of
INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. The announcement of Janssen’s partial termination, expectations
regarding the loss of royalty revenues from U.S. sales of such products resulting from such termination, and actual losses of royalty revenues that have
resulted from such termination, caused the market price of our ordinary shares to decline significantly. In April 2022, we commenced binding arbitration
proceedings related to, among other things, Janssen’s partial termination of this license agreement and Janssen’s royalty and other obligations under the
agreement. On December 21, 2022, we received an Interim Award in these proceedings from the Tribunal, in which the Tribunal agreed with our position
that, while Janssen may terminate the agreement, it may not continue to sell Products (as defined in the agreement) developed during the term of the
agreement without paying royalties pursuant to the term of the agreement. This award is not yet final. We will engage with Janssen and the Tribunal in
additional proceedings prior to the Tribunal’s issuance of a final award and cannot be certain of the outcome of the final award or the impact that such final
award may have on our business, financial condition, cash flows and results of operations.
For these and other reasons that may be outside of our control, our revenues from products sold by our licensees, and related commercial milestone
payments, may fall below our expectations, the expectations of our licensees or those of our shareholders, which could have a material adverse effect on
our results of operations and the market price of our ordinary shares.
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,
such as research institutions and other biopharmaceutical companies, including companies with similar technologies or medicines, and manufacturers of
generic drugs. Some of these competitors are also our licensees, who control the commercialization of products from which we receive manufacturing
and/or royalty revenues. For example, our proprietary products ARISTADA and LYBALVI compete with the long-acting INVEGA products and
RISPERDAL CONSTA, products from which we receive manufacturing and/or royalty revenues.
The biopharmaceutical industry is characterized by intensive research, development and commercialization efforts and rapid and significant
technological change. In many cases, there are already products on the market that may be in direct competition with our commercial products or products
in development. In addition, there are many companies developing generic versions of our products, or products with similar technologies to ours or for use
in similar indications with whom we and our licensees compete, many of whom are larger and have significantly greater financial and other resources than
we do. Other smaller or earlier stage companies may
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also prove to be significant competitors, particularly through focused development programs and collaborative arrangements with large, established
companies. Some of the products being developed by our competitors are being designed to work differently than our products and may turn out to be safer
or more effective than our products, which may render our products or technology platforms obsolete or noncompetitive. For a detailed discussion of the
competition that we face with respect to our current marketed products, technology platforms and product indications, please see the section entitled
“Competition” in “Item 1—Business” in this Annual Report. If we are unable to compete successfully in this highly competitive biopharmaceutical
industry, our business, financial condition, cash flows and results of operations could be materially adversely affected.
Our revenues from sales of our products may decrease or grow at a slower than expected rate due to many factors.
We cannot be assured that our products will be, or will continue to be, accepted in the U.S. or markets outside the U.S. or that we will be able to
maintain or increase sales of our products. Factors that may cause revenues from our products to grow at a slower than expected rate, decrease or cease all
together, include, among others:
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the perception of physicians and other members of the healthcare community as to our products’ safety and efficacy relative to that of
competing products and the willingness or ability of physicians and other members of the healthcare community to prescribe, dispense and/or
administer, and patients to use, our products;
unfavorable publicity concerning us, our licensees, our products, similar classes of drugs or the industry generally;
the cost-effectiveness of our products and reimbursement policies of government and third-party payers that may impact use of our products;
the cost and availability of raw materials necessary for the manufacture of our products;
the successful manufacture of our products on a timely and cost-effective basis;
the size of the markets for our products, and patient and physician satisfaction with our products;
significant changes in the competitive landscape for our products, including any approval of generic versions of our products or other branded
products that may compete with our 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 engage third parties to package and/or distribute our products on acceptable terms;
the unfavorable outcome of investigations, arbitrations, litigation or other legal proceedings, including government requests for information
regarding VIVITROL, securities litigation, IP litigation, including so-called “Paragraph IV” litigation relating to VIVITROL and other
products from which we receive revenue, litigation or other proceedings before the U.S. Patent and Trademark Office’s (the “USPTO”) Patent
Trial and Appeal Board (the “PTAB”) or its equivalent in other jurisdictions outside of the U.S., including opposition proceedings in the EU
and any other litigation or arbitration related to any of our products;
regulatory developments and actions related to the manufacture, commercialization or continued use of our products, including FDA actions
such as the issuance of a REMS or warning letter, or conduct of an audit by the FDA or another regulatory authority in which a
manufacturing or quality deficiency is identified;
the extent and effectiveness of the sales, marketing and distribution support for our products, including our licensees’ decisions as to the
timing and volume of product orders and shipments, the timing of product launches, and product pricing and discounting;
disputes with our licensees relating to the use of our technology in, and marketing and sale of, products from which we received, or currently
receive, manufacturing and/or royalty revenue and the amounts to be paid with respect to such products, including the dispute relating to our
license agreement with Janssen described above;
exchange rate valuations and fluctuations;
U.S. and global political changes and/or instability, and any related changes in applicable laws and regulations, that may impact resources and
markets for our products;
the impacts that the ongoing COVID-19 pandemic may have on the development, manufacture and commercialization of our products; and
any other material adverse developments with respect to the commercialization of our products.
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Revenues generated by sales of our products depend, in part, 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 cost-control measures imposed,
and any reductions in payment rate or reimbursement or increases in our or in patients’ financial obligation to payers could result in decreased sales of
our products and/or decreased revenues.
In both U.S. and non-U.S. markets, sales of our products depend, in part, on adequate coverage, pricing and reimbursement from third-party payers
such as state and federal governments, including Medicare and Medicaid in the U.S. and similar programs in other countries, managed care providers and
private insurance plans. Deterioration in the timeliness, certainty and amount of reimbursement for our products, the existence of barriers to coverage of
our products (such as prior authorization, criteria for use or other requirements), increases in our financial obligation to payers, including government
payers, limitations by healthcare providers on how much, or under what circumstances, they will prescribe or administer our products or unwillingness by
patients to pay any required co-payments, or deductible amounts, could reduce the use of, and revenues generated from, our products and could have a
material adverse effect on our business, financial condition, cash flows and results of operations.
The availability of government and private reimbursement for our products and coverage restrictions that may be imposed for our products are
uncertain, as is the amount for which our products will be reimbursed. Pricing and reimbursement for our products may be adversely affected by a number
of factors, including: changes in, and implementation of, federal or state government regulations or private third-party payors’ reimbursement policies;
pressure by employers on private health insurance plans to reduce costs; and consolidation and increasing assertiveness of payors seeking price discounts or
rebates in connection with the placement of our products on their formularies and, in some cases, the imposition of restrictions on access or coverage of
particular drugs or pricing determined based on perceived value. We cannot predict the availability, amount, or consistency of reimbursement for, or the
prevalence and extent of other access barriers to, 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. In August
2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes several provisions that will impact our business to varying
degrees, including those that impose new manufacturer financial liability on all drugs in Medicare Part D beginning in 2025, allow the U.S. government to
negotiate prices for some drugs covered under Medicare Part D beginning in 2026 and Medicare Part B in 2028, and require companies to pay rebates to
Medicare beginning in 2023 for drug prices that increase faster than inflation.
In addition, economic pressure on state budgets may result in states increasingly seeking to achieve budget savings through mechanisms that limit
coverage or payment for drugs, including but not limited to price control initiatives, discounts and other pricing-related actions. State Medicaid programs
are increasingly requesting that manufacturers pay supplemental rebates and are requiring prior authorization by the state program for use of any drug.
Managed care organizations continue to seek price discounts and, in some cases, to impose restrictions on the coverage of particular drugs. U.S.
government efforts to reduce Medicaid expenses may lead to increased use of managed care organizations by Medicaid programs. This may result in
managed care organizations influencing prescription decisions for a larger segment of the population and a corresponding constraint on prices and
reimbursement for our products.
Furthermore, we may face uncertainties as a result of efforts to repeal, substantially modify or invalidate some or all of the provisions of the
PPACA, whether by legislative means or through litigation, and further potential reforms to government negotiation or regulation of drug pricing. The
PPACA significantly expanded coverage of mental health and substance use disorders and provided federal parity protections to such coverage benefits. If
successful, such efforts and proposed legislation or other future federal or state legislative or administrative changes relating to healthcare reform and drug
pricing could adversely affect our business and financial results. Additional discounts, rebates, coverage or plan changes, restrictions or exclusions as
described above could have a material adverse effect on sales of our affected products. Our failure to obtain or maintain adequate coverage, pricing or
reimbursement for our products could have an adverse effect on our business, reputation, revenue and results of operations.
Many payors continue to adopt benefit plan changes that shift a greater portion of prescription costs to patients, including more limited benefit plan
designs, higher patient co-pay or co-insurance obligations and limitations on patients' use of commercial manufacturer co-pay payment assistance programs
(including through co-pay accumulator adjustment or maximization programs). Significant consolidation in the health insurance industry has resulted in a
few large insurers and pharmacy benefit managers exerting greater pressure in pricing and usage negotiations with drug manufacturers, significantly
increasing discounts and rebates required of manufacturers and limiting patient access and usage. In addition, pharmacy benefit managers have combined
with specialty and mail order pharmacies and provider groups. Further consolidation among insurers, pharmacy benefit managers, other entities in the
pharmaceutical supply chain and other payors would increase the negotiating leverage such entities have over us and other drug manufacturers.
In the U.S., to help patients afford our approved products, we may utilize programs to assist them, including patient assistance programs and co-pay
programs for eligible patients. Government enforcement agencies have shown increased interest in pharmaceutical companies' product and patient
assistance programs, including reimbursement support services, and a number of investigations into these programs have resulted in significant civil and
criminal settlements. Our co-pay programs could become the target of similar insurer actions. In addition, in November 2013, CMS issued guidance to the
issuers of qualified health plans sold through the PPACA’s marketplaces encouraging such plans to reject patient cost-sharing support from third parties and
indicating that
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CMS intends to monitor the provision of such support and may take regulatory action to limit it in the future. CMS subsequently issued a rule requiring
individual market qualified health plans to accept third-party premium and cost-sharing payments from certain government-related entities. In September
2014, the Office of Inspector General of the U.S. Department of Health and Human Services issued a Special Advisory Bulletin warning manufacturers that
they may be subject to sanctions under the federal anti-kickback statute and/or civil monetary penalty laws if they do not take appropriate steps to exclude
Part D beneficiaries from using co-pay programs. It is possible that changes in insurer policies regarding co-pay programs and/or the introduction and
enactment of new legislation or regulatory action could restrict or otherwise negatively affect these patient support programs, which could result in fewer
patients using affected products, and therefore could have a material adverse effect on our sales, business, and financial condition.
Clinical trials for our products are expensive, may take several years to complete, and their outcomes are uncertain.
In order to obtain regulatory approvals for the commercial sale of any product, we or our licensees must demonstrate, through preclinical testing and
clinical trials, that such product is safe and effective for use in humans. Designing, conducting and completing a clinical development program is often a
lengthy, time-consuming and expensive process. We have incurred, and we will continue to incur, substantial expenses for preclinical testing, clinical trials
and other activities related to our clinical development programs.
Our preclinical and clinical development efforts may take several years or more, varying substantially with the type, complexity, novelty and
intended use of the product and the clinical study designs and methodologies employed, and may not be successfully completed in a timely manner or at
all. Timelines for the initiation, conduct and completion of clinical trials may be delayed by many factors, including:
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issues with the opening, operation or inspection of a new or ongoing clinical trial site;
delays or failures of third-party CROs and other third-party service providers and clinical investigators to manage and conduct the trials,
perform oversight of the trials, including data audit and verification procedures, or to meet expected deadlines;
an inability to recruit clinical trial participants at the expected rate or at all, or to adequately follow participants following treatment;
unforeseen safety or tolerability issues;
an inability to manufacture or obtain sufficient quantities of materials used for clinical trials;
unforeseen governmental or regulatory issues or concerns, including those of the FDA and other regulatory agencies;
impacts of the potential separation of our neuroscience and oncology businesses; and
global instability, including instability relating to political events or a global pandemic or other contagious disease, such as COVID-19, in or
near the countries in which we conduct our clinical trials.
In addition, we are currently conducting and enrolling patients in clinical studies in a number of countries where our experience is more limited. In
these instances, we must depend on third parties, including independent clinical investigators, CROs and other third-party service providers, to successfully
conduct our clinical trials and to audit, verify and accurately report results from such trials. Though we do not have much control over many aspects of such
third-party activities, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and
protocols for the trial. Third parties may not complete planned activities on schedule or conduct our trials in accordance with regulatory requirements or our
stated protocols.
The outcome of our clinical trials is uncertain. The results from preclinical testing and early clinical trials often have not predicted results of later
clinical trials. A number of products have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy
data in later clinical trials to obtain necessary regulatory approvals.
If a product fails to demonstrate safety and efficacy in clinical trials, or if we and/or third parties fail to manage or conduct clinical trials in a timely
manner or in accordance with study protocols or obligations, the development, approval and commercialization of our products may be delayed or
prevented, and such events could materially adversely affect our business, financial condition, cash flows and results of operations.
Preliminary, topline or interim data from our clinical trials that we may announce, publish or report from time to time may change as more patient
data become available or based on subsequent audit and verification procedures, and may not be indicative of final data from such trials, data from
future trials or real-world results.
From time to time, we may announce, publish or report preliminary, topline or interim data from our clinical trials, including those we are
conducting in oncology. Such data are subject to the risk that one or more of the clinical outcomes may materially change as patients continue progressing
through the study (for example, in oncology studies, a patient may progress from a complete or partial response to progressive disease), as patient
enrollment continues and/or as more patient data become available, and such data may not
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be indicative of final data from such trials, data from future trials or real-world results. In addition, such data may remain subject to audit confirmation and
verification procedures that may result in the final data being materially different from the preliminary, topline or interim data disclosed. As a result, all
preliminary, topline and interim data should be viewed with caution until the final data are available. Material adverse differences between preliminary,
topline or interim data and final data could significantly harm our business, financial condition, cash flows and results of operations.
The FDA or other regulatory agencies may not agree with our regulatory approval strategies or components of our filings for our products and may
not approve, or may delay approval of, our products.
We must obtain government approvals before marketing or selling our products. The FDA in the U.S., and comparable regulatory agencies in other
jurisdictions, impose substantial and rigorous requirements for the development, manufacture and commercialization of medicines, the satisfaction of
which can take 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 impose
more stringent requirements than currently in effect, which may adversely affect our plans for product development, manufacture and/or
commercialization. The approval procedure and the time required to obtain approval also varies among countries. Regulatory agencies may have varying
interpretations of the same data, and approval by one regulatory agency does not ensure approval by regulatory agencies in other jurisdictions. In addition,
the FDA or other regulatory agencies may choose not to communicate with or update us during clinical testing and regulatory review periods and the
ultimate decision by the FDA or other regulatory agencies regarding drug approval may not be consistent with prior communications.
The product approval process can last many years, be very costly and still be unsuccessful. Regulatory approval by the FDA or other regulatory
agencies can be delayed, limited or not granted at all for many reasons, including:
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a product may not demonstrate safety and efficacy for each target indication in accordance with applicable regulatory agencies’ standards;
data from preclinical testing and clinical trials may be interpreted by applicable regulatory agencies in different ways than we or our licensees
interpret it;
regulatory agencies may not agree with our or our licensees’ regulatory approval strategies, plans for accelerated development timelines,
components of our or our licensees’ filings such as clinical trial designs, conduct and methodologies, or the sufficiency of our or our
licensees’ submitted data to meet their requirements for product approval;
regulatory agencies might not approve our or our licensees’ manufacturing processes or facilities, or those of the CROs and contract
manufacturing organizations who conduct research or manufacturing work on our or our licensees’ behalf;
failure by our clinical investigational sites and the records kept at such sites, including any clinical trial data, to be in compliance with the
FDA’s GCP, or EU legislation governing GCP, or to pass FDA, EMA or EU member state inspections of clinical trials;
regulatory agencies may change their requirements for approval or post-approval marketing; and
adverse medical events during the trials could lead to requirements that trials be repeated or extended, or that a program be terminated or
placed 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, including those relating to
COVID-19, a prolonged U.S. government shutdown, or other political or economic conditions, could cause delays to the regulatory approval process for
our products.
Any failure to obtain, or delay in obtaining, regulatory approval for our products will prevent or delay their commercialization and could have a
material adverse effect on our business, financial condition, cash flows and results of operations. In addition, any failure to obtain, or delay in obtaining,
approval for our products could have a material impact on our shareholders’ confidence in the strength of our development capabilities and/or our ability to
generate significant revenue from our development programs and could result in a significant decline in our share price.
The FDA or other regulatory agencies may impose limitations or post-approval requirements on approvals for our products.
Even if regulatory approval to market a product is granted by the FDA or other regulatory agencies, the approved label for the product may not be
consistent with our initial expectations or commercial plans. For example, the FDA or other regulatory agencies may impose limitations on the clinical data
that may be included in the label for the product or the indicated uses for which, or the manner in which, the product may be marketed, or may impose
additional post-approval requirements, such as a REMS, with which we would need to comply in order to maintain the approval of such product. Our
business could be seriously harmed if we do not complete these post-approval requirements and, as a result, the FDA or other regulatory agencies require
us to change the label for such product, or if such post-approval requirements significantly restrict the marketing, sale or use of such product.
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In addition, legislation and regulatory policies relating to post-approval requirements and restrictions on promotional activities for pharmaceutical
products, or FDA or other regulatory agency regulations, guidance or interpretations with respect to such legislation or regulatory policy may change,
which may impact the development and commercialization of our products.
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. We have in
the past, and may in the future, face unanticipated interruptions or delays in manufacturing through our internal or external supply chain and resources.
Such disruptions can occur for many reasons, including, but not limited to, the supply and quality of API, drug product and other product components and
any potential shortages of such materials; regulatory actions; failures relating to materials, manufacturing equipment or processes, quality deviations or
safety issues, vendor error, operator error, labor shortages or disputes, utility or transportation disruptions, or physical or electronic security breaches; site-
specific incidents (such as fires), environmental incidents, natural disasters and other severe weather events, including those that may occur as a result of
climate change, or global disruptions such as the current global pandemic and the ongoing war in Ukraine; and many other factors.
Any such problems with manufacturing processes, whether at our facilities or those of our licensees or other third parties that manufacture or
package products or components of products on our behalf, could result in product defects or shortages, manufacturing failures or products not being
manufactured to their applicable specifications, which could require us to delay shipment of products or recall products previously shipped, or could impair
our or our licensees’ ability to receive regulatory approval for a product, commercially launch a product, expand into new markets or supply products in
existing markets. We may not be able to resolve any such issues in a timely manner, or at all, which could result in declines in sales and reputational
damage as well as significant remediation costs to address any issues that arise.
We rely solely on our manufacturing facility in Wilmington, Ohio for the manufacture of RISPERDAL CONSTA, VIVITROL, ARISTADA,
ARISTADA INITIO and LYBALVI and on our manufacturing facility in Athlone, Ireland for the manufacture of FAMPYRA, VUMERITY, other products
using our NanoCrystal or OCR technologies and certain of our other products in development. Due to regulatory and technical requirements, we have
limited ability to shift production among our facilities or to outsource any portions of our manufacturing to third parties in the event of an interruption in
manufacturing or demand for manufacturing that exceeds our capacity at the applicable facility. Any need to shift production among our facilities or
transition our manufacturing processes, or portions thereof, to a third party, whether due to an interruption in our manufacturing or to demand for a product
that exceeds our manufacturing capacity, could take a significant amount of time and money, may not be successful, and could cause significant
interruption or delay in our ability to supply product.
Any interruption or delay in supply, whether resulting from issues with equipment, materials, personnel, manufacturing processes, or internal or
external quality audits or reviews, could result in delays in meeting our contractual obligations and could damage our reputation and relationships with our
licensees, including the loss of manufacturing and supply rights and/or revenues.
Our manufacturing facilities also require specialized personnel and are expensive to operate and maintain. Any interruption in manufacturing, delay
in a regulatory approval or commercial launch, or recall or suspension of sales of products manufactured in our facilities, may cause operating losses as we
continue to operate these facilities and retain the required specialized personnel. In addition, any significant personnel shortages at our manufacturing
facilities, whether temporary or prolonged, including shortages resulting from impacts of the COVID-19 pandemic or related to the labor market more
broadly, may cause significant interruptions to our manufacturing facilities and to our supply of products.
We are also dependent in certain cases on third parties who manufacture or distribute certain products from which we receive revenue. Supply or
manufacturing issues related to such products could materially and adversely affect sales of such products, and in turn our revenue from such products.
We rely on third parties to provide goods and services in connection with the manufacture and distribution of the products we manufacture.
We rely on third parties for the timely supply of goods and services that play a role in our manufacturing activities, including, among others,
specified raw materials, equipment, contract manufacturing, formulation and packaging services, storage and product distribution services, customer
service activities and product returns processing, and some of these goods and services for our products are currently only available from a single source or
a limited number of qualified sources. Although we actively manage these third-party relationships to ensure continuity, quality and compliance with
applicable regulations, events beyond our control, including natural disasters and other severe weather events, including those that may occur as a result of
climate change, or global disruptions such as the current global pandemic and the ongoing war in Ukraine, could negatively impact the continuity of supply
of such materials and/or services, their quality and their compliance with applicable standards. 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,
packaging, storage and distribution of our products, requires successful coordination among us and multiple third-party providers. Lack of capacity
available at such third-party providers or any other issues with the quality or operations of these
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third-party providers, including any issues related to regulatory permits, audits or requirements, could require us to delay shipment of saleable products,
recall products previously shipped or impair our ability to supply products at all.
We endeavor to qualify and register new vendors and to develop contingency plans so that production is not materially impacted by third-party
provider issues. Nonetheless, any such third-party provider issues could increase our costs, cause us to lose revenue or market share and damage our
reputation, and may have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, we rely heavily on the three largest pharmaceutical wholesalers in the U.S. market—Cardinal Health Inc., AmerisourceBergen Corp.
and McKesson Corp—in the distribution of the products that we market and sell in the U.S. If we are unable to maintain our business relationships with
these wholesalers on commercially acceptable terms, if the buying patterns of these wholesalers fluctuate due to seasonality or any other reason or if
wholesaler buying decisions or other factors outside of our control change, our business, financial condition, cash flows and results of operations could be
materially adversely affected.
If we or our third-party providers fail to meet the stringent requirements of governmental regulation in the manufacture of our products, we could
incur substantial remedial costs and a reduction in sales and/or revenues.
We and the third-party providers that play a role in our manufacturing activities are generally required to comply with cGMP regulations and other
applicable non-U.S. standards in the manufacture of our products or components of our products. If any of our products or components of our products in
the U.S. are scheduled by the DEA as controlled substances, we would also be subject to DEA regulations. We and our third-party providers are subject to
unannounced inspections by the FDA and other agencies to confirm compliance with all applicable laws. Any changes to our suppliers or modifications of
methods of manufacturing require submission of amendments to our NDAs or other marketing applications to the FDA or other applicable regulatory
agencies, and ultimate acceptance by such agencies of such amendments, prior to release of product to the applicable marketplace. Our inability or the
inability of our third-party providers to demonstrate ongoing compliance with cGMP or other regulatory requirements could require us to withdraw or
recall products 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 operations or the facilities or operations of third-party providers
to pass any regulatory agency inspection could significantly impair our ability to develop, obtain and maintain regulatory approval of, and commercialize
or supply, products. This could increase our costs, cause us to lose revenue or market share and damage our reputation with our collaboration partners or in
the market generally.
In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law
in the U.S., and served to increase the FDA’s existing authority with respect to drug shortage measures. Under the CARES Act, for each facility where
marketed products for certain serious diseases or conditions are manufactured, or where components of such products are manufactured, we are required to
have a risk management plan in place that identifies and evaluates risks to the supply of such products or product components, which plans may be subject
to review during any FDA inspection. Each of our facilities operates in accordance with a comprehensive quality management system, which includes risk
assessment, preventive actions and regular review of inventory levels for each of the marketed products that we manufacture; however, there is no
guarantee that the FDA will consider our risk management program to be sufficient upon inspection or that we will not experience shortages in the supply
of marketed products that we manufacture, which could materially adversely affect the patients who rely on such marketed products and our business,
financial condition, cash flows and results of operations. The FDA and various regulatory agencies outside the U.S. have inspected and approved our
commercial manufacturing facilities. However, we cannot guarantee that the FDA or any other regulatory agencies will approve any other facility that we
or our third-party providers may operate or, once approved, that any of these facilities will remain in compliance with cGMP and other regulations. Any
third party we use to manufacture bulk drug product for use in the U.S. must be licensed by the FDA. Failure by us or our third-party providers to gain or
maintain regulatory compliance with and approvals from the FDA or other regulatory agencies could materially adversely affect our business, financial
condition, cash flows and results of operations.
Adverse market conditions may exacerbate certain risks inherent to our business, including risk of non-payment from licensees and customers and
reimbursement for our products.
Adverse market conditions or other business developments may cause disruptions, delays or significant financial impact to our business or to the
businesses of third parties from which we receive revenues, or reductions in the availability or extent of reimbursement available to us. For example, we
depend on our licensees and customers for substantial portions of our revenue, and the contracts with our licensees and customers pursuant to which we
supply product, or under which we are eligible for certain development or sales milestones or royalties related to products that incorporate our proprietary
technologies, may not be secured by collateral or other security. Accordingly, we bear the risk that our licensees may not be able to pay amounts due to us
under such contracts.
In addition, as a result of adverse market conditions, organizations that provide reimbursement for use of our products, such as government health
administration authorities and private health insurers, may be unable to satisfy such reimbursement obligations or may delay payment. In addition, U.S.
federal and state health authorities may reduce the extent of their reimbursements (including Medicare and Medicaid reimbursements in the U.S.) or
payments, and private insurers may increase their scrutiny of claims. If such
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licensees or other third parties are unable or unwilling to pay amounts owed to us or satisfy their commitments to us, or if there are reductions to such
payments or commitments, our business, financial condition, cash flows and results of operations may be materially adversely affected.
Our success largely depends upon our ability to attract, recognize 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 sell
products depends largely upon our ability to attract, recognize and retain highly skilled technical, scientific, manufacturing, management, regulatory,
compliance and selling and marketing personnel. Each of our executive officers and all of our employees are employed “at will,” meaning we or each
officer or employee may terminate the employment relationship at any time. We face intense competition for employees, due, among many factors, to the
geographic locations in which we operate and the competitive benefits and compensation practices in our industry, and in recent years, new competition as
employees are increasingly able to work remotely. The loss of key personnel due to any of these factors or our inability to hire and retain personnel who
have technical, scientific, manufacturing, management, regulatory, compliance or commercial backgrounds could materially adversely impact our business,
including the achievement of our manufacturing, research and development, commercial, financial and other operational and strategic business objectives.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used as a means of corporate communications and for purposes of social networking and commentary. We are
increasingly using social media tools to communicate certain information about our business, our employees, our company values and corporate
responsibility initiatives, to support disease state education in our areas of focus, and to provide information about our products or development programs.
Despite our efforts to monitor evolving social media guidance and to comply with applicable rules, regulations and regulatory guidance relating to social
media, such practices are evolving and not always clear. There is a risk that the use of social media by us or our employees to communicate about our
products or business may cause us to be found in violation of applicable requirements and could result in regulatory actions or legal claims against us
related to off-label marketing or other prohibited activities. In addition, our employees may knowingly or inadvertently engage on social media in ways that
may not comply with our social media policy or other legal, contractual or regulatory requirements, which may give rise to liability, lead to the loss of trade
secrets and other intellectual property, or result in public disclosure of personal information of our employees, clinical trial patients, customers, and others.
In addition, negative or inaccurate posts or comments about us or our products on any social media platforms could damage our reputation, brand image
and goodwill. If such disclosures were to occur, there is a risk that we fail to monitor and comply with applicable adverse event reporting obligations or that
we may not be able to defend the Company or the public’s legitimate interests due to restrictions on what we may say about our products or our business.
Any of these events, if they were to occur, could cause us to incur liability, face overly restrictive regulatory actions or suffer reputational or other harm to
our business.
Risks Related to Intellectual Property
Patent and other IP protection for our products is key to our business and our competitive position but is uncertain.
Receiving and maintaining patent and/or trademark protection for our products and technologies, including those that 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 are
each key to our success and our competitive position.
Patent protection provides rights of exclusivity for the term of the patent. We are able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. In this
regard, we try to protect our proprietary position by filing patent applications in the U.S. and elsewhere related to our proprietary product inventions and
improvements that are important to our business and products. Our pending patent applications, together with those we may file in the future, or those we
may license to or from third parties, may not result in patents being issued. Even if issued, such patents may not provide us with sufficient proprietary
protection or competitive advantages against competitors with similar products or technology. Because the patent positions of biopharmaceutical companies
involve complex legal and factual questions, enforceability of patents cannot be predicted 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 and lawmakers in these countries. The development of new technologies
or products may take a number of years, 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 to expire by the time such products are commercialized, or that such patents will successfully withstand any challenges
during their respective terms.
Although we make reasonable efforts to protect our IP rights and to ensure that our proprietary technology does not infringe the rights of third
parties, we cannot ascertain the existence of all potentially conflicting IP claims. Therefore, there is a risk that third parties may make claims of
infringement against our products or technologies. If patents exist or are issued that cover our products or technologies, we may not be able to manufacture,
use, offer for sale, sell or import 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 refuse to grant us a license at all. This
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could delay or prevent us from developing, manufacturing, selling or importing those of our products that would require the license. Claims of IP
infringement may also require that we redesign affected products, enter into costly settlement or license agreements, pay costly damage awards, or face a
temporary or permanent injunction prohibiting us from marketing or selling certain of our products. Even if we have an agreement that may serve to
indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot, or do not, license the infringed
technology on reasonable terms or at all, or substitute similar technology from another source, our business, financial condition, cash flows and results of
operations could be materially adversely affected.
Patents, if issued, may be challenged, invalidated or circumvented. As our products achieve greater commercial sales, potential competitors are more
likely to seek to challenge our patents. The laws of certain countries may not protect our IP rights to the same extent as the laws of the U.S., and any
patents that we own or license from others may not provide any protection against competitors. In addition, in the case of certain of our licensed products or
products incorporating our licensed technology, our licensees are responsible for prosecuting, maintaining, enforcing and defending the IP related to the
product(s) from which we derive revenue. Their failure to secure, maintain, enforce and defend this IP could materially and adversely affect our business,
financial condition, cash flows, and results of operations.
We also rely on trade secrets, know-how and inventions, which are not protected by patents, to maintain our competitive position. We try to protect
this 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. However, any of these parties may breach such agreements and may disclose our confidential
information, or our competitors might learn of the information in some other way. To the extent that our employees, consultants or contractors use IP
owned by 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
other invention not protected by a patent were to be disclosed to, or independently developed by, a competitor, such event could materially and adversely
affect our business, financial condition, cash flows and results of operations.
Uncertainty over IP in the biopharmaceutical industry has been the source of litigation, which is inherently costly and unpredictable, could
significantly delay or prevent approval or negatively impact 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 the
U.S. and elsewhere in the world. We cannot currently determine the ultimate scope, validity and enforceability of patents which may be granted to third
parties in the future or which patents third parties may assert are infringed by the manufacture, use or sale of our products.
Stemming in part from this uncertainty, there has been, and we expect that there may continue to be, significant litigation and an increasing number
of inter partes reviews (“IPRs”) and administrative proceedings in the pharmaceutical industry regarding patents and other IP rights. A patent holder might
file an IPR, interference and/or infringement action against us, including in response to patent certifications required under the Hatch-Waxman Act,
claiming that certain 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 more of such party’s patents. We may have to expend considerable time, effort and resources to defend such actions, and litigation may be
necessary in some instances to determine the validity and scope of certain of our proprietary rights.
In addition, we may need to enforce our IP rights against third parties who infringe on our patents and other IP or challenge our patents, patent
applications or trademark applications. Litigation and trial proceedings, such as so-called Paragraph IV litigation and IPRs, concerning patents and other IP
rights may be expensive, protracted and distracting to management, with no certainty of success. As a result, we may at times give up certain rights with
respect to our IP in order to avoid or resolve timely and costly IP litigation or IPR proceedings. For example, in July 2019, in order to resolve an IPR
instituted by Amneal with the PTAB, we granted Amneal a non-exclusive license under certain patents covering VIVITROL, including the latest to expire
patent covering VIVITROL in the U.S., to market and sell a generic formulation of VIVITROL in the U.S. beginning sometime in 2028 or earlier under
certain circumstances. Ultimately, the outcome of such litigation and proceedings, or any settlement arrangement with respect thereto, could adversely
affect our business and the validity and scope of our patents or other proprietary rights or delay or prevent us from manufacturing and marketing our
products.
We or our licensees may face claims against IP 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
not infringe the innovator’s patents 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, Teva entities filed an ANDA seeking approval to engage in the commercial manufacture, use or sale of a generic version of
VIVITROL and alleging that one of our Orange-Book patents related to VIVITROL is invalid, unenforceable and/or will not be infringed by Teva’s
proposed product. In September 2020, we initiated a Paragraph IV lawsuit against Teva to dispute such claims. A trial is scheduled to begin on February
16, 2023.
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Although we intend to vigorously defend our IP rights, and we expect our licensees to do the same, there can be no assurance that we or our
licensees will prevail. Our and our licensees’ existing patents could be invalidated, found unenforceable or found not to cover generic forms of our or our
licensees’ products. If Teva or other ANDA filers were to receive FDA approval to sell generic versions of our products or the products from which we
receive revenue and/or prevail in any patent litigation with respect to such products, such products would become subject to increased competition, and our
business, financial condition, cash flows and results of operations could be materially adversely affected.
Risks Related to Regulatory or Legal Matters
Litigation or arbitration filed against Alkermes, including securities litigation, or actions (such as citizens petitions) filed against regulatory agencies in
respect of our products, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our
products, or otherwise negatively impact our business.
We are, and may in the future become, involved in various legal proceedings, including those asserting violations of securities and/or fraud and
abuse laws and those asserting claims related to product liability, intellectual property and/or contractual arrangements. Such proceedings may include
claims for, or the possibility of, damages or fines and penalties involving substantial amounts of money or other relief, including but not limited to civil or
criminal fines and penalties. Such legal proceedings and the preparation therefor may result in substantial costs to us and diversion of management’s
attention and resources, which in turn could harm our business. Moreover, if any of such legal proceedings were to result in an adverse outcome, such
outcome could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Further, our liability insurance coverage may not be sufficient to satisfy, or may not cover, any expenses or liabilities that may arise. Additionally,
regardless of whether or not there is merit to the claims underlying any legal proceedings to which we are subject, or whether or not we are found as a
result of such lawsuits to have violated any applicable laws, such lawsuits and inquiries can be expensive to defend or respond to, may divert the attention
of our management and other resources that would otherwise be engaged in managing our business, and may further cause significant and potentially
irreparable harm to our public reputation.
We have been, and may again be, the subject of citizen petitions that request that the FDA refuse to approve, delay approval of, or impose additional
approval requirements on our NDAs. If successful, such petitions can significantly delay, or even prevent, the approval of the NDA in question. Even if the
FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition, or may impose additional
approval requirements 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 the commercialization and sale of our products and products using our proprietary technologies.
The clinical study or commercial use of our products may cause unintended side effects or adverse reactions, or incidents of misuse may occur, which
could adversely affect our products, business and share price.
We cannot predict whether the clinical or commercial use of our products will produce undesirable or unintended side effects that have not been
evident in the use of, or in clinical trials conducted for, such products to date. The administration of drugs in humans carries the inherent risk of product
liability claims whether 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, and we may not learn about or understand those effects until the products have been administered to study participants or patients for a
prolonged period of time. Additionally, incidents of product misuse may occur.
These events, among others, could result in product recalls or additional regulatory controls (including additional regulatory scrutiny, REMS
programs, and/or requirements for additional labeling) or product liability actions. As our development activities progress and we continue to have
commercial sales, our product liability insurance coverage may be inadequate to satisfy liabilities that arise, we may be unable to obtain adequate coverage
at an acceptable cost or at all, or our insurer may disclaim coverage as to a future claim. This could prevent or limit the development or commercialization
of our products. In addition, the reporting of adverse safety events involving our products, including instances of product misuse, and public perceptions
about such events could cause our product sales or share price to decline or experience periods of volatility. These types of events could have a material
adverse effect on our business, financial condition, cash flows and results of operations.
If there are changes in, or we fail to comply with, the extensive legal and regulatory requirements affecting the healthcare industry, we could face
litigation, costs, penalties and business losses.
Our activities, and the activities of our licensees and third-party providers, are subject to extensive government regulation. Government regulation
by various national, state and local agencies includes detailed inspections of, and controls over, research and laboratory procedures, clinical investigations,
product approvals and manufacturing, marketing and promotion, adverse event reporting, sampling, distribution, recordkeeping, storage, and disposal
practices. Achieving compliance with these regulations substantially increases the time, difficulty and costs incurred in obtaining and maintaining
approvals to market newly developed and existing products. Government regulatory actions, including audits, records requests and inspections of
manufacturing facilities, can result in delay in the release of products, seizure or recall of products, suspension or revocation of the authority necessary for
the manufacture and sale of products, and other regulatory enforcement actions, including the levying of civil fines or criminal penalties, the issuance of a
warning letter, or the imposition of an injunction.
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Biopharmaceutical companies also have been the target of government lawsuits and investigations alleging violations of government regulation,
including claims asserting submission of incorrect pricing information, impermissible promotion of pharmaceutical products, payments intended to
influence the referral of healthcare business, submission of false claims for government reimbursement, antitrust violations and violations related to
environmental matters. We have been, and may continue to be, the subject of certain government inquiries or requests for documentation. For example, we
have received a subpoena and civil investigative demands from U.S. state and federal authorities for documents related to VIVITROL. We are cooperating
with the government in each instance. If, as a result of government requests, proceedings are initiated, including under the U.S. federal anti-kickback statute
and False Claims Act and state False Claims Acts or other laws, and we are found to have violated one or more applicable laws, we may be subject to
significant liability, including without limitation, civil fines, criminal fines and penalties, civil damages and exclusion from U.S. federal funded healthcare
programs such as Medicare and Medicaid, any of which could materially affect our reputation, business, financial condition, cash flows and results of
operations. Conduct giving rise to such liability could also form the basis for private civil litigation by third-party payers or other persons allegedly harmed
by such conduct. Additionally, regardless of whether or not there is merit to claims underlying any investigation or legal proceedings to which we are
subject, or whether or not we are found as a result of such investigations or lawsuits to have violated any applicable laws, such lawsuits and inquiries can
be expensive to defend or respond to, may divert the attention of our management and other resources that would otherwise be engaged in managing our
business, and may further cause significant and potentially irreparable harm to our public reputation. While we have implemented numerous risk mitigation
measures, we cannot guarantee that we, our employees, our licensees, our consultants or our contractors are, or will be, in compliance with all applicable
laws, regulations or interpretations of the applicability of these laws to our products, operations and marketing practices. If we or our agents fail to comply
with any of those laws, regulations or interpretations, a range of actions could result, including the suspension or termination of clinical trials, the failure to
approve a product, restrictions on sales of our products or our manufacturing processes, withdrawal of our products from the market, significant fines,
exclusion from government healthcare programs or other sanctions or litigation.
Changes affecting the healthcare industry, including new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations
or decisions, related to patent protection and enforcement, access to healthcare, environmental issues or product pricing and marketing, could also
adversely affect our revenues, our public reputation or our potential to be profitable. For example, and as discussed above, the Inflation Reduction Act,
signed into law in August 2022, includes several provisions that will impact our business to varying degrees, including those that impose new manufacturer
financial liability on all drugs in Medicare Part D beginning in 2025, allow the U.S. government to negotiate prices for some drugs covered under Medicare
Part B and Part D beginning in 2026, and require companies to pay rebates to Medicare beginning in 2023 for drug prices that increase faster than inflation.
This law and any further changes in laws, regulations or decisions or in the interpretation of existing laws, regulations and decisions could have a material
adverse effect on our business, financial condition, cash flows and results of operations.
If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs, we
could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business,
financial condition, results of operations and growth prospects.
We participate in the Medicaid Drug Rebate Program, the 340B program, the U.S. Department of Veterans Affairs, FSS pricing program, and the
Tricare program, and have obligations to report the average sales price for certain of our drugs to the Medicare program. For calendar quarters beginning
January 1, 2022, manufacturers will need to start reporting the average sales price for drugs under the Medicare program regardless of whether they are
enrolled in the Medicaid Drug Rebate Program. Currently, only manufacturers participating in the Medicaid Drug Rebate Program are obligated to do so.
Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by us, governmental or
regulatory agencies and the courts, which can change and evolve over time. In the case of our Medicaid pricing data, if we become aware that our reporting
for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, we are generally obligated to resubmit the corrected data for
up to three years after those data originally were due. Such restatements and recalculations increase our costs for complying with the laws and regulations
governing the Medicaid Drug Rebate Program and could result in an overage or underage in our rebate liability for past quarters. Price recalculations also
may affect the ceiling price at which we are required to offer our products under the 340B program and give rise to an obligation to refund entities
participating in the 340B program for overcharges during past quarters impacted by a price recalculation.
Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information to the government, if we
are found to have made a misrepresentation in the reporting of our average sales price, if we fail to submit the required price data on a timely basis, or if we
are found to have charged 340B covered entities more than the statutorily mandated ceiling price. The CMS could also decide to terminate our Medicaid
drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs. We
cannot assure you that our submissions will not be found by CMS to be incomplete or incorrect.
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Our failure to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program and other governmental programs
could negatively impact our financial results. CMS issued a final regulation, which became effective in April 2016, to implement the changes to the
Medicaid Drug Rebate Program under the Affordable Care Act. In December 2020, CMS issued a final regulation that modified prior Medicaid Drug
Rebate Program regulations to permit reporting multiple best price figures with regard to value-based purchasing arrangements (beginning in 2022); and
provided definitions for “line extension,” “new formulation,” and related terms, with the practical effect of expanding the scope of drugs considered to be
line extensions that are subject to an alternative rebate formula (beginning in 2022). Regulatory and legislative changes, and judicial rulings relating to the
Medicaid Drug Rebate Program and related policies (including coverage expansion), have increased and will continue to increase our costs and the
complexity of compliance, have been and will continue to be time-consuming to implement, and could have a material adverse effect on our results of
operations, particularly if CMS or another agency challenges the approach we take in our implementation.
The HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on
manufacturers that knowingly and intentionally overcharge covered entities, which became effective in January 2019. Implementation of this regulation
could affect our obligations and potential liability under the 340B program in ways we cannot anticipate. We are also required to report the 340B ceiling
prices for our covered outpatient drugs to HRSA, which then publishes them to 340B covered entities. Any charge by HRSA that we have violated this
regulation or other requirements of the program could negatively impact our financial results. Moreover, HRSA newly established an administrative dispute
resolution (“ADR”) process under a final regulation effective January 2021, for claims by covered entities that a manufacturer engaged in overcharging,
including claims that a manufacturer limited the ability of a covered entity to purchase the manufacturer’s drugs at the 340B ceiling price, and by
manufacturers that a covered entity violated the prohibitions against diversion or duplicate discounts. Such claims are to be resolved through an ADR panel
of government officials rendering a decision that could be appealed only in federal court. This ADR regulation has been challenged in separate litigation
instituted by PhRMA and by pharmaceutical manufacturers in multiple federal courts. Under the ADR final rule which became effective in January 2021,
an ADR proceeding could potentially subject us to discovery by covered entities and other onerous procedural requirements and could result in additional
liability. HRSA could also decide to terminate a manufacturer’s agreement to participate in the 340B program for a violation of that agreement or other
good cause shown, in which case the manufacturer’s covered outpatient drugs may no longer be eligible for federal payment under the Medicaid or
Medicare Part B program. In November 2022, HRSA issued a proposed rule to revise the ADR procedures contained in its January 2021 final regulation
for disputes arising under the 340B drug pricing program between covered entities and manufacturers.
Further, legislation may be introduced that, if passed, would, among other things, further expand the 340B program to additional covered entities or
would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting, and any additional future
changes to the definition of average manufacturer price or the Medicaid rebate amount could affect our 340B ceiling price calculations and negatively
impact our results of operations. Additionally, certain pharmaceutical manufacturers are involved in ongoing litigation regarding contract pharmacy
arrangements under the 340B Program. The outcome of those judicial proceedings and the potential impact on the way in which manufacturers extend
discounts to covered entities through contract pharmacies remain uncertain.
We have obligations to report the average sales price for certain of our drugs to the Medicare program. Statutory or regulatory changes or CMS
guidance could affect the average sales price calculations for our products and the resulting Medicare payment rate, and could negatively impact our results
of operations.
Pursuant to applicable law, knowing provision of false information in connection with price reporting under the U.S. Department of Veterans
Affairs, FSS or Tricare programs can subject a manufacturer to civil monetary penalties. These program obligations also contain extensive disclosure and
certification requirements. If we overcharge the government in connection with our arrangements with FSS or Tricare, we are required to refund the
difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the
False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement
action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and
growth prospects.
Our 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
regulations and to periodic inspections for possible violations of these laws and regulations. Under certain of these laws and regulations, we could be liable
for any contamination at our current or former properties or third-party waste disposal sites. In addition to significant remediation costs, contamination can
give rise to third-party claims for fines, penalties, natural resource damages, personal injury and damage (including property damage). The costs of
compliance with environmental, health and safety laws and regulations are significant. We have developed and implemented a proprietary risk mitigation
program to preemptively identify and address environmental, health, safety and security risks; however, there can be no assurance that a violation of current
or future environmental, health or safety laws or regulations will not occur. Any violations, even if inadvertent or accidental, or the cost of compliance with
any resulting order, fine or liability that may be imposed, could materially adversely affect our business, financial condition, cash flows and results of
operations.
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Risks Related to our Financial Condition and Tax Matters
We may not become profitable on a sustained basis.
At December 31, 2022, our accumulated deficit was $1.7 billion, which was primarily the result of net losses incurred from 1987, the year
Alkermes, Inc., was founded, through December 31, 2022, partially offset by net income over certain fiscal periods.
Our ability to achieve sustained profitability in the future will depend on our ability to grow and diversify our revenue and effectively and efficiently
manage our costs. Factors that may impact our future revenue, and in turn our future profitability, include our or our licensees’ (as applicable) ability to:
•
•
•
•
•
•
successfully commercialize VIVITROL, the ARISTADA product family, LYBALVI, VUMERITY, RISPERDAL CONSTA, the long-acting
INVEGA products, FAMPYRA and any other marketed products for which we earn revenue in the countries in which such products are
approved;
successfully develop, and obtain and maintain regulatory approval for, products both in the U.S. and in other countries;
successfully manufacture our products and third-party products efficiently and in a cost-effective manner;
obtain adequate reimbursement coverage for our products and third-party products from insurance companies, government programs and
other third-party payers;
achieve certain product development and sales milestones under our collaborative arrangements; and
resolve favorably any commercial disputes that may arise in respect of collaborative arrangements from which we receive revenues.
Factors that may impact our future spend, and in turn our future profitability, include:
•
•
•
•
•
•
•
•
•
•
the scope of our research and development activities, including the number of products, indications or new technologies that we may pursue,
and our ability, if sought, to share development costs through potential collaborations;
the time and expense required to pursue FDA and/or other regulatory approvals for our products;
the time and expense required to prosecute, enforce, defend and/or challenge patent and other IP rights;
the costs of operating and maintaining our manufacturing and research facilities;
the costs of doing business with third-party vendors, including suppliers, manufacturers, packagers and distributors;
the cost of possible licenses or acquisitions of technologies, compounds or product rights or the potential acquisition of other assets, including
equipment, facilities or businesses;
the costs related to potential litigation, arbitration or other legal proceedings or government requests for information;
the costs of defending against potential or actual proxy contests or other activist shareholder actions;
the costs associated with the planning for and/or execution of the potential separation of our neuroscience and oncology businesses; and
the costs associated with recruiting, compensating and retaining a highly-skilled workforce in an environment where competition for highly-
skilled employees is intense.
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 “controlled
foreign corporation”.
In December 2017, the Tax Cuts and Jobs Act was signed into law. This legislation significantly changed 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 (“CFC”) for taxable
years 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 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, the
application of which are not entirely certain. These changes to the attribution rules relating to the determination of CFC status make it possible that one or
more of our non-U.S. subsidiaries will be classified as a CFC. Existing and prospective investors should consult their tax advisers regarding the potential
application of these rules to their investments in our securities.
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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.
If goodwill or other intangible assets become impaired, we could have to take significant charges against earnings.
At December 31, 2022, we had $37.7 million of amortizable intangible assets and $92.9 million of goodwill. Under accounting principles generally
accepted in the U.S. (“GAAP”), we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite‑lived
intangible assets have been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. Any reduction
or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results
of operations 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 derived
from 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
will become payable in each of these places. Our effective tax rate may fluctuate depending on a number of factors, including, but not limited to, the
distribution of 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 in which 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. If we 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 or penalties, 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.
Changes in tax rules and regulations, or interpretations thereof, may adversely affect our financial condition.
Effective January 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct R&D expenses in the year incurred and instead requires
taxpayers to capitalize, and subsequently amortize such expenses over five years for research activities conducted in the U.S., and over fifteen years for
research activities conducted outside of the U.S. As such, we expect a material decrease in cash flows provided from operations and a material increase in
our net deferred tax assets over the next number of years.
Unless the U.S. Department of the Treasury issues regulations that narrow the application of this provision to a smaller subset of our R&D expenses
or the provision is deferred, modified or repealed by the U.S. Congress, there will be a material increase in our U.S. income tax liability over the next
number of years.
Our deferred tax assets may not be realized.
As of December 31, 2022, we had $115.6 million of net deferred tax assets in the U.S. 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 arise from unforeseen operating events, an enlarged foreign derived
intangible income deduction due to the capitalization of R&D expenses, or the occurrence of significant excess tax benefits arising from the exercise of
stock options and/or the vesting of restricted stock units. Unless we are able to generate 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
valuation allowance is recognized and materially adversely affect our financial condition and results of operations.
Furthermore, we have included within our U.S. net deferred tax assets of $115.6 million an amount of $36.4 million relating to employee share-
based compensation expense. It is possible that a material portion of this deferred tax asset will not be realized, especially if the price of our ordinary shares
remains at its current level (refer to “Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities” in this Annual Report for details of the price of our ordinary shares). Unless the price of our ordinary shares increases, we will incur a deferred
tax expense as our U.S.-based employees exercise or forfeit their stock options and their restricted stock unit awards vest. This could materially increase
our tax expense and may materially adversely affect our financial condition and results of operations.
The business combination in 2011 of Alkermes, Inc. and the drug technology business (“EDT”) of Elan Corporation, plc may limit our ability to use
our tax attributes 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
“Business Combination”). For U.S. federal income tax purposes, a corporation is generally considered tax resident in the place of its incorporation.
Because we are incorporated in Ireland, we should be deemed an Irish corporation under these general rules. However, Section 7874 of the Code generally
provides that a corporation organized outside the U.S. that acquires substantially all of the assets of a corporation organized in 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 of holding stock in the domestic
corporation, and the “expanded affiliated group” (as defined in Section 7874) that includes the acquiring corporation does not have substantial business
activities in the country in which it is organized.
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In addition, Section 7874 provides that if a corporation organized outside the U.S. acquires substantially all of the assets of a corporation organized
in the 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 the date 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 the transfer 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, which is 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 of the acquiring foreign corporation after the acquisition by reason of holding stock in the domestic corporation, and the “expanded
affiliated group” of the acquiring corporation does not have substantial business activities in the country in which it is organized. If this rule was to apply to
the Business Combination, among other things, Alkermes, Inc. would have been restricted in its ability to use the approximately $274.0 million of U.S.
federal 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 of these
limitations should apply as a result of the Business Combination. However, the IRS could assert a contrary position, in which case we could become
involved in tax controversy with the IRS regarding possible additional U.S. tax liability. If we were to be unsuccessful in resolving any such tax
controversy in our favor, we could be liable for significantly greater U.S. federal and state income tax than we anticipate being liable for as a result of the
Business Combination, which would place further demands on our cash needs.
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 2021, we amended and refinanced our then-existing term loan (the “2023 Term Loans”), in order to, among other things, provide for a new
class of replacement term loans equal to $300.0 million; extend the due date of the loan from March 26, 2023 to March 12, 2026; amend the interest
payable from LIBOR plus 2.25% with no LIBOR floor to LIBOR plus 2.50% with a LIBOR floor of 0.5%; and increase covenant flexibility (such
refinancing, the “Term Loan Refinancing” and the 2023 Term Loans as so amended and refinanced, the “2026 Term Loans”). The 2026 Term Loans were
also amended to include customary Alternative Reference Rates Committee (“ARRC”) hardwired benchmark replacement language. As of December 31,
2022, our borrowings consisted of $294.8 million outstanding under the 2026 Term Loans.
The 2026 Term Loans are secured by a first priority lien on substantially all of the combined company assets and properties of Alkermes plc and
most of its subsidiaries, which serve as guarantors. The agreements governing the 2026 Term Loans include a number of restrictive covenants that, among
other things, and subject to certain exceptions and baskets, impose operating and financial restrictions on us.
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 the
indebtedness. Our future operating results may not be sufficient to ensure our ability to make our debt payments or to remedy any such default. In the event
of an acceleration 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 2017, the U.K. Financial Conduct Authority announced its intention to phase out LIBOR after 2023. Currently, it is anticipated that LIBOR will
be completely phased out by June 30, 2023. The U.S. Federal Reserve, in conjunction with the ARRC, a steering committee comprised of large U.S.
financial institutions, has proposed a new index calculated by short term repurchase agreements, backed by U.S. Treasury securities, called the Secured
Overnight Financing Rate (“SOFR”) as an alternative to LIBOR for use in contracts that are currently indexed to U.S. dollar LIBOR and has proposed a
paced market transition plan to SOFR. On July 29, 2021, the ARRC formally recommended SOFR as its preferred alternative replacement rate for U.S.
dollar LIBOR. The 2026 Term Loans contain customary ARRC hardwired benchmark replacement language to transition from LIBOR to SOFR. The
discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit
markets or cause disruption to the broader financial markets. Uncertainty as to the nature of such potential discontinuation, reform or replacement may
negatively impact the volatility of LIBOR rates, liquidity, or our access to funding required to operate our business. In addition, SOFR is a relatively new
reference rate and its composition and characteristics are not the same as LIBOR. Given SOFR’s very limited history and potential volatility as compared
to other benchmark or market rates, the future performance of SOFR cannot be predicted based on historical performance. The consequences of using
SOFR could include an increase in the cost of our variable rate indebtedness. We are monitoring these transition efforts and, although the 2026 Term Loans
contain provisions designed to accommodate an alternate reference rate, we may need to amend these and other contracts to accommodate any replacement
rate.
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Our business strategy may involve future transactions which may harm the market price of our ordinary shares or require us to seek additional funds,
and such funding may not be available on commercially favorable terms or at all and may cause dilution to our existing shareholders.
In order to achieve our business strategy, we regularly review potential transactions related to technologies, products or product rights, and
businesses that are complementary to our business, including mergers and acquisitions, licenses and collaborations, and development and supply,
commercialization or co-promotion arrangements, among others. We may choose to enter into one or more of these or other transactions at any time, which
may cause substantial fluctuations in the market price of our ordinary shares. Moreover, depending upon the nature of any transaction, we may experience a
charge to earnings, which could also materially adversely affect our results of operations and could harm the market price of our ordinary shares.
In order to finance such transactions, we may require additional funds, and we may seek such funds through various sources, including debt and
equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets, monetization of royalty streams or other financing methods or
structures. The source, timing and availability of any financings will depend on global economic conditions, credit and financial market conditions, interest
rates and other factors. If we issue additional equity securities or securities convertible into equity securities, our shareholders would suffer dilution of their
investment, and it may adversely affect the market price of our ordinary shares. In addition, under Irish law, the directors of an Irish public limited company
must have specific authority, as approved by the company’s shareholders, to allot and issue any ordinary shares (other than pursuant to employee equity
plans) and, if such directors desire to allot and issue ordinary shares for cash, such shares must first be offered on the same or more favorable terms to the
company’s existing shareholders on a pro-rata basis, unless this statutory pre-emption right is disapplied by approval of the company’s shareholders. In July
2022, our shareholders authorized our board of directors to allot and issue ordinary shares in an amount equal to approximately 33% of our issued share
capital (at the date of such authorization), and to issue ordinary shares for cash on a non-pre-emptive basis in an amount equal to approximately 5% of our
issued share capital (at the date of such authorization) or in an amount equal to approximately 10% of our issued share capital (at the date of such
authorization) under certain specified circumstances; however, these share issuance authorities were granted for eighteen months only, at which point they
lapse unless renewed by our shareholders. If we are unable to obtain renewal of share issuance authorities from our shareholders, or are otherwise limited
by the terms of new share issuance authorities approved by our shareholders, our ability to use our authorized but unissued share capital to effect or to fund
acquisition or other transaction opportunities, or to otherwise raise capital, could be adversely affected.
In addition, future investors or lenders may demand, and may be granted, rights superior to those of existing shareholders. If we issue additional
debt securities, our existing debt service obligations will increase further. If we are unable to generate sufficient cash to meet these obligations and need to
use existing cash or liquidate investments in order to fund our debt service obligations or to repay our debt, we may be forced to curtail our operations. We
cannot be certain that additional financing will be available from any of these sources when needed or, if available, will be on acceptable terms. If we fail to
obtain additional capital when we need it, we may not 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 terms that may not be favorable to us.
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
all of our FAMPYRA, XEPLION, TREVICTA and BYANNLI 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 arising from expenses and payables at our Irish operations that are settled in Euro. Our efforts to mitigate the impact of fluctuating currency
exchange rates may not be successful. As a result, currency fluctuations among our reporting currency, USD, and the currencies in which we do business
will affect our results of operations, often in unpredictable ways. See “Item 7A—Quantitative and Qualitative Disclosures about Market Risk” in this
Annual Report for additional information relating to our foreign currency exchange rate risk.
Risks Related to our Ordinary Shares
The market price of our ordinary shares has been volatile and may continue to be volatile in the future, and could decline significantly.
The market price of our ordinary shares has fluctuated significantly from time to time. During the year ended December 31, 2022, the closing price
of our ordinary shares on the Nasdaq Global Select Market ranged from $21.94 to $31.87 per share. The market price of our ordinary shares is likely to
continue to be volatile and subject to significant price and volume fluctuations in response to market and industry factors, our results of operations, our
ability to maintain and increase sales of our products, the success of our key development programs, our ability to achieve profitability, and other factors,
including the risk factors described in this Annual Report. We have also experienced significant volatility in the market price of our ordinary shares based
on our business performance, including in relation to our commercial sales and the financial guidance that we issue for such sales, results from our clinical
development programs, and events relating to regulatory actions and interactions related to our product candidates and commercial products. For example,
a series of adverse actions by the FDA in 2018 relating to our NDA for ALKS 5461, our investigational product for the treatment of major depressive
disorder, caused the market price of our ordinary shares to decline significantly.
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In addition, the stock market in general, including the market for biopharmaceutical companies, has experienced extreme price and trading volume
fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. In particular, negative publicity regarding
pricing and price increases by pharmaceutical companies, and potential legislation to regulate drug pricing, has negatively impacted, and may continue to
negatively impact, the market for biopharmaceutical companies. These broad market and industry factors have harmed, and in the future may harm, the
market price of our ordinary shares, regardless of our operating performance.
Our 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 our industry over the last several years.
Activist shareholders may agitate, either publicly or privately, for changes to a company’s board of directors, management, structure, spend or strategic
direction, among other things.
Since 2021, we have engaged in extensive dialogue with principals of Sarissa Capital Offshore Master Fund LP and its affiliates. These
engagements and activities related to these engagements required the expenditure of significant time and energy by management and our board of directors.
Proxy contests and other actions by activist shareholders can be costly and time-consuming, disrupting operations and diverting the attention of
management and employees, and can lead to perceived uncertainties as to the future direction of the Company or its business that may result in the loss of
potential acquisitions, collaborations or in-licensing opportunities and make it more difficult to attract and retain qualified personnel and business partners.
In addition, if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our
strategic plan in a timely manner and create additional value for our shareholders.
Any such activist shareholder contests, actions or requests, or the mere public presence of activist shareholders among our shareholder base, could
cause the market price of our ordinary shares to experience periods of significant volatility.
Risks Related to Information Security and Data Privacy
Information security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and
reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including IP, our proprietary business information and that of our
suppliers and partners, as well as personally identifiable information of patients, clinical trial participants and employees. In recent years, we have
implemented additional remote work flexibility for certain of our employees who are able to work remotely. Our partners and third-party providers also
possess certain of our sensitive data. The secure maintenance of all such information and the secure performance of our information technology (“IT”)
systems are critical to our operations and business strategy.
As our dependency on, and the complexity of, our IT systems increases, the confidentiality, integrity and availability of our IT systems and the data
that they store is critical to managing our business. While we take prudent measures to secure our IT systems, the risk still exists that such systems may
become compromised by successful breaches, malfeasance, human error or technological fault. Moreover, the prevalent use of mobile devices to access
confidential information increases the risk of security breaches. Cyber-attacks have increased in frequency, persistence, sophistication and intensity, often
conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage,
hactivists and organized come). In addition to the extraction of important information, such attacks could include the deployment of harmful malware,
ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and
availability of our information. Certain types of attacks or breaches on our IT systems or infrastructure may go undetected for a prolonged period. Although
to our knowledge we have not experienced any material incident or interruption to date, any breakdown, invasion, corruption, destruction or breach of our,
our partners’ or our third-party providers’ technology systems could compromise such IT systems and the information stored there could be accessed,
modified, publicly disclosed, lost or stolen, which could result in legal claims or proceedings and liability under laws that protect the privacy of personal
information, demands for ransom or other forms of blackmail, disruptions to our development programs or commercial operations, damage to our
reputation and adverse effects on our business. We retain cybersecurity insurance to cover costs and expenses related to a breach or similar event; however,
there is no guarantee that such costs and expenses would not exceed the insurance that we retain.
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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
legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data
protection issues which may affect our business. In the U.S., numerous federal and state laws and regulations, including state security breach notification
laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of
personal information. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for
us. If we fail to comply with applicable laws and regulations, we could be subject to penalties or sanctions, including criminal penalties if we knowingly
obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by the Health Insurance
Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA.
Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well. The EU and
other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In the EU, for example, the GDPR
governs the processing of personal data. The GDPR imposes significant obligations on controllers and processors of personal data, including, high
standards for obtaining consent from individuals to process their personal data, robust notification requirements to individuals about the processing of their
personal data, a strong individual data rights regime, mandatory data breach notifications, limitations on the retention of personal data and stringent
requirements 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
also imposes 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 in order
to introduce further conditions, including limitations, with regard to the 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 place
additional mechanisms to ensure compliance. Any failure to comply with the requirements of GDPR and applicable national data protection laws of EU
member states could lead to regulatory enforcement actions and significant administrative and/or financial penalties against us (fines of up to €20,000,000
or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher), and could adversely affect our business, financial
condition, cash flows and results of operations.
General Risk Factors
If we identify a material weakness in our internal control over financial reporting, our ability to meet our reporting obligations and the trading price of
our 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 reasonable
possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness
increases 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 are
required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however
well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the
system are met. If we, or our independent registered public accounting firm, determine that our internal controls over financial reporting are not effective,
or we discover areas that need improvement in the future, these shortcomings could have an adverse effect on our business and financial results, and the
price of our 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 is
unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the
reliability of our financial statements, which could lead to a decline in the trading price of our ordinary shares. Failure to comply with reporting
requirements could also subject us to sanctions and/or investigations by Nasdaq or the SEC or other regulatory authorities.
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease approximately 14,600 square feet of corporate office space in Dublin, Ireland, which houses our corporate headquarters. In 2023, we
exercised our option to extend the lease term for a four-year period. This extended lease expires in 2027 and does not include an additional tenant option to
further extend the term.
We lease two properties in Waltham, Massachusetts. One facility has approximately 180,000 square feet of space and houses corporate offices,
administrative areas and laboratories. This lease expires in 2026 and includes a tenant option to extend the term for an additional five-year period. The
second property has approximately 231,000 square feet of office space and laboratory space. This lease, which commenced in January 2020, expires in
2035 and includes a tenant option to extend the term for an additional ten-year period.
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.
We own an R&D and manufacturing facility in Athlone, Ireland (approximately 400,000 square feet) and a manufacturing facility in Wilmington,
Ohio (approximately 375,000 square feet).
We believe that our current facilities are suitable and adequate for our current and near‑term preclinical, clinical and commercial requirements.
Item 3. Legal Proceedings
For information regarding legal proceedings, refer to the discussion under the heading “Litigation” in Note 17, Commitments and Contingent
Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report, which discussion is incorporated into this Item 3 by reference.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market and shareholder information
Our ordinary shares are traded on the Nasdaq Global Select Market under the symbol “ALKS.” There were 103 shareholders of record of our
ordinary shares on February 10, 2023. In addition, the last reported sale price of our ordinary shares as reported on the Nasdaq Global Select Market on
February 10, 2023 was $27.09.
Dividends
No dividends have been paid on our ordinary shares to date, and we do not expect to pay cash dividends thereon in the foreseeable future. We
anticipate that we will retain all earnings, if any, to support our operations and our proprietary drug development programs. Any future determination as to
the payment of dividends will be at the sole discretion of our board of directors and will depend on our financial condition, results of operations, capital
requirements and other factors that our board of directors deems relevant.
Repurchase of equity securities
On September 16, 2011, our board of directors authorized the continuation of the Alkermes, Inc. program to repurchase up to $215.0 million of our
ordinary shares at the discretion of management from time to time in the open market or through privately negotiated transactions. We did not purchase any
shares under this program during the year ended December 31, 2022. As of December 31, 2022, we had purchased a total of 8,866,342 shares under this
program at a cost of $114.0 million. The 2026 Term Loans include restrictive covenants that impose certain limitations on our ability to repurchase our
ordinary shares.
During the three months ended December 31, 2022, we acquired 12,609 of our ordinary shares, at an average price of $23.85 per share, related to
the vesting of employee equity awards to satisfy withholding tax obligations.
Irish taxes applicable to U.S. holders
The following is a general summary of the main Irish tax considerations applicable to the purchase, ownership and disposition of our ordinary shares
by U.S. holders. It is based on existing Irish law and practices in effect on February 2, 2023, and on discussions and correspondence with the Irish Revenue
Commissioners. 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 our ordinary
shares held as capital assets and does not apply to all categories of shareholders, such as dealers in securities, trustees, insurance companies, collective
investment schemes and shareholders who acquire, or who are deemed to acquire, their ordinary shares by virtue of an office or employment. The
statements are in reference to individuals who are considered non-resident and non-ordinarily resident of Ireland for tax purposes. This summary is not
exhaustive 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 dividends
While we have no current plans to pay dividends, dividends on our ordinary shares would generally be subject to Irish dividend withholding tax
(“DWT”) at 25%, unless an exemption applies. Dividends on our ordinary shares that are owned by residents of the U.S. and held beneficially through the
Depositary Trust Company (“DTC”) will not be subject to DWT provided that the address of the beneficial 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
that the shareholder has completed the appropriate Irish DWT form and this form remains valid. Such shareholders must provide the appropriate Irish DWT
form to our 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, they should generally be able to make an application for a refund
from the Irish Revenue Commissioners on the prescribed form.
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Income tax on dividends
Irish income tax, if any, may arise in respect of dividends paid by us. However, a shareholder who is neither resident nor ordinarily resident in
Ireland and 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, unless he 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 gains
A shareholder who is neither resident nor ordinarily resident in Ireland and does not hold our ordinary shares in connection with a trade or business
carried on by such shareholder in Ireland through a branch or agency, should not be within the scope of the charge to Irish tax on capital gains on a disposal
of our ordinary shares.
Capital acquisitions tax
Irish capital acquisitions tax (“CAT”) is comprised principally of gift tax and inheritance tax. CAT could apply to a gift or inheritance of our
ordinary shares irrespective of the place of residence, ordinary residence or domicile of the parties. This is because our ordinary shares are regarded as
property situated in 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
the donor and the recipient, and (ii) the aggregation of the values of previous gifts and inheritances received by the recipient from persons within the same
category of relationship for CAT purposes. Gifts and inheritances passing between spouses are exempt from CAT. Our shareholders should consult their
own tax advisers as to whether CAT is creditable or deductible in computing any domestic tax liabilities.
Stamp duty
Irish stamp duty, if any, may become payable in respect of ordinary share transfers. However, a transfer of our ordinary shares from a seller who
holds shares 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 a seller 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 acquired ordinary 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 ordinary shares 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 market value, 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
provided that 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 exactly the 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 being contemplated by the shareholder. Similarly, a shareholder who holds ordinary shares through DTC may transfer those ordinary shares out of
DTC without giving 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 a result 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 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 exactly the same proportions 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 interest in the ordinary shares, as the case may be, by the shareholder to a third party being contemplated.
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Stock performance graph
The information contained in the performance graph below shall not be deemed to be “soliciting material” or to be “filed” with the SEC, and such
information shall not be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we
specifically incorporate it by reference into such filing.
The following graph compares the cumulative total shareholder return on our ordinary shares from December 31, 2017 through December 31, 2022
with the cumulative returns of the Nasdaq Composite Total Return Index and the Nasdaq Biotechnology Index. The comparison assumes $100 was invested
on December 31, 2017 in our ordinary shares and in each of the foregoing indices and further assumes reinvestment of any dividends. We did not declare or
pay any dividends on our ordinary shares during the comparison period.
Alkermes
Nasdaq Composite Total Return
Nasdaq Biotechnology Index
Item 6. [Reserved]
Not applicable.
2017
2018
Year Ended December 31,
2020
2019
2021
2022
100
100
100
54
97
91
37
133
114
36
192
144
42
235
144
48
159
130
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following should be read in conjunction with our consolidated financial statements and related notes beginning on page F‑1 of this Annual
Report. The following discussion contains forward‑looking statements. Actual results may differ significantly from those projected in the forward‑looking
statements. See “Cautionary Note Concerning Forward‑Looking Statements” on page 3 of this Annual Report. Factors that might cause future results to
differ materially from those projected in the forward‑looking statements also include, but are not limited to, those discussed in “Item 1A—Risk Factors”
and elsewhere in this Annual Report. A detailed discussion of our 2020 financial condition and results of operations, and of 2021 year-over-year changes as
compared to 2020, can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 16, 2022.
Overview
We have a portfolio of proprietary products that we manufacture, market and sell in the U.S.—VIVITROL, ARISTADA, ARISTADA INITIO and
most recently, LYBALVI, which we launched commercially in October 2021. We also earn manufacturing and/or royalty revenues on net sales of products
commercialized by our licensees, the most significant of which in 2022 were the long-acting INVEGA products and VUMERITY. We expect VIVITROL,
ARISTADA, ARISTADA INITIO, LYBALVI and VUMERITY to generate significant revenues for us in the near‑ and medium‑term as we believe these
products are singular or competitively advantaged products in their classes.
In 2022, we incurred an operating loss of $142.3 million, as compared to an operating loss of $29.3 million in 2021. The increase in the operating
loss was primarily due to an increase in operating expenses of $51.0 million and a decrease in revenues of $62.0 million. These items are discussed in
further detail within the “Results of Operations” section below.
In November 2022, we announced our intent, as approved by our board of directors, to separate our neuroscience business and oncology business.
We are exploring a separation of the oncology business into an independent, publicly-traded company as part of an ongoing review of strategic alternatives
for the oncology business. Following the planned separation, we would focus on driving growth of our proprietary commercial products: LYBALVI,
ARISTADA, ARISTADA INITIO and VIVITROL and on advancing the development of pipeline programs focused on neurological disorders. We also
expect to retain manufacturing and royalty revenues related to our licensed products and third-party products using our proprietary technologies under
license. Oncology Co. would focus on the discovery and development of cancer therapies, including the continued development of nemvaleukin alfa and
our portfolio of novel, preclinical, engineered cytokines. The separation, if consummated, is expected to be completed in the second half of 2023 and is
subject to customary closing conditions, including final approval by our board of directors and, if sought, receipt of a private letter ruling from the IRS
and/or tax opinion from our tax advisors.
COVID-19 Update
The COVID-19 pandemic has impacted, and may continue to impact, many aspects of society, including the operation of healthcare systems, global
travel, supply and labor markets and other business and economic activity worldwide. A number of the marketed products from which we derive revenue,
including manufacturing and royalty revenue, are injectable medications administered by healthcare professionals, which have been, and may continue to
be, adversely impacted to varying degrees as a result of COVID-19 related closures, restrictions, labor shortages and other disruptions that have transpired,
and may continue to transpire, while the pandemic persists.
The COVID-19 pandemic has caused, and may continue to cause, varying degrees of disruption to our employees and our business operations.
While we have continued to operate our manufacturing facilities and supply our medicines throughout the pandemic, we have at times during the pandemic
experienced labor or supply chain disruptions at our manufacturing facilities and may continue to experience such disruptions while the pandemic persists,
which could impact our ability to manufacture our products and the third-party products from which we receive revenue in a timely matter or at all. In
addition, while we have continued to conduct R&D activities, including our ongoing clinical trials, the COVID-19 pandemic has at times impacted the
timelines of certain of our early-stage discovery efforts and clinical trials, and may continue to impact such timelines while the pandemic persists. We work
with our internal teams, our clinical investigators, R&D vendors and critical supply chain vendors to continually assess, and mitigate, the potential impact
of COVID-19 on our manufacturing operations and R&D activities.
The degree to which the COVID-19 pandemic may continue to impact our employees, business, financial condition and results of operations will
depend on the ultimate severity and duration of the pandemic and the manner in which it continues to evolve, including the emergence, prevalence and
severity of new COVID-19 variants, and future developments in response thereto. Due to these and numerous other uncertainties surrounding the ongoing
COVID-19 pandemic, the actual impact of the pandemic on our financial condition and operating results may differ from our current projections. For
additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, our financial condition or our results
of operations, see “Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “Our business, financial condition and results of
operations have been, and may continue to be, adversely affected by the ongoing COVID-19 pandemic or other similar outbreaks of contagious diseases.”
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Results of Operations
Product Sales, Net
Our product sales, net consist of sales in the U.S. of VIVITROL, ARISTADA, ARISTADA INITIO, and following its commercial launch in October
2021, LYBALVI, primarily to wholesalers, specialty distributors and pharmacies. The following table presents the adjustments deducted from product
sales, gross to arrive at product sales, net for sales of VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI in the U.S. during the years ended
December 31, 2022 and 2021:
(In millions, except for % of Sales)
Product sales, gross
Adjustments to product sales, gross:
Medicaid rebates
Chargebacks
Product discounts
Medicare Part D
Other
Total adjustments
Product sales, net
2022
% of Sales
2021
% of Sales
1,548.9
100.0 % $
1,315.1
Year Ended December 31,
(344.0)
(157.2)
(124.1)
(68.1)
(77.9)
(771.3)
777.6
(22.2) %
(10.2) %
(8.0) %
(4.4) %
(5.0) %
(49.8) %
50.2 % $
(331.9)
(129.1)
(107.0)
(59.8)
(59.9)
(687.7)
627.4
100.0 %
(25.2) %
(9.8) %
(8.1) %
(4.5) %
(4.6) %
(52.2) %
47.8 %
$
$
Product sales, net during the years ended December 31, 2022 and 2021 were as follows:
(In millions)
VIVITROL
ARISTADA and ARISTADA INITIO
LYBALVI
Product sales, net
Year Ended December 31,
2022
2021
Change
$
$
379.5 $
302.1
96.0
777.6 $
343.9 $
275.4
8.1
627.4 $
35.6
26.7
87.9
150.2
VIVITROL product sales, gross, increased by 7% in 2022 which was primarily due to an increase of 2% in the number of VIVITROL units sold and
a 6% increase in the selling price of VIVITROL that went into effect in April 2022. ARISTADA and ARISTADA INITIO product sales, gross, increased
by 11% in 2022 which was primarily due to an increase of 8% in the number of ARISTADA and ARISTADA INITIO units sold and a 3% increase in the
selling price of ARISTADA and ARISTADA INITIO that went into effect in April 2022. The increase in LYBALVI during 2022, as compared to 2021, was
due to the product having a full year of sales in 2022 following its commercial launch in October 2021.
The decrease in Medicaid rebates as a percentage of sales was primarily due to actual Medicaid utilization rates related to VIVITROL being lower
than original estimates as such rates normalize from initial pandemic levels and due to the increased sales of LYBALVI, which had lower Medicaid
utilization than VIVITROL and ARISTADA.
A number of companies are working to develop products to treat addiction, including alcohol and opioid dependence, that may compete with, and
negatively impact, future sales of VIVITROL. Increased competition may lead to reduced unit sales of VIVITROL and increased pricing pressure. The
latest to expire of our patents covering VIVITROL will expire in 2029 in the U.S. and expired in Europe in 2021. Under the terms of a settlement and
license agreement, we granted Amneal a license under certain patents covering VIVITROL, including the latest to expire patent covering VIVITROL in the
U.S., to market and sell a generic formulation of VIVITROL in the U.S. beginning sometime in 2028 or earlier under certain circumstances. We are
currently engaged in Paragraph IV litigation with certain Teva entities in respect of the last to expire patent covering VIVITROL in the U.S. For a
discussion of these legal proceedings, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this
Annual Report and for information regarding the risks relating to these legal proceedings, see “Item 1A—Risk Factors” in this Annual Report and
specifically the section entitled “Risks Related to our Intellectual Property—We or our licensees may face claims against IP rights covering our products
and competition from generic drug manufacturers”. A number of companies currently market and/or are developing products to treat schizophrenia and/or
bipolar I disorder that may compete with and negatively impact future sales of ARISTADA, ARISTADA INITIO and LYBALVI. Increased competition
may lead to reduced unit sales of ARISTADA, ARISTADA INITIO and LYBALVI and increased pricing pressure. The latest to expire of our patents
covering ARISTADA, ARISTADA INITIO and LYBALVI in the U.S. will expire in 2039, 2039 and 2032, respectively; and, as such, we do not anticipate
any generic versions of these products to enter the market in the near term. We expect our product sales, net will continue to grow as VIVITROL continues
to penetrate the alcohol dependence and opioid dependence markets in the U.S., as ARISTADA and ARISTADA INITIO continue to gain market share in
the U.S., and as we continue the commercial launch of LYBALVI.
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Manufacturing and Royalty Revenues
Manufacturing revenue from RISPERDAL CONSTA and VUMERITY are recognized at the point in time that the product has been fully
manufactured. Manufacturing revenues for third-party products using our proprietary technologies are mostly recognized over time as products move
through the manufacturing process, using an input method based on costs as a measure of progress. Royalties earned on our licensees’ net sales of third-
party products using our proprietary technologies are generally recognized in the period such products are sold by our licensees. The following table
compares manufacturing and royalty revenues earned in the years ended December 31, 2022 and 2021:
(In millions)
Manufacturing and royalty revenues:
Long-acting INVEGA products
VUMERITY
RISPERDAL CONSTA
Other
Manufacturing and royalty revenues
Year Ended December 31,
2022
2021
Change
$
$
115.7
115.5
49.9
50.9
332.0
$
$
303.1
87.4
50.9
100.4
541.8
$
$
(187.4)
28.1
(1.0)
(49.5)
(209.8)
Our agreements with Janssen related to the long-acting INVEGA products provide for tiered royalty payments, which consist of a patent royalty and
a know-how royalty, both of which 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 the last of the patents with valid claims applicable to the product in such country. The know-how royalty is a tiered royalty of
3.5% on calendar year net sales up to $250 million; 5.5% on calendar year net sales of between $250 million and $500 million; and 7.5% on calendar year
net sales exceeding $500 million. The know-how royalty rate resets to 3.5% at the beginning of each calendar year and is payable until 15 years from the
first commercial sale of a product in each individual country, subject to expiry of the agreement. For more information about the license agreement with
Janssen in respect of the long-acting INVEGA products, see “Collaborative Arrangements—Janssen” in “Item 1—Business” in this Annual Report.
In November 2021, we received notice of partial termination of our license agreement with Janssen under which we provided Janssen with rights to,
and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound technology, known as NanoCrystal technology,
which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, and INVEGA HAFYERA/BYANNLI. The partial
termination became effective in February 2022, at which time Janssen ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA
TRINZA and INVEGA HAFYERA in the U.S. In April 2022, we commenced binding arbitration proceedings related to, among other things, Janssen’s
partial termination of this license agreement and Janssen’s royalty and other obligations under the agreement. On December 21, 2022, we received the
Interim Award for these proceedings from the Tribunal, in which the Tribunal agreed with our position that, while Janssen may terminate the agreement, it
may not continue to sell Products (as defined in the agreement) developed during the term of the agreement without paying royalties pursuant to the term of
the agreement. This award is not yet final. We will engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal’s issuance of a final
award. Accordingly, we have not recognized royalty revenue related to U.S. sales of long-acting INVEGA products since February 2022. For additional
information regarding the arbitration proceedings with Janssen, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated
Financial Statements” in this Annual Report. For information about risks relating to the notice of partial termination and our collaborative arrangements
more broadly, see “Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “We rely heavily on our licensees in the
commercialization and continued development of products from which we receive revenue and, if our licensees are not effective, or if disputes arise in
respect of our contractual arrangements, our revenues could be materially adversely affected.”
The decrease in royalty revenues from the long-acting INVEGA products was primarily due to Janssen’s partial termination of our license
agreement related to such products. When the partial termination of the license agreement became effective in February 2022, Janssen ceased paying
royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. and we stopped recognizing royalty revenue
related to net sales of these products. During 2022, Janssen’s rest of world net sales were $1,426.0 million, as compared to $1,472.0 million during 2021.
We expect royalty revenues from net sales of XEPLION, TREVICTA and BYANNLI to decrease over time. The amount, timing and duration of royalty
revenues from sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA depend upon the outcome of our dispute with Janssen related
to the impact of its partial termination of our license agreement on its obligations to continue to pay us know-how royalties in accordance with the terms of
the agreement.
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In addition, each of INVEGA SUSTENNA and INVEGA TRINZA are currently subject to Paragraph IV litigation in response to companies seeking
to market generic versions of such products. Increased competition from new products or generic versions of these products may lead to reduced unit sales
of such products and increased pricing pressure. For a discussion of these legal proceedings, see Note 17, Commitments and Contingent Liabilities in the
“Notes to Consolidated Financial Statements” in this Annual Report, and for information about risks relating to these legal proceedings, see “Item 1A—
Risk Factors” in this Annual Report, and specifically the section entitled “We or our licensees may face claims against IP rights covering our products and
competition from generic drug manufacturers.”
We recognize manufacturing revenue for RISPERDAL CONSTA at the point in time when RISPERDAL CONSTA has been fully manufactured,
which is deemed to have occurred when the product is approved for shipment by both us and Janssen. We record royalty revenue, equal to 2.5% of
Janssen’s end-market net sales, in the period that the end-market sales of RISPERDAL CONSTA occur. The decrease in revenue from RISPERDAL
CONSTA was primarily due to a decrease of $3.2 million in royalty revenue, partially offset by a $2.2 million increase in manufacturing revenue. This
decrease in royalty revenue was due to a decrease in end-market sales of RISPERDAL CONSTA, which was $485.0 million during 2022, as compared to
$592.0 million during 2021. The increase in manufacturing revenue was primarily due to an increase in the number of units approved for shipment to
Janssen. We expect revenues from RISPERDAL CONSTA to decrease over time. The latest to expire patent covering RISPERDAL CONSTA expired in
2021 in the EU and expired in January 2023 in the U.S., and we are aware of potential generic competition for RISPERDAL CONSTA that may lead to
reduced unit sales and increased pricing pressure.
We receive a 15% royalty on worldwide net sales of VUMERITY for product manufactured and packaged by us, subject to increases for
VUMERITY manufactured and/or packaged by Biogen or its designees, in the period that the end-market sales of VUMERITY occur. We also recognize
manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and, to the extent we
package such product, then also when packaged batches of VUMERITY are made available to Biogen. The increase in revenue from VUMERITY was due
to increases of $6.7 million and $21.4 million in manufacturing revenue and royalty revenue, respectively. The increase in manufacturing revenue was due
to an increase in the number of packaged batches that were manufactured for Biogen, partially offset by a manufacturing issue related to VUMERITY,
which, for a period during 2022, negatively impacted the number of commercial batches we were able to manufacture. The increase in royalty revenue was
due to an increase in net sales of VUMERITY, which were $553.4 million during 2022, as compared to $410.0 million during 2021.
The decrease in other manufacturing and royalty revenue was primarily due to the decision from an arbitration panel in October 2022, which found
that we must return to Acorda $16.5 million (inclusive of prejudgment interest and administrative fees) previously paid by Acorda under a license
agreement between the Company and Acorda. In November 2022, the panel found that we must pay to Acorda an additional $1.8 million (inclusive of
prejudgment interest). These amounts represent a portion of the royalty revenue paid to us by Acorda since July 2020 related to AMPYRA. We paid the
$16.5 million in October 2022 and paid the additional $1.8 million in December 2022. In addition, during the three months ended June 30, 2022, we had
recorded $3.2 million of royalty revenue related to AMPYRA as we believed that we had met the necessary revenue recognition criteria under the Financial
Accounting Standards Board Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”). However, as a result of the
arbitration ruling, we reversed the $3.2 million as the panel found that we were no longer entitled to be paid those royalties. During the three months ended
September 30, 2022, we recorded both the approximately $18.3 million in repayments and the $3.2 million reversal as reversals of royalty revenue within
“Manufacturing and royalty revenue” in the accompanying consolidated statements of operations and comprehensive loss. As a result of the arbitration
ruling, we no longer have a contractual obligation to manufacture and supply AMPYRA or a contractual right to receive future manufacturing or royalty
revenue related to AMPYRA. In January 2023, Acorda filed a petition with the U.S. District Court for the Southern District of New York asking the court
to confirm in part and modify in part the final arbitral award rendered by the arbitration panel in October 2022 and, as part of the requested modification,
seeking an additional approximately $66.0 million in damages. We intend to contest this petition and believe it is without merit.
Certain of our manufacturing and royalty revenues are earned in countries outside of the U.S. and are denominated in currencies in which the
product is sold. See “Item 7A—Quantitative and Qualitative Disclosures about Market Risk” in this Annual Report for information on currency exchange
rate risk related to our revenues and “Item 1A—Risk Factors” in this Annual Report, and specifically the section entitled “Currency exchange rates may
affect revenues and expenses” for risks related to currency exchange rates.
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Costs and Expenses
Cost of Goods Manufactured and Sold
(In millions)
Cost of goods manufactured and sold
Year Ended December 31,
2022
2021
Change
$
218.1 $
197.4 $
20.7
The increase in cost of goods manufactured and sold was primarily due to increases of $6.4 million and $4.8 million, respectively, in the cost of
goods manufactured for VUMERITY and RISPERDAL CONSTA and increases of $5.6 million and $10.2 million, respectively, in the cost of goods sold
for VIVITROL and LYBALVI. The increases related to VUMERITY and RISPERDAL CONSTA were primarily due to increased manufacturing activity,
as discussed above. The increase related to LYBALVI was primarily due to the increase in sales activity, as discussed above. The increase related to
VIVITROL was primarily due to an increase in costs incurred for out-of-specification batches, as well as an increase in sales activity, as discussed above.
Research and Development Expenses
For each of our R&D programs, we incur both external and internal expenses. External R&D expenses include fees for clinical and non-clinical
activities performed by CROs, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party
manufacturing development activities. Internal R&D expenses include employee-related expenses, occupancy costs, depreciation and general overhead. We
track external R&D expenses for each of our development programs; however, internal R&D expenses are not tracked by individual program as they can
benefit multiple programs or our technologies in general.
The following table sets forth our external R&D expenses for the years ended December 31, 2022 and 2021 relating to our then-current development
programs and our internal R&D expenses, listed by the nature of such expenses:
(In millions)
External R&D expenses:
Development programs:
nemvaleukin
LYBALVI
ALKS 1140
Other external R&D expenses
Total external R&D expenses
Internal R&D expenses:
Employee-related
Occupancy
Depreciation
Other
Total internal R&D expenses
Research and development expenses
Year Ended December 31,
2022
2021
Change
$
$
77.8 $
23.1
3.5
76.1
180.5
159.0
17.8
12.0
24.5
213.3
393.8 $
80.1 $
26.0
29.3
65.7
201.1
148.6
19.5
12.2
25.1
205.4
406.5 $
(2.3)
(2.9)
(25.8)
10.4
(20.6)
10.4
(1.7)
(0.2)
(0.6)
7.9
(12.7)
These amounts are not necessarily predictive of future R&D expenses. In an effort to allocate our spending most effectively, we continually evaluate
our products under development based on the performance of such products in preclinical and/or clinical trials, our expectations regarding the likelihood of
their regulatory approval and our view of their future potential commercial viability, among other factors.
The decrease in expenses related to nemvaleukin was primarily due to decreased spend on the ARTISTRY-1 study, partially offset by increased
spend on the ARTISTRY-7 study. For additional detail on the ARTISTRY development program for nemvaleukin, see “Item 1—Business” in this Annual
Report and specifically the section entitled “Key Development Program – nemvaleukin alfa”. The decrease in expenses related to LYBALVI was primarily
due to decreased R&D activities for the product in light of its commercial launch in October 2021, partially offset by continued spend on ongoing clinical
studies. The decrease in expenses related to ALKS 1140 was primarily due to the termination of the ALKS 1140 clinical development program in the
second quarter of 2022, as the initial data did not support further clinical development, and a $25.0 million development milestone in the third quarter of
2021 related to the submission of a clinical trial authorization for ALKS 1140. The increase in other external R&D expenses was primarily due to an
increase of $10.2 million related to our early-stage development programs.
The increase in employee-related expense was primarily related to an increase of $5.5 million in labor and benefits, primarily due to increases in
recruitment costs and temporary labor and an increase of $3.2 million in R&D-related share-based compensation, primarily due to an increase in the fair
value of the awards granted in 2022.
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Selling, General and Administrative Expenses
(In millions)
Selling and marketing expense
General and administrative expense
Selling, general and administrative expense
Year Ended December 31,
2022
2021
Change
$
$
392.2 $
213.5
605.7 $
365.9 $
195.1
561.0 $
26.3
18.4
44.7
The increase in selling and marketing expense was primarily due to a $14.6 million increase in employee-related expenses due to an increase in
selling-and-marketing-related salaries and benefits and an increase of $10.0 million in marketing activity related to the commercial launch of LYBALVI.
The increase in general and administrative expense was primarily due to a $9.9 million increase in professional service fees, primarily due to
increased spend on legal fees and fees related to the proposed separation of the Company’s oncology business. We also had a $3.5 million increase in our
branded prescription drug fee due to an increase in sales of our commercialized products and a $1.9 million increase in travel and expense, primarily due to
resuming in-person meetings as travel restrictions loosened.
Amortization of Acquired Intangible Assets
(In millions)
Amortization of acquired intangible assets
Year Ended December 31,
2022
2021
Change
$
36.4 $
38.1 $
(1.7)
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 that the 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, 2022 is
expected to be approximately $35.0 million and $1.0 million in the years ending December 31, 2023 and 2024, respectively.
Other Expense, Net
(In millions)
Interest income
Interest expense
Change in the fair value of contingent consideration
Other income, net
Total other expense, net
Year Ended December 31,
2022
2021
Change
$
$
7.6 $
(13.0)
(21.8)
2.2
(25.0) $
2.4 $
(11.2)
(1.4)
0.2
(10.0) $
5.2
(1.8)
(20.4)
2.0
(15.0)
The increase in total other expense, net was primarily due to the change in the fair value of contingent consideration and an increase in interest
expense, partially offset by increases in interest income and other income, net. The change in the fair value of the contingent consideration was due to the
determination that it was unlikely that we would collect any further contingent consideration proceeds from Baudax Bio, Inc. (“Baudax”), and accordingly,
we reduced the fair value of the contingent consideration to zero, as discussed in Note 5, Fair Value, in the “Notes to Consolidated Financial Statements” in
this Annual Report. Interest expense consists primarily of interest incurred on our 2026 Term Loans. Interest income consists primarily of interest earned
on our available-for-sale investments. The increases in interest income and interest expense were primarily due to increases in interest rates. The increase in
interest expense was partially offset by a decrease in certain financing costs related to the Term Loan Refinancing completed in March 2021. The Term
Loan Refinancing is discussed in Note 11, Long-Term Debt in the “Notes to Consolidated Financial Statements” in this Annual Report. The increase in
other income, net was primarily due to proceeds received in connection with the Company’s investment in Fountain Healthcare Partners II, L.P. of Ireland
(“Fountain”) in March 2022, partially offset by the write down of certain construction in progress due to the determination that certain construction in
progress related to our agreement with Baudax had no future value, as discussed in Note 7, Property, Plant and Equipment, in the “Notes to Consolidated
Financial Statements” in this Annual Report. The Fountain investment is discussed in Note 4, Investments, in the “Notes to Consolidated Financial
Statements” in this Annual Report.
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Income Tax (Benefit) Provision
(In millions)
Income tax (benefit) provision
Year Ended December 31,
2022
2021
Change
$
(9.0) $
8.9 $
(17.9)
The income tax benefit in 2022 was primarily due to an enhanced foreign derived intangible income deduction that resulted from a change to
Section 174 of the Tax Cuts and Jobs Act in relation to capitalization and amortization of R&D expenses. The income tax provision in 2021 was primarily
due to U.S. federal and state taxes on income earned in the U.S. and the tax impact of employee equity activity. No provision for income tax has been
provided on undistributed earnings of our foreign subsidiaries because such earnings are indefinitely reinvested in the foreign operations. Cumulative
unremitted earnings of overseas subsidiaries totaled approximately $812.8 million at December 31, 2022. In the event of a repatriation of those earnings in
the form of dividends or otherwise, we may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes
payable to foreign tax authorities. We estimate that approximately $55.0 million of income taxes would be payable on the repatriation of the unremitted
earnings to Ireland.
As of December 31, 2022, we had $1.7 billion of Irish NOL carryforwards, $15.1 million of U.S. federal NOL carryforwards, $43.2 million of state
NOL carryforwards, $5.7 million of federal R&D credits and $29.0 million of state tax credits which will either expire on various dates through 2042 or
can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and tax.
These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities and may be subject to limitations
based upon changes in the ownership of our ordinary shares.
As discussed in “Item 1A—Risk Factors” in this Annual Report and specifically the section entitled “Changes in tax rules and regulations, or
interpretations thereof, may adversely affect our financial condition”, effective in 2022, the Tax Cuts and Jobs Act of 2017 requires us to capitalize, and
subsequently amortize R&D expenses over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted
outside of the U.S. In 2022, this resulted in a material increase to our U.S. income tax liability and net deferred tax assets and a material decrease to our
cash flows provided from operations. We expect an impact from this legislative change throughout the amortization period.
In December 2022, the EU agreed to implement a corporate minimum tax rate of 15% on companies with combined annual revenue of at least
€750.0 million. The Irish government will be required to transpose these rules into Irish legislation. The new rules are expected to come into effect on
January 1, 2024. The Company is currently monitoring these developments and assessing the potential impact.
Liquidity and Capital Resources
Our financial condition is summarized as follows:
(In millions)
Cash and cash equivalents
Investments—short-term
Investments—long-term
Total cash and investments
Outstanding borrowings—short and long-term
U.S.
December 31, 2022
Ireland
Total
U.S.
December 31, 2021
Ireland
Total
$
$
$
208.4 $
207.6
70.3
486.3 $
293.3 $
84.1 $
108.4
61.3
253.8 $
— $
292.5 $
316.0
131.6
740.1 $
293.3 $
88.6 $
144.5
163.0
396.1 $
295.8 $
248.9 $
54.3
66.4
369.6 $
— $
337.5
198.8
229.4
765.7
295.8
At December 31, 2022, our investments consisted of the following:
(In millions)
Investments—short-term available-for-sale
Investments—long-term available-for-sale
Investments—long-term held-to-maturity
Total
Gross
Unrealized
Gains
Losses
Allowance for
Credit Losses
Estimated
Fair Value
— $
—
—
— $
(4.6) $
(4.8)
—
(9.4) $
— $
—
—
— $
316.0
129.8
1.8
447.6
Amortized
Cost
$
$
320.6 $
134.6
1.8
457.0 $
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Sources and Uses of Cash
We generated $21.0 million and $101.7 million of cash from operating activities during the years ended December 31, 2022 and 2021, respectively.
We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash
requirements, such as capital expenditures and principal and interest payments on our long‑term debt, for at least the twelve months following the date
from which our financial statements were issued. Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain
additional financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other
financing methods or structures. In addition, the 2026 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional
potential amounts provided that 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 in
our cash reserves by maintaining a well-diversified portfolio that limits the amount of investment exposure as to institution, maturity and investment type.
However, the value of these securities may be adversely affected by the instability of the global financial markets, which could, in turn, adversely impact
our financial position and our overall liquidity. Our available-for-sale investments consist primarily of short and long-term U.S. government and agency
debt securities, corporate debt securities and debt securities issued and backed by non-U.S. governments. Our held-to-maturity investments consist of
investments that are held as collateral under certain letters of credit related to certain of our lease agreements.
We classify available‑for‑sale investments in an unrealized loss position that do not mature within 12 months as long‑term investments. We have the
intent and 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
these securities before recovery of their amortized cost.
We have no off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources in the next twelve months. As discussed above,
we made a $25.0 million development milestone payment to the former shareholders of Rodin Therapeutics, Inc. (“Rodin”) during the year ended
December 31, 2021. We are obligated to make up to $825.0 million in future payments, $225.0 million of which would be triggered upon achievement of
certain specified clinical milestones, $300.0 million of which would be triggered by the achievement of certain regulatory milestones and $325.0 million of
which would be triggered upon the attainment of certain sales thresholds. At December 31, 2022, we had not recorded a liability related to these milestone
payments as none of the future events that would trigger a milestone payment were considered probable of occurring.
Information about our cash flows, by category, is presented in the accompanying consolidated statements of cash flows. The following table
summarizes our cash flows for the years ended December 31, 2022 and 2021:
(In millions)
Cash and cash equivalents, beginning of period
Cash flows provided by operating activities
Cash flows used in investing activities
Cash flows (used in) provided by financing activities
Cash and cash equivalents, end of period
Operating Activities
Year Ended December 31,
2022
2021
$
$
337.5 $
21.0
(64.4)
(1.6)
292.5 $
273.0
101.7
(66.2)
29.0
337.5
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing
activities. We expect cash provided from operating activities will continue to be our primary source of funds to finance operating needs and capital
expenditures for the foreseeable future. Operating cash flow is derived by adjusting our net loss for non-cash operating items such as depreciation,
amortization and share-based compensation as well as changes in operating assets and liabilities, which reflect timing differences between the receipt and
payment of cash associated with transactions and when they are recognized in our results of operations.
The decrease in cash flows provided by operating activities was primarily due to an increase in our net loss of $110.1 million and an increase in cash
used for our lease liabilities of $15.3 million related to an early payment of our lease of approximately 231,000 square feet of office and laboratory space
located at 900 Winter Street in Waltham, Massachusetts. Please refer to Note 9, Leases, in the “Notes to Consolidated Financial Statements” in this Annual
Report for additional information related to such early payment. These were partially offset by an increase in the cash provided by working capital,
primarily due to an increase in cash provided by receivables of $63.3 million and from accounts payable and accrued expenses of $4.0 million.
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Investing Activities
The decrease in cash flows used in investing activities was primarily due to a $17.4 million decrease in net purchase of investments and a $6.7
million decrease in payments received in connection with the contingent consideration resulting from the Gainesville Transaction, partially offset by a
$10.2 million increase in capital expenditures.
We expect to spend approximately $35.0 million to $40.0 million during the year ending December 31, 2023 for capital expenditures. We continue
to evaluate our manufacturing capacity based on expectations of demand for the products that we manufacture and will continue to record such amounts
within construction in progress until such time as the underlying assets are placed into service, or we determine we have sufficient existing capacity and the
assets are no longer required, at which time we would recognize an impairment charge. We continue to periodically evaluate whether facts and
circumstances indicate that the carrying value of these long‑lived assets to be held and used may not be recoverable.
Financing Activities
The change in cash flows from financing activities was primarily due to $23.6 million in proceeds from the Term Loan Refinancing, which we
received in 2021, and a $7.3 million decrease in the amount of cash that we received upon the exercise of employee stock options, net of employee taxes.
Debt
At December 31, 2022, our borrowings consisted of $294.8 million outstanding under the 2026 Term Loans. The 2026 Term Loans bear interest at
LIBOR plus 2.5%, with a LIBOR floor of 0.5%. Principal payments of $0.8 million are to be made quarterly through 2025, with a final payment of $285.8
million due in March 2026. Please refer to Note 11, Long‑Term Debt, in the “Notes to Consolidated Financial Statements” in this Annual Report for a
discussion of our outstanding term loans.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are
required to make assumptions and estimates about future events, and apply judgments based on historical experience, current trends and other factors that
management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review these accounting policies,
assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future
events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be
material.
Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the “Notes to Consolidated Financial
Statements” in this Annual Report. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our
reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects
of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the audit and risk committee of
our board of directors.
Revenue from Contracts with Customers
When entering into arrangements with customers, we identify whether our performance obligations under each arrangement represent a distinct
good or 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 each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each
performance obligation. The fair value of performance obligations under each arrangement may be derived using an estimate of selling price if we do not
sell the 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. Management
judgment is required in determining the consideration to be earned under an arrangement and the period over which we are expected to complete our
performance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory and that are determined to be
performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the
level of effort required in an arrangement and the period over which we expect to complete our aggregate performance obligations.
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Product Sales, Net
Our product sales, net consist of sales in the U.S. of VIVITROL, ARISTADA, ARISTADA INITIO and, following its commercial launch in October
2021, LYBALVI, primarily to wholesalers, specialty distributors and pharmacies. 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
our customers, healthcare providers or payers. Our process for estimating reserves established for these variable consideration components does not differ
materially from historical practices. The transaction price, which includes variable consideration reflecting the impact of discounts 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 of the amount of the cumulative
revenues recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these
estimates, 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 U.S. states under the Medicaid Drug Rebate Program as a reduction of sales when the
product is shipped into the distribution channel using the expected value. We rebate individual U.S. states for all eligible units purchased
under the Medicaid program based on a rebate per unit calculation, which is based on our average manufacturer prices. We estimate expected
unit sales to individuals covered by Medicaid and rebates per unit under the Medicaid program and adjust our rebate accrual based on actual
unit sales and rebates per unit and changes in trends in Medicaid utilization. To date, actual Medicaid rebates have 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 generally
charges back to us the difference between the wholesale acquisition cost and the contracted price paid to the wholesaler or specialty
distributor by the customer. The allowance for chargebacks is made using the expected value and is based on actual and expected utilization
of these programs. Chargebacks could exceed historical experience and our estimates of future participation in these programs. To date, actual
chargebacks 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
the expected value and to date, actual product discounts have not differed materially from our estimates;
Product Returns—we record an estimate for product returns at the time our customers take control of our product. We estimate this liability
using the expected returns of product sold based on our historical return levels and specifically identified anticipated returns due to known
business conditions and product expiry dates. Return amounts are recorded as a reduction of sales. Once product is returned, it is destroyed;
and
• Medicare Part D—we record 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 Centers for Medicare and Medicaid Services, manufacturers are
responsible for reimbursement of prescription plan sponsors for the portion of out-of-pocket expenses not covered under their Medicare
plans.
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A rollforward of our provisions for sales and allowances is as follows:
(In millions)
Balance, December 31, 2020
Provision:
Current year
Prior year
Total
Actual:
Current year
Prior year
Total
Balance, December 31, 2021
Provision:
$
Current year
Prior year
Total
Actual:
Current year
Prior year
Total
Balance, December 31, 2022
$
Manufacturing Revenue
Medicaid
Rebates
$
182.0
Chargebacks
4.3
$
$
Product
Discounts
Product
Returns
Medicare Part
D
Other
Total
14.4
$
23.7
$
12.9
$
10.0
$
247.3
344.3
(12.4)
331.9
(173.5)
(145.0)
(318.5)
195.4 $
366.1
(22.1)
344.0
(186.5)
(144.6)
(331.1)
208.3 $
129.1
—
129.1
(124.4)
(3.4)
(127.8)
5.6 $
157.2
—
157.2
(149.9)
(4.1)
(154.0)
8.8 $
107.0
—
107.0
(85.1)
(17.8)
(102.9)
18.5 $
124.1
—
124.1
(103.0)
(22.3)
(125.3)
17.3 $
11.4
(1.0)
10.4
(9.7)
—
(9.7)
24.4 $
15.9
3.2
19.1
(13.8)
—
(13.8)
29.7 $
59.8
—
59.8
(47.6)
(10.8)
(58.4)
14.3 $
68.1
—
68.1
(51.1)
(12.9)
(64.0)
18.4 $
49.5
—
49.5
(39.3)
(10.6)
(49.9)
9.6 $
58.8
—
58.8
(48.8)
(11.6)
(60.4)
8.0 $
701.1
(13.4)
687.7
(479.6)
(187.6)
(667.2)
267.8
790.2
(18.9)
771.3
(553.1)
(195.5)
(748.6)
290.5
We recognize manufacturing revenues from the sale of products we manufacture for resale by our licensees. Manufacturing revenues for our
partnered products, with the exception of those from Janssen related to RISPERDAL CONSTA and from Biogen related to VUMERITY, are recognized
over time as products move through the manufacturing process, 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 recognize manufacturing revenue from these products over time as we determined, in each instance,
that we would have a right to payment for performance completed to 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.
We are the exclusive manufacturer of RISPERDAL CONSTA for commercial sale under our manufacturing and supply agreement with Janssen. We
determined that it is appropriate to record revenue under this agreement at the point in time when control of the product passes to Janssen, which is
determined to be when the product has been fully manufactured, since Janssen does not control the product during the manufacturing process and, in the
event Janssen terminates the manufacturing and supply agreement, it is uncertain whether, and at what amount, we would be reimbursed for performance
completed to date for product not yet fully manufactured. The manufacturing process is considered fully complete once the finished goods have been
approved for shipment by both us and Janssen.
We recognize manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and,
to the extent we package such product, then also when packaged batches of VUMERITY are made available to Biogen. Control of the product passes to
Biogen when VUMERITY, in either bulk or finished form, is made available to Biogen.
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
generally occur after we have recorded manufacturing revenue, we estimate the sales price for such products based on information supplied to us by our
licensees, our historical transaction experience and other third-party data. Differences between actual manufacturing revenues and estimated manufacturing
revenues are reconciled and adjusted for in the period in which they become known, which is generally within the same quarter. The differences between
our actual and estimated manufacturing revenues have not been material to date.
Royalty Revenue
We recognize royalty revenues related to the sale by our licensees of products that incorporate our technology. Substantially all of our royalties
qualify for the sales-and-usage exemption under Topic 606 as (i) such 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, such royalties are earned in the period the products are sold by
our licensee and we have a present right to payment.
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Certain of our royalty revenues are recognized based on information supplied to us by our licensees and require estimates to be made. 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 differences between our actual and estimated royalty revenues have not been material to date.
Research and Development Revenue and License Revenue
Research and development revenue consists of funding that compensates us for formulation, preclinical and clinical testing under research and
development arrangements with our partners. We generally bill our partners under such arrangements using a full-time equivalent or hourly rate, plus direct
external costs, if any. Revenue is recognized as the obligations under the arrangements are performed.
We recognize revenue from the grant of distinct, right-to-use licenses of IP when control of the license is transferred to our licensee, which is the
point in time that the licensee is able to direct the use of and obtain substantially all of the benefits from the license.
Amortization and Impairment of Long‑Lived Assets
Long‑lived assets, other than goodwill which is separately tested for impairment, are evaluated for impairment whenever events or changes in
circumstances indicate the carrying value of an asset may not be recoverable. When evaluating long‑lived assets for potential impairment, we first compare
the 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
less than 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’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if
the amount 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
asset becomes 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
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Our impairment loss calculations contain uncertainties
because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting
useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.
Our amortizable intangible assets consist of IP and are being amortized as revenue is generated from products utilizing the IP, which we refer to as
the economic benefit amortization model. This amortization methodology involves calculating a ratio of actual current period sales to total anticipated sales
for the life of the product and applying this ratio 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
earned by products utilizing the capitalized IP from the date of acquisition to the end of their respective useful lives. The factors used to estimate such
future revenues included: (i) our and our licensees’ projected future sales of the existing commercial products based on these intangible assets; (ii) our
projected future sales of new products based on these intangible assets which we anticipate will be launched commercially; (iii) the patent lives of the
technologies underlying such existing and new products; and (iv) our expectations regarding the entry of generic and/or other competing products into the
markets for such existing and new products. These factors involve known and unknown risks and uncertainties, many of which are beyond our control and
could cause the actual economic benefits of these intangible assets to be materially different from our estimates.
Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet at December 31, 2022, is
expected to be approximately $35.0 million and $1.0 million in the years ending December 31, 2023 and 2024, respectively. Although we believe such
available information and assumptions are reasonable, given the inherent risks and uncertainties underlying our expectations regarding such future
revenues, there is the potential for our actual results to vary significantly from such expectations. If revenues are projected to change, the related
amortization of the intangible asset will change in proportion to the change in revenue.
If there are any indications that the assumptions underlying our most recent analysis would be different than those utilized within our current
estimates, our analysis would be updated and may result in a significant change in the anticipated lifetime revenue of the products associated with our
amortizable intangible assets. For example, the occurrence of an adverse event could substantially increase the amount of amortization expense associated
with our acquired intangible assets as compared to previous periods or our current expectations, which may result in a significant negative impact on our
future results of operations.
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Goodwill
We evaluate goodwill for impairment for our reporting units annually, as of October 31, and whenever events or changes in circumstances indicate
the carrying value of the reporting units may not be recoverable. A reporting unit is an operating segment, as defined by GAAP, or a component of an
operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial
information is available and is reviewed by management. Two or more components of an operating segment may be aggregated and deemed a single
reporting unit for goodwill impairment testing purposes if the components have similar economic characteristics. As of December 31, 2022, we have one
operating segment and two reporting units. Our goodwill, which solely relates to the Business Combination, has been assigned to one reporting unit which
consists 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 this
option 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 carrying
amount, the quantitative impairment test is required; otherwise, no further testing is required. Among other relevant events and circumstances that affect the
fair value of reporting units, we consider individual factors, such as microeconomic conditions, changes in the industry and the markets in which we
operate as well as historical and expected future financial performance. Alternatively, we may elect to not first assess qualitative factors and instead
immediately perform the quantitative impairment test.
On October 31, 2022, we elected to perform a qualitative impairment test and determined that based on the weight of all available evidence, the fair
value of the reporting unit more-likely-than-not exceeded its carrying value.
Contingent Consideration
We record contingent consideration that we are entitled to receive related to the sale of a business at fair value on the acquisition date. We estimate
the fair value of contingent consideration through valuation models that incorporate probability-adjusted assumptions related to the achievement of
milestones and the corresponding likelihood of receiving related payments. We revalue our contingent consideration each reporting period, with changes in
the fair value of contingent consideration recognized within the consolidated statements of operations and comprehensive loss. Changes in the fair value of
contingent consideration can result from changes to one or multiple assumptions, including adjustments to the discount rates, changes in the amount and
timing of cash flows, changes in the assumed achievement and timing of any development and sales-based milestones, changes in the assumed probability
associated with regulatory approval and changes in the probability of collection or default on portions of the contingent consideration due to us.
These fair value measurements are based on significant inputs, including inputs not observable in the market. 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 consideration recorded in any given period.
Valuation of Deferred Tax Assets
We evaluate the need for deferred tax asset valuation allowances based on a more‑likely‑than‑not standard. The ability to realize deferred tax assets
depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax
jurisdiction. 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 evidence
factors 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.
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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 our
financial 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” in this Annual Report and specifically the section entitled
“Our deferred tax assets may not be realized.”
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies, “New Accounting Pronouncements” in our “Notes to Consolidated Financial
Statements” in this Annual Report for a discussion of new accounting standards.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We hold securities in our investment portfolio that are sensitive to market risks. Our securities with fixed interest rates may have their market value
adversely 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 these
factors, our future investment income may fall short of expectations due to a fall in interest rates or we may suffer losses in principal if we are forced to sell
securities 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 be other‑than‑temporary. Should interest rates fluctuate by 10%, our interest income would change by an immaterial amount over an
annual period. We do not believe that we have a material exposure to interest rate risk as our investment policies specify credit quality standards for our
investments and limit the amount of credit exposure from any single issue, issuer or type of investment.
Although we have seen a significant increase in the number of our investment securities in unrealized loss positions, we do not believe our exposure
to liquidity and credit risk to be significant as approximately 47% and 45% of our investments at December 31, 2022 are in corporate debt securities with a
minimum rating of A2 (Moody’s)/A (Standard and Poor’s) and debt securities issued by the U.S. government or its agencies, respectively. We have the
intent and ability to hold these securities until recovery, which may be at maturity.
At December 31, 2022, our borrowings consisted of $294.8 million outstanding under the 2026 Term Loans. The 2026 Term Loans bear interest at
the one-, three- or six-month LIBOR rate of our choosing, plus 2.5% with a 0.5% LIBOR floor. We are currently using the one-month LIBOR rate, which
was 4.32% at December 31, 2022. A 10% increase in the one-month LIBOR rate would have increased the amount of interest we owed by approximately
$1.3 million. At December 31, 2021, a 10% increase in the three-month LIBOR rate, which was the LIBOR rate in use at the time, would not have
increased the amount of interest we owed under this agreement as the LIBOR floor of 0.5% was higher than the then-current LIBOR rate of 0.21% plus
10%.
In 2017, the U.K. Financial Conduct Authority announced its intention to phase out LIBOR after 2023. Currently, it is anticipated that LIBOR will
be completely phased out by June 30, 2023. On July 29, 2021, the ARRC, a steering committee comprised of large U.S. financial institutions, formally
recommended SOFR as its preferred alternative replacement rate for USD LIBOR. The 2026 Term Loans contain customary ARRC hardwired benchmark
replacement language to transition from LIBOR to SOFR. At this time, it is not possible to predict the effect that the anticipated discontinuance of LIBOR,
or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs. SOFR is a relatively new reference rate and its
composition and characteristics are not the same as LIBOR. Given SOFR’s very limited history and potential volatility as compared to other benchmark or
market rates, the future performance of SOFR cannot be predicted based on historical performance. The consequences of using SOFR could include an
increase in the cost of our variable rate indebtedness. We are monitoring these transition efforts and, although the 2026 Term Loans contain provisions
designed to accommodate an alternate reference rate, we may need to amend these and other contracts to accommodate any replacement rate. The potential
effect of any such event on our cost of capital cannot yet be determined, but we do not expect it to have a material impact on our consolidated financial
condition, results of operations, or cash flows. For a discussion about risks relating to LIBOR, see “Item 1A—Risk Factors” in this Annual Report and
specifically the section entitled “Discontinuation, reform or replacement of LIBOR and SOFR, or uncertainty related to the potential for any of the
foregoing, may adversely affect us.”
Currency Exchange Rate Risk
Manufacturing and royalty revenues that we receive on certain of our products and services are a percentage of the net sales made by our licensees,
and a portion 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 into USD to determine the amount that our licensees pay us
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Table of Contents
for manufacturing and royalty revenues. Fluctuations in the exchange ratio of the USD and these non‑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. For example, 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 the year ended December 31, 2022, an average 10%
strengthening of the USD relative to the currencies in which these products are sold would have resulted in revenues being reduced by approximately $1.1
million, as compared to a reduction in revenues of approximately $33.1 million for the year ended December 31, 2021.
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
and payables 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-denominated
revenues 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 on
operating expenses and payables incurred at our Irish operations that are settled in euro. For the year ended December 31, 2022, an average 10% weakening
in the USD relative to the euro would have resulted in an increase to our expenses denominated in euro of approximately $7.5 million, as compared to an
increase in our expenses of approximately $8.3 million in the year ended December 31, 2021.
Item 8. Financial Statements and Supplementary Data
All financial statements required to be filed hereunder are filed as exhibits hereto, are listed under Item 15(a)(1) below and are incorporated herein
by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures and Internal Control Over Financial Reporting
Controls and Procedures
Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act), as of December 31, 2022. Based upon that
evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure
controls and procedures were effective to provide reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and
(b) such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management
recognized that any 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 Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our 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
under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the
issuer’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements 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
the issuer;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors
of the issuer; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets
that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. 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, 2022, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report, which is included in this Annual Report, beginning on page F-1.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2023 annual general meeting of
shareholders.
Item 11. Executive Compensation
The information required by this item (excluding, for clarity, the information required by Item 402(v) of Regulation S-K) is incorporated herein by
reference to our definitive proxy statement for our 2023 annual general meeting of shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2023 annual general meeting of
shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2023 annual general meeting of
shareholders.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2023 annual general meeting of
shareholders.
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Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)(1) Consolidated Financial Statements—The consolidated financial statements of Alkermes plc, as required by this item, are submitted in a
separate section beginning on page F‑1 of this Annual Report, as follows:
Financial Statement
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Page Number
F-1
F-3
F-4
F-5
F-6
F-7
Financial Statement Schedules—All schedules have been omitted because the absence of conditions under which they are required or because
the required information is included in the consolidated financial statements or notes thereto.
The exhibits listed in the below Exhibit Index are filed or furnished as part of this Annual Report or are incorporated into this Annual Report
by reference.
(2)
(3)
Exhibit No.
2.1 *
2.1-1
2.1-2
2.1-3
2.2 **
EXHIBIT INDEX
Description of Exhibit
Purchase and Sale Agreement, dated March 7, 2015, by and among
Alkermes Pharma Ireland Limited, Daravita Limited, Eagle Holdings
USA, Inc., Recro Pharma, Inc., and Recro Pharma LLC (assigned by
Recro to Baudax Bio, Inc. in November 2019).
First Amendment to Purchase and Sale Agreement, dated December 8,
2016 by and among Alkermes Pharma Ireland Limited, Daravita Limited,
Eagle Holdings USA, Inc., Recro Pharma, Inc., and Recro Gainesville
LLC (assigned by Recro to Baudax Bio, Inc. in November 2019).
Second Amendment to Purchase and Sale Agreement, dated December 20,
2018, by and among Alkermes Pharma Ireland Limited, Daravita Limited,
Alkermes US Holdings, Inc. (as successor in interest to Eagle Holdings
USA, Inc.), Recro Pharma, Inc. and Recro Gainesville LLC (assigned by
Recro to Baudax Bio, Inc. in November 2019).
Third Amendment to Purchase and Sale Agreement, dated August 17,
2020, by and among Alkermes Pharma Ireland Limited, Daravita Limited,
Alkermes US Holdings, Inc. (as successor in interest to Eagle Holdings
USA, Inc.) and Baudax Bio, Inc. (as successor in interest to Recro
Pharma, Inc. and Recro Gainesville LLC).
Agreement and Plan of Merger, dated November 14, 2019 by and among
Alkermes, Inc., Thinker Merger Sub, Inc., Alkermes plc, Rodin
Therapeutics, Inc., and Shareholder Representative Services LLC, as
Company Equityholder Representative.
3.1
Memorandum and Articles of Association of Alkermes plc.
4.1 #
10.1
10.1-1
Description of Securities.
Lease between Alkermes, Inc. and PDM Unit 850, LLC, dated as of April
22, 2009.
First Amendment to Lease between Alkermes, Inc. and PDM Unit 850,
LLC, dated as of June 18, 2009.
72
Incorporated by reference herein
Form
Exhibit 2.1 to the Alkermes plc
Current Report on Form 8-K/A
(File No. 001-35299)
Date
April 16, 2015
Exhibit 2.1.1 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
Exhibit 2.1.2 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
February 17, 2017
February 15, 2019
Exhibit 2.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
October 29, 2020
Exhibit 2.1 to the Alkermes plc
Current Report on Form 8-K (File
No. 001-35299)
November 25, 2019
Exhibit 3.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
July 27, 2022
Exhibit 10.5 to the Alkermes, Inc.
Annual Report on Form 10-K
(File No. 001-14131)
Exhibit 10.2 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
May 28, 2009
August 6, 2009
Table of Contents
Exhibit No.
10.1-2
Second Amendment to Lease between Alkermes, Inc. and PDM Unit 850,
LLC, dated as of November 12, 2013.
Description of Exhibit
Third Amendment to Lease between Alkermes, Inc. and PDM 850 Unit,
LLC, dated as of May 15, 2014.
Fourth Amendment to Lease between Alkermes, Inc. and GI TC 850
Winter Street, LLC, dated as of December 30, 2014.
Fifth Amendment to Lease between Alkermes, Inc. and GI TC 850 Winter
Street, LLC, dated as of October 31, 2018.
Sixth Amendment to Lease between Alkermes, Inc. and GI TC 850 Winter
Street, LLC, dated as of July 24, 2020.
Incorporated by reference herein
Form
Exhibit 10.74 to the Alkermes plc
Transition Report on Form 10-KT
(File No. 001-35299)
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.7 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.1.5 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Date
February 27, 2014
July 31, 2014
July 30, 2015
February 15, 2019
October 29, 2020
License Agreement, dated as of February 13, 1996, between Medisorb
Technologies International L.P. and Janssen Pharmaceutica Inc. (United
States) (assigned to Alkermes, Inc. in July 2006).
Exhibit 10.2 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
February 25, 2016
Third Amendment to Development Agreement, Second Amendment to
Manufacturing and Supply Agreement and First Amendment to License
Agreements by and between Janssen Pharmaceutica International, Janssen
Pharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. II, dated
April 1, 2000 (assigned to Alkermes, Inc. in July 2006).
Second Amendment, dated as of August 16, 2012, to the License
Agreement, dated as of February 13, 1996, as amended, by and between
Alkermes, Inc. and Janssen Pharmaceutica Inc. and the License
Agreement, dated as of February 21, 1996, as amended, by and between
Alkermes, Inc. and JPI Pharmaceutica International, and the Fifth
Amendment, dated as of August 16, 2012, to the Manufacturing and
Supply Agreement, dated as of August 6, 1997, as amended, by and
between Alkermes, Inc., Janssen Pharmaceutica Inc. and JPI
Pharmaceutica International.
License Agreement, dated as of February 21, 1996, between Medisorb
Technologies International L.P. and Janssen Pharmaceutica International
(worldwide except United States) (assigned to Alkermes, Inc. in July
2006).
Manufacturing and Supply Agreement, dated August 6, 1997, by and
among JPI Pharmaceutica International, Janssen Pharmaceutica, Inc. and
Alkermes Controlled Therapeutics Inc. II (assigned to Alkermes, Inc. in
July 2006).
Fourth Amendment to Development Agreement and First Amendment to
Manufacturing and Supply Agreement by and between Janssen
Pharmaceutica International, Janssen Pharmaceutica Products, L.P. and
Alkermes Controlled Therapeutics Inc. II, dated December 20, 2000
(assigned to Alkermes, Inc. in July 2006).
Addendum to the Manufacturing and Supply Agreement by and among
JPI Pharmaceutica International, Janssen Pharmaceutica Inc. and
Alkermes Controlled Therapeutics Inc. II, dated August 1, 2001.
Letter Agreement and Exhibits to Manufacturing and Supply Agreement,
dated February 1, 2002, by and among JPI Pharmaceutica International,
Janssen Pharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. II
(assigned to Alkermes, Inc. in July 2006).
73
Exhibit 10.5 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
February 8, 2005
Exhibit 10.3 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
November 1, 2012
Exhibit 10.3 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
Exhibit 10.4 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
February 25, 2016
February 25, 2016
Exhibit 10.4 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
February 8, 2005
Exhibit 10.4.2 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
Exhibit 10.4.3 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
February 25, 2016
February 25, 2016
10.1-3
10.1-4
10.1-5
10.1-6
10.2
10.2-1 *
10.2-2 *
10.3
10.4
10.4-1 *
10.4-2
10.4-3
Table of Contents
Exhibit No.
10.4-4 *
10.4-5 *
10.4-6 *
10.5 *
10.5-1 *
10.6 *
10.6-1 *
10.7 *
10.7-1
10.7-2 *
10.8
10.8-1
Description of Exhibit
Amendment to Manufacturing and Supply Agreement by and between JPI
Pharmaceutica International, Janssen Pharmaceutica Inc. and Alkermes
Controlled Therapeutics Inc. II, dated December 22, 2003 (assigned to
Alkermes, Inc. in July 2006).
Fourth Amendment to Manufacturing and Supply Agreement by and
between JPI Pharmaceutica International, Janssen Pharmaceutica Inc. and
Alkermes Controlled Therapeutics Inc. II, dated January 10, 2005
(assigned to Alkermes, Inc. in July 2006).
Sixth Amendment to Manufacturing and Supply Agreement by and
between 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.
Development and License Agreement, dated as of May 15, 2000, by and
between Alkermes Controlled Therapeutics Inc. II and Amylin
Pharmaceuticals, Inc., as amended on October 24, 2005 and July 17, 2006
(assigned, as amended, to Alkermes, Inc. in July 2006).
Third Amendment to Development and License Agreement, dated March
20, 2018, by and between Amylin Pharmaceuticals, LLC and Alkermes
Pharma Ireland Limited (as successor-in-interest to Alkermes Controlled
Therapeutics Inc. II), amending that certain Development and License
Agreement, by and between ACTII and Amylin, dated May 15, 2000, as
amended on October 24, 2005 and July 17, 2006.
Agreement by and between JPI Pharmaceutica International, Janssen
Pharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. II, dated
December 21, 2002 (assigned to Alkermes, Inc. in July 2006).
Amendment to Agreement by and between JPI Pharmaceutica
International, Janssen Pharmaceutica Inc. and Alkermes Controlled
Therapeutics Inc. II, dated December 16, 2003 (assigned to Alkermes, Inc.
in July 2006).
Incorporated by reference herein
Form
Exhibit 10.6 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Date
July 30, 2015
Exhibit 10.9 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
February 8, 2005
Exhibit 10.11 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
October 23, 2018
Exhibit 10.28 to the
Alkermes, Inc. Annual Report on
Form 10-K (File No. 001-14131)
May 21, 2010
Exhibit 10.3 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
April 26, 2018
Exhibit 10.6 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
Exhibit 10.7 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
February 8, 2005
February 8, 2005
License Agreement by and among Elan Pharmaceutical Research Corp.,
d/b/a Nanosystems and Elan Pharma International Limited and Janssen
Pharmaceutica N.V. dated as of March 31, 1999.
Exhibit 10.23 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
May 23, 2013
First Amendment, dated as of July 31, 2003, to the License Agreement by
and among Elan Drug Delivery, Inc. (formerly Elan Pharmaceutical
Research Corp.) and Elan Pharma International Limited and Janssen
Pharmaceutica NV dated March 31, 1999.
Agreement Amendment No. 2, dated as of July 31, 2009, to the License
Agreement by and among Elan Pharmaceutical Research Corp., d/b/a
Nanosystems and Elan Pharma International Limited and Janssen
Pharmaceutica N.V. dated as of March 31, 1999, as amended by the First
Amendment, dated as of July 31, 2003.
Amendment to First Lien Credit Agreement, dated September 25, 2012,
among Alkermes, Inc., Alkermes plc, the guarantors party thereto, the
lenders party thereto, Morgan Stanley Senior Funding, Inc. as
Administrative Agent and Collateral Agent and the arrangers and agents
party thereto.
Amendment No. 2, dated as of February 14, 2013, to Amended and
Restated Credit Agreement, dated as of September 16, 2011, as amended
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 and Collateral Agent and the
arrangers and agents party thereto.
Exhibit 10.24 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
May 23, 2013
Exhibit 10.25 to the Alkermes plc
Annual Report on Form 10-K
(File No. 001-35299)
May 23, 2013
Exhibit 10.1 to the Alkermes plc
Current Report on Form 8-K (File
No. 011-35299)
September 25, 2012
Exhibit 10.1 to the Alkermes plc
Current Report on Form 8-K (File
No. 011-35299)
February 19, 2013
74
Table of Contents
Exhibit No.
10.8-2
10.8-3
10.8-4
10.8-5
10.9 *
10.9-1 *
10.9-2
10.9-3 **
10.9-4 **
10.10
10.10-1
10.10-2
Description of Exhibit
Amendment No. 3 and Waiver to Amended and Restated Credit
Agreement, dated as of May 22, 2013, among Alkermes, Inc., Alkermes
plc, Alkermes Pharma Ireland Limited, Alkermes US Holdings, Inc.,
Morgan Stanley Senior Funding, Inc. as Administrative Agent and
Collateral Agent and the lenders party thereto.
Amendment No. 4, dated as of October 12, 2016, to Amended and
Restated Credit Agreement, dated as of September 16, 2011, as amended
and restated on September 25, 2012, as further amended by Amendment
No. 2 on February 14, 2013 and as amended by Amendment No. 3 and
Waiver to Amended and Restated Credit Agreement dated as of May 22,
2013, among Alkermes, Inc., Alkermes plc, the guarantors party thereto,
the lenders party thereto and Morgan Stanley Senior Funding, Inc. as
Administrative Agent and Collateral Agent.
Amendment No. 5, dated as of March 26, 2018, to Amended and Restated
Credit Agreement, dated as of September 16, 2011, as amended and
restated on September 25, 2012, as further amended by Amendment No. 2
on February 14, 2013, as amended by Amendment No. 3 and Waiver to
Amended and Restated Credit Agreement dated as of May 22, 2013, and
as amended by Amendment No. 4, dated as of October 12, 2016, among
Alkermes, Inc., Alkermes plc, the guarantors party thereto, the lenders
party thereto and Morgan Stanley Senior Funding, Inc. as Administrative
Agent and Collateral Agent.
Amendment No. 6, dated as of March 12, 2021, to Amended and Restated
Credit Agreement, dated as of September 16, 2011, as amended and
restated on September 25, 2012, as further amended by Amendment No. 2
on February 14, 2013, as amended by Amendment No. 3 and Waiver to
Amended and Restated Credit Agreement dated as of May 22, 2013, as
amended by Amendment No. 4, dated as of October 12, 2016, and as
amended by Amendment No. 5, dated as of March 26, 2018, among
Alkermes, Inc., Alkermes plc, the guarantors party thereto, the lenders
party thereto and Morgan Stanley Senior Funding, Inc. as Administrative
Agent and Collateral Agent.
License and Collaboration Agreement, dated November 27, 2017, by and
between Alkermes Pharma Ireland Limited and Biogen Swiss
Manufacturing GmbH.
First Amendment to License and Collaboration Agreement between
Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing
GmbH, effective as of October 3, 2018.
Second Amendment to License and Collaboration Agreement between
Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing
GmbH, effective as of January 31, 2019.
Third Amendment to License and Collaboration Agreement between
Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing
GmbH, effective as of October 30, 2019.
Fourth Amendment to License and Collaboration Agreement between
Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing
GmbH, effective as of August 25, 2022.
Lease, dated March 23, 2018, by and between Alkermes, Inc. and PDM
900 Unit, LLC.
First Amendment to Lease, dated June 21, 2018, by and between
Alkermes, Inc. and PDM 900 Unit, LLC.
Second Amendment to Lease, dated May 10, 2019, by and between
Alkermes, Inc. and PDM 900 Unit, LLC.
75
Incorporated by reference herein
Form
Exhibit 10.52 to the Alkermes plc
Annual Report on Form 10-K
(File No. 011-35299)
Date
May 23, 2013
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
November 2, 2016
Exhibit 10.5 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
April 26, 2018
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
April 28, 2021
Exhibit 10.10 of the Alkermes plc
Annual Report on Form 10-K
(File No. 011-35299)
Exhibit 10.12 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.10.3 of the Alkermes
plc Annual Report on Form 10-K
(File No. 011-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.4 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
February 16, 2018
October 23, 2018
April 25, 2019
February 13, 2020
November 2, 2022
April 26, 2018
July 26, 2018
July 25, 2019
Table of Contents
Exhibit No.
10.11 †
Employment Agreement, dated as of December 12, 2007, by and between
Richard F. Pops and Alkermes, Inc.
Description of Exhibit
10.11-1 †
Amendment to Employment Agreement, dated as of October 7, 2008, by
and between Alkermes, Inc. and Richard F. Pops.
10.11-2 †
Amendment No. 2 to Employment Agreement, dated as of September 10,
2009 by and between Richard F. Pops and Alkermes, Inc.
10.12 †
Form of Employment Agreement, as amended by the Form of Amendment
to Employment Agreement set forth in 10.12.1, entered into by and
between Alkermes, Inc. and each of Blair C. Jackson and Michael J.
Landine.
10.12-1 †
Form of Amendment to Employment Agreement with Alkermes, Inc.
10.13 †
10.14 †
10.14-1†
10.14-2 †
10.15 †
10.16 †
10.17†
10.17-1 †
10.17-2 †
Form of Covenant Not to Compete, of various dates, by and between
Alkermes, Inc. and Michael J. Landine.
Form of Employment Agreement entered into by and between Alkermes,
Inc. and each of Iain M. Brown, David J. Gaffin, Craig C. Hopkinson,
M.D. and Christian Todd Nichols.
Offer Letter by and between Alkermes, Inc. and Craig C. Hopkinson
M.D., effective as of April 24, 2017.
Offer Letter, dated March 29, 2019, by and between Alkermes, Inc. and
Christian Todd Nichols.
Form of Indemnification Agreement entered into by and between
Alkermes, Inc. and each of the Directors and Secretaries of Alkermes plc
and its Irish subsidiaries.
Form of Deed of Indemnification entered into by and between each of the
Directors, Secretaries and executive officers of Alkermes plc and its
subsidiaries.
Alkermes plc Amended and Restated 2008 Stock Option and Incentive
Plan, as amended.
Form of Stock Option Award Certificate (Non-Employee Director) under
the Alkermes plc Amended and Restated 2008 Stock Option and Incentive
Plan, as amended.
Form of Restricted Stock Unit Award Certificate (Time Vesting Only –
Irish) under the Alkermes plc Amended and Restated 2008 Stock Option
and Incentive Plan, as amended.
Incorporated by reference herein
Form
Exhibit 10.1 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
Exhibit 10.5 to the Alkermes, Inc.
Current Report on Form 8-K (File
No. 001-14131)
Exhibit 10.2 to the Alkermes, Inc.
Current Report on Form 8-K (File
No. 001-14131)
Exhibit 10.3 to the Alkermes, Inc.
Quarterly Report on Form 10-Q
(File No. 001-14131)
Exhibit 10.7 to the Alkermes, Inc.
Current Report on Form 8-K (File
No. 001-14131)
Exhibit 10.15(a) to the
Alkermes, Inc. Annual Report on
Form 10-K (File No. 001-14131)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.17.1 to the Alkermes
plc Annual Report on Form 10-K
(File No. 011-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 011-35299)
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2017 (File No. 001-35299)
Exhibit 10.4 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Exhibit 10.5 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Date
February 11, 2008
October 7, 2008
September 11, 2009
February 11, 2008
October 7, 2008
May 30, 2008
November 2, 2016
February 16, 2018
July 29, 2020
April 29, 2020
April 29, 2020
April 27, 2017
April 28, 2016
April 28, 2016
76
Table of Contents
Exhibit No.
10.17-3 †
Form of Restricted Stock Unit Award Certificate (Time Vesting Only –
U.S.) under the Alkermes plc Amended and Restated 2008 Stock Option
and Incentive Plan, as amended.
Description of Exhibit
Form of Stock Option Award Certificate (Time Vesting Non-Qualified
Option – Irish) under the Alkermes plc Amended and Restated 2008 Stock
Option and Incentive Plan, as amended.
Form Stock Option Award Certificate (Time Vesting Non-Qualified
Option – U.S.) under the Alkermes plc Amended and Restated 2008 Stock
Option and Incentive Plan, as amended.
Form of Stock Option Award Certificate (Incentive Stock Option – U.S.)
under the Alkermes plc Amended and Restated 2008 Stock Option and
Incentive Plan, as amended.
10.17-4 †
10.17-5 †
10.17-6 †
10.17-7 †
Incorporated by reference herein
Form
Exhibit 10.6 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Exhibit 10.7 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Exhibit 10.8 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Exhibit 10.9 to the Alkermes plc
Quarterly Report on Form 10-Q
for the quarter ended March 31,
2016 (File No. 001-35299)
Date
April 28, 2016
April 28, 2016
April 28, 2016
April 28, 2016
Form of 2008 Restricted Stock Unit Award Certificate (Performance
Vesting Only) under the Alkermes plc Amended and Restated 2008 Stock
Option and Incentive Plan, as amended.
Exhibit 10.2 to the Alkermes, Inc.
Current Report on Form 8-K (File
No. 001-14131)
May 22, 2009
10.18†
Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
10.18-1 †
Form of Incentive Stock Option Award Certificate under the Alkermes plc
2011 Stock Option and Incentive Plan, as amended.
10.18-2 †
Form of Non-Qualified Stock Option (Employee) Award Certificate under
the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
10.18-3 †
Form of Restricted Stock Unit (Time-Vesting) Award Certificate under the
Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
Exhibit 10.1 to the Alkermes plc
Current Report on Form 8-K (File
No. 011-35299)
Exhibit 10.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.3 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.4 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.1 to the Alkermes plc
Current Report on Form 8-K (File
No. 001-35299)
Exhibit 10.6 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.7 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.8 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Exhibit 10.6 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
May 24, 2017
October 23, 2018
October 23, 2018
October 23, 2018
October 23, 2018
October 23, 2018
July 7, 2022
October 23, 2018
October 23, 2018
October 23, 2018
July 29, 2020
July 29, 2020
10.18-4 †
10.18-5 †
Form of Restricted Stock Unit (Performance-Vesting) Award Certificate
under the Alkermes plc 2011 Stock Option and Incentive Plan, as
amended.
Form of Non-Qualified Stock Option (Non-Employee Director) Award
Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan,
as amended.
Exhibit 10.5 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
10.19 †
Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
10.19-1 †
Form of Incentive Stock Option Award Certificate under the Alkermes plc
2018 Stock Option and Incentive Plan, as amended.
10.19-2 †
Form of Non-Qualified Stock Option (Employee) Award Certificate under
the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
10.19-3 †
Form of Restricted Stock Unit (Time-Vesting) Award Certificate under the
Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
10.19-4 †
10.19-5 †
Form of Restricted Stock Unit (Performance-Vesting) Award Certificate
under the Alkermes plc 2018 Stock Option and Incentive Plan, as
amended.
Form of Non-Qualified Stock Option (Non-Employee Director) Award
Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan,
as amended.
Exhibit 10.4 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
77
Table of Contents
Exhibit No.
10.19-6 †
10.19-7 †
10.19-8 †
10.19-9 †#
Description of Exhibit
Form
Form of Non-Employee Director Restricted Stock Unit (Time-Vesting)
Award Certificate under the Alkermes plc 2018 Stock Option and
Incentive Plan, as amended.
Exhibit 10.5 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Form of Non-Employee Director New Director Grant Non-Qualified
Stock Option Award Certificate under the Alkermes plc 2018 Stock
Option and Incentive Plan, as amended.
Exhibit 10.1.1 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Form of Non-Employee Director New Director Grant Restricted Stock
Unit (Time-Vesting) Award Certificate under the Alkermes plc 2018 Stock
Option and Incentive Plan, as amended.
Exhibit 10.1.2 to the Alkermes plc
Quarterly Report on Form 10-Q
(File No. 001-35299)
Date
July 29, 2020
July 27, 2022
July 27, 2022
Incorporated by reference herein
Form of Incentive Stock Option Award Certificate for Reporting Officers
under the Alkermes plc 2018 Stock Option and Incentive Plan, as
amended.
10.19-10 †# Form of Non-Qualified Stock Option Award Certificate for Reporting
Officers under the Alkermes plc 2018 Stock Option and Incentive Plan, as
amended.
10.19-11 †# Form of Restricted Stock Unit (Time-Vesting) Award Certificate for
Reporting Officers under the Alkermes plc 2018 Stock Option and
Incentive Plan, as amended.
10.19-12 †# Form of Restricted Stock Unit (Performance-Vesting) Award Certificate
for Reporting Officers under the Alkermes plc 2018 Stock Option and
Incentive Plan, as amended.
21.1 #
23.1 #
24.1 #
31.1 #
31.2 #
32.1 ‡
101.SCH #
101.CAL #
101.LAB #
101.PRE #
101.DEF #
104
List of subsidiaries.
Consent of PricewaterhouseCoopers LLP, an independent registered public
accounting firm.
Power of Attorney (included on the signature pages hereto).
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934.
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL with
applicable taxonomy extension information contained in Exhibits 101).
†
#
‡
*
**
Indicates a management contract or any compensatory plan, contract or arrangement.
Filed herewith.
Furnished herewith.
Confidential treatment has been granted or requested for certain portions of this exhibit. Such portions have been filed separately with the
SEC pursuant to a confidential treatment request.
In accordance with Item 601(b)(2)(ii) of Regulation S-K, certain information (indicated by “[**]”) has been excluded from this exhibit
because it is both not material and would likely cause competitive harm to the Company if publicly disclosed.
Item 16. Form 10-K Summary
None.
78
Table of Contents
Pursuant 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
on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
ALKERMES PLC
By:
/s/ RICHARD F. POPS
Richard F. Pops
Chairman and Chief Executive Officer
February 16, 2023
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant 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 Iain M. Brown, 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 and Exchange Commission any and all amendments to this Annual Report, with exhibits thereto and other documents in connection therewith,
and hereby ratifies and confirms all that said attorney‑in‑fact or his substitute or substitutes may do or cause to be done by virtue hereof.
Signature
/s/ RICHARD F. POPS
Richard F. Pops
/s/ IAIN M. BROWN
Iain M. Brown
/s/ EMILY PETERSON ALVA
Emily Peterson Alva
/s/ SHANE M. COOKE
Shane M. Cooke
/s/ DAVID A. DAGLIO, JR.
David A. Daglio, Jr.
/s/ RICHARD B. GAYNOR
Richard B. Gaynor
/s/ CATO T. LAURENCIN
Cato T. Laurencin
/s/ BRIAN P. MCKEON
Brian P. McKeon
/s/ NANCY L. SNYDERMAN
Nancy L. Snyderman
/s/ FRANK ANDERS WILSON
Frank Anders Wilson
/s/ CHRISTOPHER I. WRIGHT
Christopher I. Wright
/s/ NANCY J. WYSENSKI
Nancy J. Wysenski
Chairman and Chief Executive Officer (Principal Executive Officer)
February 16, 2023
Title
Date
Senior Vice President, Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
79
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
February 16, 2023
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Alkermes plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Alkermes plc and its subsidiaries (the “Company”) as of December 31,
2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity and of cash flows for
each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated
financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, 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 as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and 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
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud, and whether effective 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
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing 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 Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal 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 as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-1
Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to
the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Rebate Accruals – Medicaid Drug Rebate Program
As described in Note 2 and Note 10 to the consolidated financial statements, the Company’s revenue from product sales are recorded net of
reserves established for applicable discounts and allowances that are offered within contracts with the Company’s customers, health care
providers or payers. The Company records accruals for rebates to U.S. states under the Medicaid Drug Rebate Program as a reduction of sales
when the product is shipped into the distribution channel using the expected value method. As of December 31, 2022, accrued Medicaid
rebates were $208.3 million, of which a significant amount related to the Medicaid Drug Rebate Program. The Company rebates individual
U.S. states for all eligible units purchased under the Medicaid program based on a rebate per unit calculation, which is based on the
Company’s average manufacturer prices. The Company estimates expected unit sales to individuals covered by Medicaid and rebates per unit
under the Medicaid program and adjusts its rebate accrual based on actual unit sales and rebates per unit and changes in trends in Medicaid
utilization.
The principal considerations for our determination that performing procedures relating to rebate accruals for the Medicaid Drug Rebate
Program is a critical audit matter are (i) the significant judgment by management due to significant measurement uncertainty involved in
developing the reserves, as the reserves are based on assumptions developed using historical experience, current contractual requirements,
specific known market events and payment patterns and (ii) a high degree of auditor judgment, effort, and subjectivity in applying
procedures related to these assumptions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to rebate accruals for the Medicaid
Drug Rebate Program, including controls over the assumptions used to estimate the rebate accruals. These procedures also included, among
others, (i) developing an independent estimate of the rebate accruals by utilizing third-party data related to product sales, the historical trend
of actual rebate claims paid and consideration of contractual requirement changes and market events; (ii) comparing the independent
estimate to management’s estimate; and (iii) testing rebate claims processed by the Company.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2023
We have served as the Company’s auditor since 2007.
F-2
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2022 and 2021
December 31, 2021
December 31, 2022
(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Investments—short-term
Receivables, net
Inventory
Contract assets
Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT, NET
INVESTMENTS—LONG-TERM
RIGHT-OF-USE ASSETS
INTANGIBLE ASSETS, NET
GOODWILL
DEFERRED TAX ASSETS
OTHER ASSETS
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses
Accrued sales discounts, allowances and reserves
Operating lease liabilities—short-term
Contract liabilities—short-term
Current portion of long-term debt
Total current liabilities
LONG-TERM DEBT
OPERATING LEASE LIABILITIES—LONG-TERM
OTHER LONG-TERM LIABILITIES
Total liabilities
$
$
$
COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)
SHAREHOLDERS’ EQUITY:
Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued
and outstanding at December 31, 2022 and 2021, respectively
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 168,951,193 and
165,790,549 shares issued; 164,377,009 and 161,937,327 shares outstanding at December 31,
2022 and 2021, respectively
Treasury shares, at cost (4,574,184 and 3,853,222 shares at December 31, 2022 and 2021,
respectively)
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
292,473 $
315,992
287,967
181,418
8,929
43,527
1,130,306
325,361
131,610
115,855
37,680
92,873
115,602
14,691
1,963,978 $
220,089 $
252,115
15,722
6,816
3,000
497,742
290,270
89,829
42,384
920,225
—
1,690
(160,862)
2,913,099
(10,889)
(1,699,285)
1,043,753
1,963,978 $
337,544
198,767
313,193
150,335
13,363
48,967
1,062,169
341,054
229,430
115,627
74,043
92,873
81,833
27,455
2,024,484
208,491
237,216
16,240
6,339
3,000
471,286
292,804
104,162
43,648
911,900
—
1,658
(142,658)
2,798,325
(3,723)
(1,541,018)
1,112,584
2,024,484
The accompanying notes are an integral part of these consolidated financial statements.
F-3
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ALKERMES PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years Ended December 31, 2022, 2021 and 2020
2022
Year Ended December 31,
2021
(In thousands, except per share amounts)
2020
REVENUES:
Product sales, net
Manufacturing and royalty revenues
License revenue
Research and development revenue
Total revenues
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired
intangible assets shown below)
Research and development
Selling, general and administrative
Amortization of acquired intangible assets
Total expenses
OPERATING LOSS
OTHER (EXPENSE) INCOME, NET:
Interest income
Interest expense
Change in the fair value of contingent consideration
Other income, net
Total other (expense) income, net
LOSS BEFORE INCOME TAXES
INCOME TAX (BENEFIT) PROVISION
NET LOSS
LOSS PER ORDINARY SHARE:
Basic and diluted
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic and diluted
COMPREHENSIVE LOSS:
$
777,552 $
331,983
2,000
260
1,111,795
627,424 $
541,807
3,500
1,020
1,173,751
218,108
393,842
605,747
36,363
1,254,060
(142,265)
7,629
(13,040)
(21,750)
2,122
(25,039)
(167,304)
(9,037)
(158,267) $
197,387
406,526
560,977
38,148
1,203,038
(29,287)
2,408
(11,219)
(1,427)
219
(10,019)
(39,306)
8,863
(48,169) $
551,760
484,000
1,050
1,946
1,038,756
178,316
394,588
538,827
39,452
1,151,183
(112,427)
6,960
(8,659)
3,945
13,644
15,890
(96,537)
14,324
(110,861)
$
$
(0.97) $
(0.30) $
(0.70)
163,541
160,942
158,803
Net loss
Holding loss, net of a tax (benefit) provision of $(973), $(706) and $130, respectively
$
COMPREHENSIVE LOSS
$
(158,267) $
(7,166)
(165,433) $
(48,169) $
(2,374)
(50,543) $
(110,861)
467
(110,394)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2022, 2021 and 2020
BALANCE — December 31, 2019
160,489,888
$
1,602
$ 2,586,030
(In thousands, except share data)
$
(1,816) $ (1,381,988) (2,710,886) $
(118,386) $ 1,085,442
Ordinary Shares
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury Stock
Shares
Amount
Total
Issuance of ordinary shares under employee stock
plans
Receipt of Alkermes' shares for the purchase of stock
options or to satisfy minimum tax withholding
obligations related to share-based awards
Share-based compensation
Unrealized gain on marketable securities, net of tax
provision of $130
Net loss
BALANCE — December 31, 2020
Issuance of ordinary shares under employee stock
plans
Receipt of Alkermes' shares for the purchase of stock
options or to satisfy minimum tax withholding
obligations related to share-based awards
Share-based compensation
Unrealized loss on marketable securities, net of tax
benefit of $706
Net loss
BALANCE —December 31, 2021
Issuance of ordinary shares under employee stock
plans
Receipt of Alkermes' shares for the purchase of stock
options or to satisfy minimum tax withholding
obligations related to share-based awards
Share-based compensation
Unrealized loss on marketable securities, net of tax
682,122
1,097,210
—
7
11
—
8,366
(11)
91,262
—
—
162,269,220
$
—
—
1,620
—
—
$ 2,685,647
—
—
—
467
—
—
—
—
—
(110,861)
—
—
8,373
(397,193)
—
—
—
(7,701)
—
(7,701)
91,262
—
—
467
(110,861)
(126,087) $ 1,066,982
$
(1,349) $ (1,492,849) (3,108,079) $
3,521,329
—
—
38
—
—
25,281
—
87,397
—
—
—
—
—
—
—
—
25,319
(745,143)
—
(16,571)
—
(16,571)
87,397
—
—
165,790,549
$
—
—
1,658
—
—
$ 2,798,325
$
(2,374)
—
—
(48,169)
(3,723) $ (1,541,018) (3,853,222) $
—
—
—
—
(2,374)
(48,169)
(142,658) $ 1,112,584
3,160,644
—
—
32
—
—
19,598
—
95,176
—
—
—
—
—
19,630
(720,962)
—
(18,204)
—
(18,204)
95,176
—
—
—
—
benefit of $973
Net loss
BALANCE —December 31, 2022
—
—
168,951,193
$
—
—
1,690
—
—
$ 2,913,099
$
(7,166)
—
(158,267)
(10,889) $ (1,699,285) (4,574,184) $
—
—
—
—
(7,166)
(158,267)
(160,862) $ 1,043,753
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2022, 2021 and 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to cash flows from operating activities:
2022
Year Ended December 31,
2021
(In thousands)
2020
$
(158,267) $
(48,169) $
(110,861)
Depreciation and amortization
Share-based compensation expense
Deferred income taxes
Change in the fair value of contingent consideration
Other non-cash charges
Changes in assets and liabilities:
Receivables
Contract assets
Inventory
Prepaid expenses and other assets
Right-of-use assets
Accounts payable and accrued expenses
Accrued sales discounts, allowances and reserves
Contract liabilities
Operating lease liabilities
Other long-term liabilities
Cash flows provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment
Proceeds from the sale of equipment
Proceeds from contingent consideration
Return of Fountain Healthcare Partners II, L.P. investment
Payment made for licensed Intellectual Property ("IP")
Purchases of investments
Sales and maturities of investments
Cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
77,862
94,254
(32,795)
21,750
5,531
25,250
4,434
(31,021)
(5,328)
16,569
15,534
14,899
(7,129)
(33,225)
12,726
21,044
(38,255)
—
1,273
485
—
(309,671)
281,627
(64,541)
78,652
87,622
5,081
1,427
2,650
(38,011)
6,037
(24,769)
11,481
17,051
11,514
18,339
(6,080)
(16,777)
(4,333)
101,715
(28,020)
287
7,937
—
(1,000)
(340,418)
295,010
(66,204)
Proceeds from the issuance of ordinary shares under share-based compensation arrangements
Employee taxes paid related to net share settlement of equity awards
Proceeds from the issuance of long-term debt
Payment made for debt extinguishment
Principal payments of long-term debt
Cash flows (used in) provided by financing activities
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS—Beginning of period
CASH AND CASH EQUIVALENTS—End of period
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest
Cash paid for taxes
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses
$
$
$
$
19,630
(18,204)
—
—
(3,000)
(1,574)
(45,071)
337,544
292,473 $
25,319
(16,571)
23,567
(993)
(2,250)
29,072
64,583
272,961
337,544 $
13,563 $
20,749 $
6,904 $
1,888 $
2,950 $
6,025 $
The accompanying notes are an integral part of these consolidated financial statements.
F-6
81,854
90,164
9,985
(3,945)
2,514
(18,050)
(6,015)
(22,933)
4,022
17,336
(14,375)
64,975
(4,924)
(16,273)
9,368
82,842
(42,219)
643
3,886
2,751
—
(229,543)
253,001
(11,481)
8,373
(7,701)
—
—
(2,843)
(2,171)
69,190
203,771
272,961
8,288
620
2,420
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Alkermes plc (the “Company”) 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 in the fields of neuroscience and oncology. Alkermes has a portfolio of proprietary commercial products focused on alcohol
dependence, opioid dependence, schizophrenia and bipolar I disorder and a pipeline of product candidates in development for neurological disorders and
cancer. Headquartered in Dublin, Ireland, the Company has a research and development (“R&D”) center in Waltham, Massachusetts; R&D and
manufacturing facilities in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio.
On November 2, 2022, the Company announced its intent, as approved by its board of directors, to separate its neuroscience business and oncology
business. The Company is exploring a separation of the oncology business into an independent, publicly- traded company (referred to herein as “Oncology
Co.”) as part of an ongoing review of strategic alternatives for the oncology business. Following the planned separation, the Company would retain its
focus on driving growth of its proprietary commercial products: LYBALVI, ARISTADA/ARISTADA INITIO and VIVITROL, and advancing the
development of pipeline programs focused on neurological disorders. The Company also expects to retain manufacturing and royalty revenues related to its
licensed products and third-party products using its proprietary technologies under license. Oncology Co. would focus on the discovery and development of
cancer therapies, including the continued development of nemvaleukin alfa and the Company’s portfolio of novel, preclinical engineered cytokines. The
separation, if consummated, is expected to be completed in the second half of 2023 and is subject to customary closing conditions, including final approval
by the Company’s board of directors and, if sought, receipt of a private letter ruling from the IRS and/or tax opinion from the Company’s tax advisors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Alkermes plc and its wholly-owned subsidiaries. Intercompany accounts and
transactions have been eliminated.
Reclassification
The Company reclassified certain prior year amounts on the consolidated balance sheet to conform to the current year presentation. These
reclassifications had no impact on the previously reported total assets, liabilities or shareholders’ equity.
Use of Estimates
The preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United
States (“GAAP”) requires that Company management make estimates, judgments and assumptions that may affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on‑going basis, the Company evaluates its estimates and
judgments and methodologies, including but not limited to, those related to revenue from contracts with its customers and related allowances, impairment
and amortization of intangibles and long‑lived assets, share‑based compensation, income taxes including the valuation allowance for deferred tax assets,
valuation of investments, contingent consideration 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 estimates under different assumptions or conditions.
Cash and Cash Equivalents
The Company values its cash and cash equivalents at cost plus accrued interest, which the Company believes approximates their market value. The
Company considers cash equivalents only those investments that are highly liquid, readily convertible into cash and so near their maturity, generally three
months from the date of purchase, that they present insignificant risk of change in value because of interest rate changes.
Investments
The Company has investments in various types of securities, consisting primarily of United States (“U.S.”) government and agency obligations,
corporate debt securities and debt securities issued by non-U.S. agencies and backed by non-U.S. governments. The Company generally holds its interest-
bearing investments with major financial institutions and in accordance with documented investment policies. The Company limits the amount of credit
exposure to any one financial institution or corporate issuer. At December 31, 2022, substantially all these investments were classified as available-for-sale
and were recorded at fair value.
F-7
Table of Contents
Unrealized gains and losses are included in accumulated other comprehensive loss in equity, net of related tax, in accumulated other comprehensive
loss unless: (i) the security has experienced a credit loss; (ii) the Company has determined that it has the intent to sell the security; or (iii) it has determined
that it is more likely than not that the Company will have to sell the security before its expected recovery. Periodic reviews are conducted to identify and
evaluate each investment that has an unrealized loss in accordance with the meaning of other-than-temporary impairment. An unrealized loss exists when
the current fair value of an individual security is less than its amortized cost basis.
For available-for-sale debt securities with unrealized losses, the Company performs an analysis to assess whether it intends to sell or whether it
would more likely than not be required to sell the security before the expected recovery of the amortized cost basis. Where the Company intends 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 amount of the unrealized loss is
reflected in earnings as an impairment loss.
Regardless of the Company’s intent to sell a security, the Company performs additional analysis on all securities with unrealized losses to evaluate
losses associated with the creditworthiness of the security. Credit losses are identified where the Company does not expect to receive cash flows sufficient
to recover the amortized cost basis of a security.
The Company’s held-to-maturity investments are restricted investments held as collateral under letters of credit related to certain of the Company’s
agreements and are included in “Investments—long-term,” in the accompanying consolidated balance sheets.
Fair Value of Financial Instruments
The 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, as
described in the accounting standards for fair value measurement. At December 31, 2022, the Company’s financial assets consisted of cash equivalents,
investments and contingent consideration and are classified within the fair value hierarchy as follows:
•
•
•
Level 1–these valuations are based on a market approach using quoted prices in active markets for identical assets. Valuations of these
products do not require a significant degree of judgment. Assets utilizing Level 1 inputs at December 31, 2022 included U.S. treasury
securities, marketable securities classified as cash equivalents and a fixed term deposit account;
Level 2–these valuations are based on quoted prices for identical or similar assets in active markets or other market observable inputs such as
interest rates, yield curves, foreign currency spot rates and option pricing valuation models. Assets utilizing Level 2 inputs at December 31,
2022 included U.S. government agency debt securities, debt securities issued by non-U.S. agencies and backed by non-U.S. governments and
investments in corporate debt securities that are trading 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 fair
value measurement. Valuations of these products require a significant degree of judgment. At December 31, 2022, no assets utilized Level 3
inputs.
The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, other current assets, accounts
payable and accrued expenses approximate fair value due to their short‑term nature.
Inventory
Inventory 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 raw
materials used in production of preclinical and clinical products, which have alternative future use and are charged to R&D expense when consumed. The
cost 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 idle
capacity, which are expensed directly to the consolidated statement of operations and comprehensive loss.
The Company capitalizes inventory costs associated with its products prior to regulatory approval when, based on management’s judgment, future
commercialization of the product is considered probable and future economic benefit from such product is expected to be realized. The Company assesses
the regulatory approval process and where the particular product stands in relation to that approval process, including any known safety, efficacy or quality
concerns, potential labeling restrictions and other potential impediments to approval. The Company also considers the shelf life of the product in relation to
the expected timeline for approval and considers issues that may prevent or delay commercialization, including issues that may arise in relation to the
manufacturing of the product. The Company expenses previously capitalized costs related to pre-approval inventory upon a change in such judgment, due
to, among other potential factors, a denial or significant delay of approval by relevant regulatory agencies or other issues that may make the pre-approval
inventory batches less likely or unlikely to be commercialized and to result in future economic benefit.
F-8
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, subject to review for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. Expenditures for repairs and maintenance are charged to expense as incurred and major renewals and
improvements are capitalized. Depreciation is calculated using the straight‑line method over the following estimated useful lives of the assets:
Asset group
Buildings and improvements
Furniture, fixtures and equipment
Leasehold improvements
Contingent Consideration
Term
15 - 40 years
3 - 10 years
Shorter of useful life or lease term
The Company records contingent consideration it is entitled to receive related to the sale of a business at fair value on the acquisition date. The
Company estimates the fair value of contingent consideration through valuation models that incorporate probability-adjusted assumptions related to the
likelihood of achievement of milestones and the corresponding likelihood of receiving related payments. The Company revalues its contingent
consideration each reporting period, with changes in the fair value of contingent consideration recognized within the consolidated statements of operations
and comprehensive loss. Changes in the fair value of contingent consideration can result from changes to one or multiple assumptions, including
adjustments to the discount rates, changes in the amount and timing of cash flows, changes in the assumed achievement and timing of any development and
sales-based milestones, changes in the assumed probability associated with regulatory approvals and changes in the probability of collection or default of
portions of the contingent consideration due to the Company.
These fair value measurements are based on significant inputs, including inputs not observable in the market. 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 consideration recorded in any given period.
Goodwill and Intangible Assets
Goodwill represents the excess cost of the Company’s investment in the net assets of acquired companies over the fair value of the underlying
identifiable 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
Elan Drug Technologies (“EDT”) from Elan Corporation, plc (such acquisition, the “Business Combination”) in September 2011 and has been assigned to
one reporting unit. A reporting 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 circumstances
indicate that the carrying value of the goodwill might not be recoverable. The Company has the option to first assess qualitative factors to determine
whether it 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 is more-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 further testing is required. Alternatively, the Company may elect to not first assess qualitative factors and immediately perform the quantitative
impairment test. In the quantitative impairment test, the Company compares the fair value of its reporting unit to its carrying value. If the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the 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 the Business
Combination, were recorded at fair value at the time of their acquisition and are stated within the Company’s consolidated balance sheets net of
accumulated amortization. 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. The useful lives
of the Company’s intangible assets are primarily based on the legal or contractual life of the underlying patent or contract, which does not include
additional years for the potential extension or renewal of the contract or patent.
Impairment of Long‑Lived Assets
The Company reviews long‑lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable
market value of an asset; a significant change in the extent or manner in which an asset
F-9
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
is used; a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset; an accumulation of costs
significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; a current-period operating or cash flow
loss combined with a history of operating or cash-flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a
long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of
its previously estimated useful life. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting 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 carrying amount 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 sell them.
In April 2015, the Company sold its Gainesville, GA manufacturing facility, the related manufacturing and royalty revenue associated with certain
products manufactured at the facility, and the rights to IV/IM and parenteral forms of Meloxicam to Recro Pharma, Inc. (“Recro”) and Recro Gainesville
LLC (such transaction the “Gainesville Transaction”). The Gainesville Transaction included in the purchase price contingent consideration tied to low
double digit royalties on net sales of the IV/IM and parenteral forms of Meloxicam and any other product with the same active ingredient as Meloxicam
IV/IM that is discovered or identified using certain of the Company’s IP to which Recro was provided a right of use, through license or transfer, pursuant to
the Gainesville Transaction (such products, the “Meloxicam Products”), and milestone payments upon the achievement of certain regulatory and sales
milestones related to the Meloxicam Products. In the third quarter of 2022, the Company determined that certain construction in progress related to the
manufacture of ANJESO®, the first approved Meloxicam Product, was impaired, as it had no alternative future use. See Note 7, Property, Plant and
Equipment, within the “Notes to Consolidated Financial Statements” in this Annual Report for details related to such construction in progress.
In the fourth quarter of 2022, the Company determined that an impairment triggering event occurred related to an arbitration panel’s ruling relative
to the Company’s manufacturing and royalty revenue arrangement with Acorda related to AMPYRA®. Following this triggering event, the Company
evaluated certain of its intangible assets for impairment under a held-and-used model. The Company concluded in this instance that the long-lived assets
evaluated for impairment were recoverable based on an analysis of the undiscounted cash flows to be generated from the use of these assets and that there
was no impact to the remaining useful lives of these assets.
Revenue from Contracts with Customers
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
606, Revenue from Contracts with Customers (“Topic 606”). When entering into arrangements with customers, the Company identifies whether its
performance obligations under the arrangement represent a distinct good or service or a series of distinct goods or services. If a contract contains more than
one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative
standalone selling prices of the promised goods or services underlying each performance obligation. The fair value of performance obligations under the
arrangement may be derived using an estimate of selling price if the 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 expected
to complete its performance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory and that are
determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in
determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance
obligations.
Product Sales, Net
The Company’s product sales, net consist of sales in the U.S. of VIVITROL®, ARISTADA® and ARISTADA INITIO® and, following its
commercial launch in October 2021, LYBALVI®, primarily to wholesalers, specialty distributors and pharmacies. 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
the Company’s customers, healthcare providers or payers. The Company’s process for estimating reserves established for these variable consideration
components does not differ materially from historical practices. The transaction price, which includes variable consideration reflecting the impact of
discounts 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
of the amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from the Company’s
estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment. The following are
the Company’s significant categories of sales discounts and allowances:
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
• Medicaid Rebates—the Company records accruals for rebates to U.S. states under the Medicaid Drug Rebate Program as a reduction of sales
when the product is shipped into the distribution channel using the expected value method. The Company rebates individual U.S. states for all
eligible units purchased under the Medicaid program based on a rebate per unit calculation, which is based on the Company’s average
manufacturer prices. The Company estimates expected unit sales to individuals covered by Medicaid and rebates per unit under the Medicaid
program and adjusts its rebate accrual based on actual unit sales and rebates per unit and changes in trends in Medicaid utilization. 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 generally
charges back to the Company the difference between the wholesale acquisition cost and the contracted price paid to the wholesaler or
specialty distributor by the customer. The allowance for chargebacks is made using the expected value method and is based on actual and
expected utilization of these programs. Chargebacks could exceed historical experience and the Company’s estimates of future participation
in these programs. 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 is
made using the expected value method and to date, actual product discounts have not differed materially from the Company’s estimates;
Product Returns—the Company records an estimate for product returns at the time its customers take control of their product. The Company
estimates this liability using the expected returns of product sold based on historical return levels and specifically identified anticipated
returns due to known business conditions and product expiry dates. Return amounts are recorded as a reduction of sales. Once product is
returned, it is destroyed; and
• 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 Centers for Medicare and Medicaid Services,
manufacturers are responsible to reimburse prescription plan sponsors for the portion of out-of-pocket expenses not covered under their
Medicare plans.
Collaborative Arrangements
The Company has entered into collaboration agreements with pharmaceutical companies including, among others, Janssen Pharmaceuticals, 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”) related to INVEGA SUSTENNA/XEPLION, INVEGA
TRINZA/TREVICTA, INVEGA HAFYERA/BYANNLI (the “long-acting INVEGA products”) and RISPERDAL CONSTA®, and Biogen Swiss
Manufacturing GmbH (together with its affiliates, “Biogen”) related to VUMERITY®. Substantially all of the products developed under these
arrangements are currently being marketed as approved products for which the Company receives payments for manufacturing services and/or royalties on
net product sales.
Manufacturing Revenue
The Company recognizes manufacturing revenues from the sale of products it manufactures for resale by its licensees. Manufacturing revenues for
the Company’s partnered products, with the exception of those from Janssen related to RISPERDAL CONSTA and from Biogen related to VUMERITY,
are recognized over time as products move through the manufacturing process, using a standard cost-based model as a measure of progress, which
represents a faithful depiction of the transfer of control of the goods. The Company recognizes manufacturing revenue from these products over time as it
determined, in each instance, that it would have a right to payment 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.
The Company is the exclusive manufacturer of RISPERDAL CONSTA for commercial sale under its manufacturing and supply agreement with
Janssen. The Company determined that it is appropriate to record revenue under this agreement at the point in time when control of the product passes to
Janssen, which is determined to be when the product has been fully manufactured, since Janssen does not control the product during the manufacturing
process and, in the event Janssen terminates the manufacturing and supply agreement, it is uncertain whether, and at what amount, the Company would be
reimbursed for performance completed to date for product not yet fully manufactured. The manufacturing process is considered fully complete once the
finished goods have been approved for shipment by both the Company and Janssen.
F-11
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company recognizes manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to
Biogen, to the extent the Company packages such product, then also when packaged batches of VUMERITY are made available to Biogen. Control of the
product passes to Biogen when VUMERITY, in either bulk or finished form, is made available to Biogen.
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-market
sales generally occur after the Company has recorded manufacturing revenue, the Company estimates the sales price for such products based on
information supplied to it by the Company’s licensees, its historical transaction experience and other third-party data. Differences between actual
manufacturing revenues and 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 Revenue
The Company recognizes royalty revenues related to the sale by its licensees of products that incorporate the Company’s technologies. Substantially
all of the Company’s royalties qualify for the sales-and-usage exemption under Topic 606 as (i) such 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 are earned in the
period that the products are sold by the Company's licensee and the Company has a present right to payment.
Certain of the Company’s royalty revenues are recognized by the Company based on information supplied to the Company by its licensees and
require estimates to be made. 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 Revenue
R&D revenue consists of funding that compensates the Company for formulation, preclinical and clinical testing under R&D arrangements with its
partners. The Company generally bills its partners under R&D arrangements using a full‑time equivalent or hourly rate, plus direct external costs, if any.
Revenue is recognized as the obligations under the R&D arrangements are performed.
License Revenue
The Company recognizes revenue from the grant of distinct, right-to-use licenses of IP when control of the license is transferred to the licensee,
which is the point in time that the licensee is able to direct the use of and obtain substantially all of the benefits from the license.
Receivables, net
Receivables, net, include amounts billed and amounts unbilled but currently unconditionally due from customers. The amounts due are stated at
their net estimated realizable value. The Company’s unbilled receivable balance was $72.0 million and $127.6 million at December 31, 2022 and 2021,
respectively, and related primarily to royalty revenue. 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 to the extent applicable. The Company’s allowance for doubtful accounts was approximately $0.2 million at
December 31, 2022 and 2021, respectively.
Contract Assets
Contract assets include unbilled amounts resulting from sales under certain of the Company’s manufacturing contracts where revenue is recognized
over time, except for $5.0 million of consideration related to the Company’s collaboration with Biogen related to VUMERITY, which was included in
contract assets at December 31, 2021 and transferred to receivables, net, as the milestone related to such amount was achieved in November 2022. The
manufacturing-related amounts included in the contract assets table below are classified as “Current assets” in the accompanying consolidated balance
sheets, as they related to manufacturing processes that are completed in ten days to eight weeks.
F-12
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contract assets consisted of the following:
(In thousands)
Contract assets at January 1, 2021
Additions
Transferred to receivables, net
Contract assets at December 31, 2021
Additions
Transferred to receivables, net
Contract assets at December 31, 2022
Contract Liabilities
The Company’s contract liabilities consist of contractual obligations related to deferred revenue.
Contract liabilities consisted of the following:
(In thousands)
Contract liabilities at January 1, 2021
Additions
Amounts recognized into revenue
Contract liabilities at December 31, 2021
Additions
Amounts recognized into revenue
Amounts recognized into other income, net
Contract liabilities at December 31, 2022
Foreign Currency
Contract Assets
19,401
30,609
(36,647)
13,363
42,218
(46,652)
8,929
Contract Liabilities
23,909
—
(6,079)
17,830
6,769
(7,514)
(6,384)
10,701
$
$
$
$
$
$
The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are recorded at the exchange rate prevailing
on the date of the transaction. The resulting monetary assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the subsequent
balance sheet date. Gains and losses as a result of translation adjustments are recorded within “Other income, net” in the accompanying consolidated
statements of operations and comprehensive loss. During the years ended December 31, 2022, 2021 and 2020, the Company recorded a gain of $0.7
million, a loss of $0.3 million and a gain of $2.4 million, respectively, on foreign currency translation.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk are receivables and marketable securities. Billings to
large pharmaceutical companies and pharmaceutical wholesalers account for the majority of the Company’s receivables, and collateral is generally not
required from these customers. To mitigate credit risk, the Company monitors the financial performance and credit-worthiness of its customers. The
following represents revenue and receivables from the Company’s customers exceeding 10% of the total in each category as of, and for the years ended,
December 31, 2022, 2021 and 2020:
Customer
Janssen
Biogen
Cardinal Health
AmerisourceBergen
McKesson
2022
Year Ended December 31,
2021
2020
Receivables
Revenue
Receivables
Revenue
Receivables
Revenue
*
19%
24%
18%
12%
15%
13%
24%
14%
16%
30%
11%
17%
13%
11%
30%
10%
20%
11%
13%
30%
*
16%
11%
*
33%
*
21%
10%
14%
*
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
ended December 31, 2022, 2021 or 2020, as noted.
The Company holds its interest‑bearing investments with major financial institutions and, in accordance with documented investment policies, the
Company limits the amount of credit exposure to any one financial institution or corporate issuer. The Company’s investment objectives are, first, to ensure
liquidity and conservation of capital and, second, to obtain investment income.
F-13
Table of Contents
Geographic Information
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company revenues by geographic location, as determined by the location of the customer, and the location of its assets, are as follows:
(In thousands)
Revenue by region:
U.S.
Ireland
Rest of world
Assets by region:
Current assets:
U.S.
Ireland
Rest of world
Long-term assets:
U.S.:
Other
Ireland:
Intangible assets
Goodwill
Other
$
$
$
$
2022
Year Ended December 31,
2021
2020
931,991 $
1,829
177,975
984,235 $
2,175
187,341
702,564 $
427,742
—
485,083 $
577,086
—
838,995
3,233
196,528
662,615
448,356
—
529,002 $
591,217 $
472,999
37,680 $
92,873
174,117
74,043 $
92,873
204,182
111,191
92,873
161,696
Research and Development Expenses
For each of its R&D programs, the Company incurs both external and internal expenses. External R&D expenses include fees related to clinical and
non‑clinical activities performed by contract research organizations, consulting fees and costs related to laboratory services, purchases of drug product
materials and third‑party manufacturing development costs. Internal R&D expenses include employee‑related expenses, occupancy costs, depreciation and
general overhead. The Company tracks external R&D expenses for each of its development programs, however, internal R&D expenses are not tracked by
individual program as they benefit multiple programs or the Company’s technologies in general.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses are primarily comprised of employee-related expenses associated with selling and
marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising, financial and legal
expenses and other general and administrative costs.
Advertising costs are expensed as incurred. During the years ended December 31, 2022, 2021 and 2020, advertising costs totaled $41.4 million,
$38.9 million and $25.5 million, respectively.
Share‑Based Compensation
The Company’s share‑based compensation programs grant awards in the form of stock options and restricted stock unit awards (“RSUs”), which
vest with the passage of time and/or based on the achievement of certain performance criteria. The Company issues new shares upon the exercise of stock
options or the vesting of RSUs. Under the terms of the Company’s stock option and incentive plans (the “Plans”), certain of the Company’s employees
may, at the discretion of the plan administrator, become eligible upon retirement for accelerated vesting of certain awards granted to them under the Plans.
Since there are no effective future service requirements for such employees, the fair value of awards to such employees would be expensed in full on the
grant date or upon meeting the retirement eligibility criteria, whichever is later.
Time-Based Stock Options
Except as otherwise provided in the applicable Plan, stock option grants to employees expire ten years from the date of grant and generally vest in
four equal annual installments, commencing on the first anniversary of the date of grant, provided the employee remains continuously employed with the
Company during the applicable vesting period. Except as otherwise provided in the applicable Plan, annual stock option grants to non-employee directors
expire ten years from the grant date and generally vest over a one-year period provided that the director continues to serve on the Company’s board of
directors through the vesting date. The estimated fair value of options is recognized over the requisite service period, which is generally the vesting period.
Share‑based compensation expense is based on awards ultimately expected to vest. Forfeitures are estimated based on historical experience at the time of
grant and revised in subsequent periods if actual forfeitures differ from those estimates.
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ALKERMES PLC AND SUBSIDIARIES
NOTES 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 uses
historical data as the basis for estimating stock option terms and forfeitures. Separate groups of employees that have similar historical stock option exercise
and forfeiture behavior are considered separately for valuation purposes. The ranges of expected terms disclosed below reflect different expected behavior
among certain groups of employees. Expected stock volatility factors are based on a weighted average of implied volatilities from traded options of the
Company’s ordinary shares and historical share price volatility of the Company’s ordinary shares, which is determined based on a review of the weighted
average of historical weekly price changes of the Company’s ordinary shares. The risk‑free interest rate for periods commensurate with the expected term
of the stock option 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 as the Company has not paid dividends and does not expect to pay dividends in the near future. The exercise price of options granted is equal to
the closing price of the Company’s ordinary shares traded on the Nasdaq Global Select 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:
Expected option term
Expected stock volatility
Risk-free interest rate
Expected annual dividend yield
Time‑Based Restricted Stock Unit Awards
2022
5 - 8 years
43 % - 51 %
1.83 % - 4.26 %
—
Year Ended December 31,
2021
5 - 7 years
43 % - 54 %
0.67 % - 1.46 %
—
2020
5 - 7 years
47 % - 54 %
0.24 % - 1.69 %
—
Except as otherwise provided in the applicable Plan, time‑based RSUs awarded to employees generally vest in four equal annual installments,
commencing on the first anniversary of the date of grant, provided the employee remains continuously employed with the Company during the applicable
vesting period. Shares subject to these RSUs are delivered to the employee upon vesting, subject to payment of applicable withholding taxes. The fair value
of time‑based RSUs is equal to the closing price of the Company’s ordinary shares traded on the Nasdaq 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 Unit Awards
Performance-based RSUs awarded to employees vest upon the achievement of certain performance criteria, typically during or at the end of a
specified performance period. The estimated fair value of these RSUs are generally based on the closing price of the Company’s ordinary shares traded on
the Nasdaq Global Select Market on the date of grant, unless the RSU is also subject to a market condition. In that case, the fair value of the RSU is based
on a Monte Carlo simulation model. Compensation expense for performance-based RSUs is recognized from the date the Company determines the
performance criteria probable of being achieved to the date the award, or relevant portion of the award, is expected to vest. Cumulative adjustments are
recorded on a quarterly basis to reflect subsequent changes to the estimated outcome of the performance criteria until the date results are determined.
Income Taxes
The Company recognizes income taxes under the asset and liability method. Deferred income taxes are recognized for differences between the
financial 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’s
ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the
existence of cumulative income in the most recent fiscal years, changes in the business in which the Company operates and its forecast of future taxable
income. In determining future taxable income, the Company is responsible for assumptions utilized including the amount of Irish and non-Irish pre‑tax
operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require
significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is using to manage the
underlying business.
The Company accounts for uncertain tax positions using a more‑likely‑than‑not threshold for recognizing and resolving uncertain tax positions. The
evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or
expected to 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
tax position. The Company evaluates its tax position on a quarterly basis. The Company also accrues for potential interest and penalties related to
unrecognized tax benefits in income tax expense.
F-15
Table of Contents
Comprehensive Loss
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Comprehensive loss consists of net loss and other comprehensive loss. Other comprehensive loss includes changes in equity that are excluded from
net loss, such as unrealized holding gains and losses on available‑for‑sale investments.
Loss Per Share
Basic loss per share is calculated based upon net loss available to holders of ordinary shares divided by the weighted average number of ordinary
shares outstanding. For the calculation of diluted earnings per share, the Company uses the weighted average number of ordinary shares outstanding, as
adjusted for the effect of potential dilutive securities, including stock options and RSUs.
Segment Information
The Company operates as one business segment, which is the business of developing, manufacturing and commercializing medicines designed to
address unmet medical needs of patients in major therapeutic areas. The Company’s chief decision maker, the Chairman and Chief Executive Officer,
reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.
Employee Benefit Plans
401(k) Plan
The Company maintains a 401(k) retirement savings plan (the “401(k) Plan”), which covers substantially all of its U.S.‑based employees. Eligible
employees may contribute up to 100% of their eligible compensation, subject to certain Internal Revenue Service (“IRS”) limitations. The Company
matches 100% 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, 2022, 2021 and 2020, the Company contributed $15.3 million, $14.6 million and $14.7 million, respectively,
to match employee deferrals under the 401(k) Plan.
Defined Contribution Plan
The Company maintains a defined contribution plan for its Ireland‑based employees (the “Defined Contribution Plan”). The Defined Contribution
Plan provides for eligible employees to contribute up to a maximum of 40%, depending upon their age, of their total taxable earnings subject to an earnings
cap of €115,000. The Company provides a match of up to 18% of taxable earnings depending upon an individual’s contribution level. During the years
ended December 31, 2022, 2021 and 2020, the Company contributed $5.1 million, $5.2 million and $4.4 million, respectively, in contributions to the
Defined Contribution Plan.
Risks and Uncertainties
The COVID-19 pandemic has impacted, and may continue to impact, many aspects of society, including the operation of healthcare systems, global
travel, supply and labor markets and other business and economic activity worldwide. A number of the marketed products from which the Company
derives revenue, including manufacturing and royalty revenue, are injectable medications administered by healthcare professionals, which have been, and
the Company expects may continue to be, adversely impacted to varying degrees as a result of COVID-19 related closures restrictions, labor shortages and
other disruptions that have transpired, and may continue to transpire, while the pandemic persists.
The COVID-19 pandemic has caused, and the Company expects may continue to cause, varying degrees of disruption to its employees and business
operations. While the Company has continued to operate its manufacturing facilities and supply its medicines throughout the pandemic, the Company has
at times during the pandemic experienced labor or supply chain disruptions at its manufacturing facilities and may continue to experience such disruptions
while the pandemic persists, which could impact the Company’s ability to manufacture its products and the third-party products from which it receives
revenue in a timely matter or at all. In addition, while the Company has continued to conduct R&D activities, including its ongoing clinical trials, the
COVID-19 pandemic has at times impacted the timelines of certain of its early-stage discovery efforts and clinical trials, and may continue to impact such
timelines while the pandemic persists. The Company works with its internal teams, its clinical investigators, R&D vendors and critical supply chain
vendors to continually assess, and mitigate, the potential impact of COVID-19 on its manufacturing operations and R&D activities.
The degree to which the COVID-19 pandemic may continue to impact the Company’s employees, business, financial condition and results of
operations will depend on the ultimate severity and duration of the pandemic and the manner in which it continues to evolve, including the emergence,
prevalence and severity of new COVID-19 variants, and future developments in response thereto. Due to these and numerous other uncertainties
surrounding the ongoing COVID-19 pandemic, the actual impact of the pandemic on the Company’s financial condition and operating results may differ
from its current projections. For additional information about risks
F-16
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and uncertainties related to the COVID-19 pandemic that may impact the Company’s business, financial condition or results of operations, see “Part I, Item
1A—Risk Factors” in this Annual Report and specifically the section entitled “—Our business, financial condition and results of operations have been, and
may continue to be, adversely affected by the ongoing COVID-19 pandemic or other similar outbreaks of contagious diseases.”
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard‑setting bodies that are adopted by the Company as of
the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not
have a material impact on its financial position or results of operations upon adoption.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
During the years ended December 31, 2022, 2021 and 2020, the Company recorded product sales, net, as follows:
(In thousands)
VIVITROL
ARISTADA and ARISTADA INITIO
LYBALVI
Total product sales, net
2022
Year Ended December 31,
2021
$
$
$
379,478
302,052
96,022
777,552 $
$
343,853
275,356
8,215
627,424 $
2020
310,722
241,038
—
551,760
During the years ended December 31, 2022, 2021 and 2020, the Company recorded manufacturing and royalty revenues from its collaboration
arrangements as follows:
(In thousands)
Long-acting INVEGA products(1)
VUMERITY
RISPERDAL CONSTA
Other
(In thousands)
Long-acting INVEGA products(1)
VUMERITY
RISPERDAL CONSTA
Other
(In thousands)
Long-acting INVEGA products (1)
VUMERITY
RISPERDAL CONSTA
Other
Year Ended December 31, 2022
Manufacturing
Revenue
$
—
$
Royalty Revenue
115,655
$
83,003
7,243
13,708
219,609 $
32,493
42,670
37,211
112,374 $
$
Year Ended December 31, 2021
Manufacturing
Revenue
$
—
Royalty Revenue
303,106
$
$
25,808
40,413
39,407
105,628 $
61,614
10,456
61,003
436,179 $
$
Year Ended December 31, 2020
Manufacturing
Revenue
$
$
—
8,848
56,893
53,293
119,034 $
Royalty Revenue
274,200
$
$
13,693
14,468
62,605
364,966 $
Total
115,655
115,496
49,913
50,919
331,983
Total
303,106
87,422
50,869
100,410
541,807
Total
274,200
22,541
71,361
115,898
484,000
(1)
“Long-acting INVEGA products”: INVEGA SUSTENNA/XEPLION (paliperidone palmitate), INVEGA TRINZA/TREVICTA (paliperidone palmitate) and
INVEGA HAFYERA/BYANNLI (paliperidone palmitate).
In October 2022, an arbitration panel found that the Company must return to Acorda $16.5 million (inclusive of prejudgment interest and
administrative fees) previously paid by Acorda under a license agreement between the Company and Acorda and in November 2022, the panel found that
the Company must pay to Acorda an additional $1.8 million (inclusive of prejudgment interest). These amounts represent a portion of the royalty revenue
paid to the Company by Acorda since July 2020 related to AMPYRA. The Company paid the $16.5 million in October 2022 and paid the additional $1.8
million in December 2022. In addition, during the three months ended June 30, 2022, the Company had recorded $3.2 million of royalty revenue related to
AMPYRA as the Company believed that it had met the necessary revenue recognition criteria under the Financial Accounting Standards Board Accounting
F-17
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ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”). However, as a result of the arbitration ruling, the Company reversed
the $3.2 million as the panel found that the Company was no longer entitled to be paid those royalties. During the three months ended September 30, 2022,
the Company recorded both the $18.3 million in repayments and the $3.2 million reversal as reversals of royalty revenue within “Manufacturing and
royalty revenue” in the accompanying consolidated statements of operations and comprehensive loss. As a result of the arbitration ruling, the Company no
longer has a contractual obligation to manufacture and supply AMPYRA or a contractual right to receive future manufacturing or royalty revenue related to
AMPYRA. In January 2023, Acorda filed a petition with the U.S. District Court for the Southern District of New York asking the court to confirm in part
and modify in part the final arbitral award rendered by the arbitration panel in October 2022 and, as part of the requested modification, seeking an
additional approximately $66.0 million in damages. The Company intends to contest this petition and believe it is without merit.
In November 2021, the Company received notice of partial termination of an exclusive license agreement with Janssen. Under this license
agreement, the Company provided Janssen with rights to, and know-how, training and technical assistance in respect of, the Company’s small particle
pharmaceutical compound technology, known as NanoCrystal technology, which it used to develop INVEGA SUSTENNA/XEPLION, INVEGA
TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI. When the partial termination became effective in February 2022, Janssen ceased paying
royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. and the Company stopped recognizing
royalty revenue related to net sales of these products in the U.S. In April 2022, the Company commenced binding arbitration proceedings related to, among
other things, Janssen’s partial termination of the license agreement and Janssen’s royalty and other obligations under the agreement. On December 21,
2022, the Company received an interim award (the “Interim Award”) in these proceedings from the arbitral tribunal (the “Tribunal”), in which the Tribunal
agreed with the Company’s position that, while Janssen may terminate the agreement, it may not continue to sell Products (as defined in the agreement)
developed during the term of the agreement without paying royalties pursuant to the terms of the agreement. This award is not yet final. The Company will
engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal’s issuance of a final award. Accordingly, the Company has not
recognized royalty revenue related to U.S. sales of the long-acting INVEGA products since February 2022. Refer to Note 17, Commitments and Contingent
Liabilities within the “Notes to Consolidated Financial Statements” in this Annual Report for additional information regarding the arbitration proceedings
with Janssen.
F-18
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. INVESTMENTS
Investments consist of the following:
December 31, 2022
Short-term investments:
Available-for-sale securities:
Corporate debt securities
U.S. government and agency debt securities
Non-U.S. government debt securities
Total short-term investments
Long-term investments:
Available-for-sale securities:
Corporate debt securities
U.S. government and agency debt securities
Non-U.S. government debt securities
Held-to-maturity securities:
Certificates of deposit
Total long-term investments
Total investments
December 31, 2021
Short-term investments:
Available-for-sale securities:
Corporate debt securities
U.S. government and agency debt securities
Non-U.S. government debt securities
Total short-term investments
Long-term investments:
Available-for-sale securities:
Corporate debt securities
U.S. government and agency debt securities
Non-U.S. government debt securities
Held-to-maturity securities:
Certificates of deposit
Total long-term investments
Total investments
Amortized
Cost
Gains
Less than
One Year
Greater than
One Year
Estimated
Fair Value
Gross Unrealized
Losses
$
145,421 $
143,710
31,452
320,583
68,229
62,220
4,099
134,548
1,820
136,368
456,951 $
85,201 $
45,349
68,046
198,596
111,793
81,296
35,902
228,991
1,820
230,811
429,407 $
$
$
$
— $
16
—
16
—
—
—
—
—
—
16 $
177 $
35
75
287
—
—
—
—
—
—
287 $
(432) $
(266)
(20)
(718)
(2,054) $
(1,289)
(546)
(3,889)
142,935
142,171
30,886
315,992
(1,550)
(917)
—
(2,467)
—
(2,467)
(3,185) $
(39) $
(24)
(53)
(116)
(654)
(517)
(210)
(1,381)
—
(1,381)
(1,497) $
(676)
(1,424)
(191)
(2,291)
—
(2,291)
(6,180) $
66,003
59,879
3,908
129,790
1,820
131,610
447,602
— $
—
—
—
—
—
—
—
—
—
— $
85,339
45,360
68,068
198,767
111,139
80,779
35,692
227,610
1,820
229,430
428,197
At December 31, 2022, the Company reviewed its investment portfolio to assess whether the unrealized losses on its available-for-sale investments
were temporary. Investments with unrealized losses consisted primarily of corporate debt securities and debt securities issued by non-U.S. agencies and
backed by non-U.S. governments. At December 31, 2022, 280 of the Company’s 289 investment securities were in an unrealized loss position and had an
aggregate estimated fair value of $422.7 million. Approximately 47% and 45% of the Company’s investment securities at December 31, 2022 are in
corporate debt securities, with a minimum rating of A2 (Moody’s)/A (Standard and Poor’s), and debt securities issued by the U.S. government or its
agencies, respectively. In a rising interest rate environment, the Company expects its fixed-rate investment securities will carry unrealized losses. In making
the determination whether the decline in fair value of these securities was other-than-temporary, the Company evaluated whether it intended to sell the
security and whether it was more likely than not that the Company would be required to sell the security before recovering its amortized cost basis. The
Company has the intent and ability to hold these investments until recovery, which may be at maturity.
In September 2019, the Company purchased $1.9 million of convertible promissory notes from Synchronicity Pharma, Inc. (“Synchronicity”), a
related party. The notes were due to mature on the earlier of June 30, 2021, the closing of a preferred equity financing, the closing of a merger, business
combination or sale of stock resulting in Synchronicity’s stockholders owning less than 50% of the surviving entity, or an event of default. During the years
ended December 31, 2021 and 2020, the Company recorded an other-than-temporary credit loss of $0.9 million and $1.0 million, respectively, against the
value of this investment and at December
F-19
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
31, 2021, this investment was fully impaired. The losses were recorded within “Other income, net” in the accompanying consolidated statements of
operations and comprehensive loss.
In January 2022, the Company purchased $0.5 million of convertible promissory notes from Synchronicity that matured on the earlier of September
30, 2022, the closing of a preferred equity financing, the closing of a merger, business combination or sale of stock resulting in Synchronicity’s
stockholders owning less than 50% of the surviving entity, or an event of default. During the year ended December 31, 2022, the Company determined
there was an other-than-temporary loss related to this investment in Synchronicity and the $0.5 million was recorded within “Other income, net” in the
accompanying consolidated statements of operations and comprehensive loss.
In May 2014, the Company entered into an agreement whereby it is committed to provide up to €7.4 million to a partnership, Fountain Healthcare
Partners II, L.P. of Ireland (“Fountain”), which was created to carry on the business of investing exclusively in companies and businesses engaged in the
healthcare, pharmaceutical and life sciences sectors. As of December 31, 2022, the Company’s total contribution in Fountain was equal to €7.4 million, and
its commitment represented approximately 7% of the partnership’s total funding. The Company is accounting for its investment in Fountain under the
equity method.
During the year ended December 31, 2020, two of the companies within the Fountain portfolio were acquired by third parties. The Company’s
proportional share of the proceeds from these transactions was $11.1 million, of which $10.4 million was received during the year ended December 31,
2020 and the remaining $0.7 million was received during the year ended December 31, 2021. The transactions were accounted for under the cumulative
earnings approach whereby the return on investment of $8.3 million was recorded as a gain within “Other income, net” in the accompanying consolidated
statements of operations and comprehensive loss and the return of investment of $2.8 million was recorded as a reduction in the Company’s net investment
in Fountain.
During the three months ended March 31, 2022, one of the companies within the Fountain portfolio was acquired by a third party. The Company’s
proportional share of the proceeds from this transaction was $1.1 million, of which $1.0 million was received during the three months ended March 31,
2022 and the remaining $0.1 million is being held in escrow until May 2023. The transaction was accounted for under the cumulative earnings approach
whereby the return on investment of $0.6 million was recorded as a gain within “Other income, net” in the accompanying consolidated statements of
operations and comprehensive loss and the return of investment of $0.5 million was recorded as a reduction in the Company’s net investment in Fountain.
The Company’s net investment in Fountain was $7.9 million and $6.1 million at December 31, 2022 and 2021, respectively, and was included within
“Other assets” in the accompanying consolidated balance sheets.
During the years ended December 31, 2022, 2021 and 2020, the Company recorded an increase in its investment in Fountain of $1.8 million, a
decrease of $0.4 million and an increase of $0.3 million, respectively, which represented the Company’s proportional share of Fountain’s net gains or losses
for such periods.
Realized gains and losses on the sales and maturities of investments, which were identified using the specific identification method, were as follows:
(In thousands)
Proceeds from the sales and maturities of investments
Realized gains
Realized losses
2022
Year Ended December 31,
2021
$
$
$
281,627 $
— $
529 $
295,010 $
34 $
977 $
2020
253,001
76
977
The Company’s available‑for‑sale and held‑to‑maturity securities at December 31, 2022 had contractual maturities in the following periods:
(In thousands)
Within 1 year
After 1 year through 5 years
Total
Available-for-sale
Amortized
Cost
Estimated
Fair Value
Held-to-maturity
Amortized
Cost
Estimated
Fair Value
$
$
318,592 $
136,539
455,131 $
313,994 $
131,788
445,782 $
1,820 $
—
1,820 $
1,820
—
1,820
F-20
Table of Contents
5. FAIR VALUE
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates
the fair value hierarchy and the valuation techniques the Company utilized to determine such fair value:
(In thousands)
Assets:
Cash equivalents
U.S. government and agency debt securities
Corporate debt securities
Non-U.S. government debt securities
Total
Assets:
U.S. government and agency debt securities
Corporate debt securities
Non-U.S. government debt securities
Contingent consideration
Total
December 31,
2022
Level 1
Level 2
Level 3
$
$
$
$
19,857 $
202,050
208,938
34,794
465,639 $
19,857 $
168,639
—
—
188,496 $
— $
33,411
208,938
34,794
277,143 $
—
—
—
—
—
December 31,
2021
Level 1
Level 2
Level 3
126,139 $
196,478
103,760
23,048
449,425 $
96,597 $
—
—
—
96,597 $
29,542 $
196,478
103,760
—
329,780 $
—
—
—
23,048
23,048
The Company transfers its financial assets and liabilities, measured at fair value on a recurring basis, between the fair value hierarchies at the end of
each reporting period.
There were no transfers of any securities between levels during the year ended December 31, 2022. The following table is a rollforward of the fair
value of the Company’s investments whose fair value was determined using Level 3 inputs at December 31, 2022:
(In thousands)
Balance, January 1, 2022
Purchase of corporate debt security
Change in the fair value of contingent consideration
Milestone and royalty payments received by the Company related to contingent consideration
Impairment of corporate debt security
Balance, December 31, 2022
$
$
Fair Value
23,048
500
(21,750)
(1,298)
(500)
—
The Company’s investments in U.S. government and agency debt securities, non-U.S. government agency debt securities and corporate debt
securities classified as Level 2 within the fair value hierarchy were initially valued at the transaction price and subsequently valued, at the end of each
reporting period, utilizing market-observable data. The market-observable data included reportable trades, benchmark yields, credit spreads, broker/dealer
quotes, bids, offers, current spot rates and other industry and economic events. The Company validated the prices developed using the market-observable
data by obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.
In November 2019, Recro Pharma, Inc. (“Recro”) spun out its acute care segment to Baudax Bio, Inc. (“Baudax”), a publicly-traded pharmaceutical
company. As part of this transaction, Recro’s obligations to pay certain contingent consideration from the Gainesville Transaction were assigned and/or
transferred to Baudax.
In Baudax’s Quarterly Report on Form 10-Q for the period ended September 30, 2022, Baudax continued to include disclosures regarding its ability
to continue as a going concern, which first appeared in its Annual Report on Form 10-K for the period ended December 31, 2021. In March 2022, Baudax
reduced its workforce by approximately 80%, which was designed to reduce its operational expenses and conserve its cash resources. As a result of these
events and the fact that, as of March 31, 2022, Baudax had only paid $0.5 million of the $6.4 million milestone payment that was due to the Company in
March 2022, the Company recorded a reduction in the fair value of the contingent consideration of $19.1 million during the three months ended March 31,
2022. In light of Baudax’s disclosures and the fact that, as of September 30, 2022, Baudax had only paid $1.2 million of the $6.4 million that was due to the
Company in March 2022, the Company determined, during the three months ended September 30, 2022, that it was unlikely to collect any further proceeds
under this arrangement and recorded a $3.6 million charge to reduce the fair value of the contingent consideration to zero within “Change in the fair value
of contingent consideration”. In addition, during the three months ended September 30, 2022, the Company determined that certain construction in progress
related to the manufacture of ANJESO had no future value. See Note 7, Property, Plant and Equipment, within the “Notes to Consolidated Financial
Statements” in this Annual Report for details related to such construction in progress.
F-21
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2022, Baudax announced that it would discontinue the sale of ANJESO and on December 28, 2022, the U.S. Food and Drug
Administration (“FDA”) acknowledged the discontinuation of sale of ANJESO via listing in the Orange Book.
The estimated fair value of the Company’s long-term debt under the 2026 Term Loans (as defined in Note 11, Long-Term Debt within these “Notes
to Consolidated Financial Statements” in this Annual Report), which was based on quoted market price indications (Level 2 in the fair value hierarchy) and
which may not be representative of actual values that could have been, or will be, realized in the future, was $278.9 million and $285.8 million at
December 31, 2022 and 2021, respectively.
6. INVENTORY
Inventory consists of the following:
(In thousands)
Raw materials
Work in process
Finished goods(1)
Total inventory
December 31,
2022
December 31,
2021
$
$
61,064 $
76,228
44,126
181,418 $
56,125
59,105
35,105
150,335
(1)
At December 31, 2022 and 2021, the Company had $30.9 million and $25.1 million, respectively, of finished goods inventory located at its
third‑party warehouse and shipping service provider.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
(In thousands)
Land
Building and improvements
Furniture, fixtures and equipment
Leasehold improvements
Construction in progress
Subtotal
Less: accumulated depreciation
Total property, plant and equipment, net
December 31,
2022
December 31,
2021
$
$
6,560 $
195,144
418,448
54,152
84,715
759,019
(433,658)
325,361 $
6,560
192,920
398,099
52,526
86,512
736,617
(395,563)
341,054
Depreciation expense was $41.7 million, $40.5 million and $42.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Also, during the years ended December 31, 2022, 2021 and 2020, the Company wrote off furniture, fixtures and equipment that had an approximate
carrying value of $0.5 million, $0.1 million and less than $0.1 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’s
manufacturing facility in Wilmington, Ohio. The Company continues to evaluate its manufacturing capacity based on expectations of demand for its
products and will continue to record such amounts within construction in progress until such time as the underlying assets are placed into service. The
Company expects that approximately $44.3 million of construction in progress will be placed into service in the second half of 2023. The Company
continues to periodically evaluate whether facts and circumstances indicate that the carrying value of its long‑lived assets to be held and used may not be
recoverable.
In September 2022, the Company determined that $8.7 million of its construction in progress that related to the manufacture of ANJESO had no
future value. The Company had previously received $6.4 million from Baudax related to such equipment which it had recorded as contract liabilities within
“Other long-term liabilities” in the accompanying consolidated balance sheets and the net amount of $2.3 million was written off through “other income,
net” in the accompanying consolidated statements of operations and comprehensive loss.
F-22
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consists of the following:
(In thousands)
Goodwill
Finite-lived intangible assets:
Collaboration agreements
Capitalized IP
Total
Weighted
Amortizable
Life (Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
December 31, 2022
December 31, 2021
12
11-13
$
$
$
92,873 $
— $
92,873 $
92,873 $
— $
92,873
465,590 $ (435,887) $
118,160
(110,183)
583,750 $ (546,070) $
29,703 $
7,977
37,680 $
465,590 $ (407,012) $
118,160
(102,695)
583,750 $ (509,707) $
58,578
15,465
74,043
The Company’s finite‑lived intangible assets consist of collaborative agreements and the NanoCrystal and oral controlled release technologies
acquired as part of the EDT acquisition. The Company recorded $36.4 million, $38.1 million and $39.5 million of amortization expense related to its
finite‑lived intangible assets during the years ended December 31, 2022, 2021 and 2020, respectively. Based on the Company’s most recent analysis,
amortization of intangible assets included within its consolidated balance sheets at December 31, 2022 is expected to be approximately $35.0 million and
$1.0 million in the years ending December 31, 2023 and 2024, respectively. Although the Company believes such available information and assumptions
are reasonable, given the inherent risks and uncertainties underlying its expectations regarding such future revenues, there is the potential for the
Company’s actual results to vary significantly from such expectations. If revenues are projected to change, the related amortization of the intangible assets
will change in proportion to the change in revenues.
The Company performed its annual goodwill impairment test as of October 31, 2022. The Company elected to perform a qualitative impairment test
and based on the weight of all available evidence, determined that the fair value of the reporting unit more-likely-than-not exceeded its carrying value.
9. LEASES
All of the Company’s leases are accounted for as operating leases. The Company’s two significant operating leases at December 31, 2022 include
the following:
900 Winter Street
The Company leases approximately 231,000 square feet of office and laboratory space located at 900 Winter Street in Waltham, Massachusetts (the
“900 Winter Street Lease”). The initial term of the lease commenced on January 20, 2020, expires in 2035 and includes an option to extend the term for an
additional ten-year period.
In December 2022, the Company exercised an early payment option included within the terms of the 900 Winter Street Lease. The election of such
early payment option resulted in a remeasurement of the remaining lease liability and right-of-use asset as of the remeasurement date of December 1, 2022
of $12.8 million. Subsequently, the Company made the early lease payment of $15.3 million in December 2022. As of December 31, 2022, the
remeasurement and subsequent payment resulted in an increase in the right-of-use asset of $12.8 million and a net decrease in the lease liability of $2.5
million.
852 Winter Street
The Company leases approximately 180,000 square feet of corporate office space, administrative areas and laboratories at 852 Winter Street in
Waltham, Massachusetts. The original lease commenced in 2010 and was extended, at the Company’s option, for five years in 2020. The lease extension
commenced in March 2021 for 163,000 square feet of space and in September 2021 for the remaining 17,000 square feet of space. The lease expires in
2026 and includes a tenant option to extend the term of the lease for an additional five-year period.
At December 31, 2022 and 2021, the operating leases held by the Company had a weighted average incremental borrowing rate of 5.25% and
5.25%, respectively, and a weighted average remaining lease term of 8.9 years and 11.7 years, respectively. During the years ended December 31, 2022,
2021 and 2020, cash paid for amounts included for the measurement of lease liabilities was $33.2 million, $16.8 million and $16.3 million, respectively.
The Company recorded operating lease expense of $16.6 million, $17.1 million and $17.3 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
F-23
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future lease payments under non-cancelable leases as of December 31, 2022 consisted of the following:
(In thousands)
2023
2024
2025
2026
2027
Thereafter
Total operating lease payments
Less: imputed interest
Total operating lease liabilities
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following:
(In thousands)
Accounts payable
Accrued compensation
Accrued other
Total accounts payable and accrued expenses
December 31,
2022
16,665
16,608
16,855
12,767
9,506
69,474
141,875
(36,324)
105,551
$
$
$
December 31,
2022
December 31,
2021
$
$
32,843 $
79,085
108,161
220,089 $
55,721
77,256
75,514
208,491
A summary of the Company’s current provision for sales discounts, allowances and reserves is as follows:
(In thousands)
Medicaid rebates
Product discounts
Medicare Part D
Other
Total accrued sales discounts, allowances and reserves
11. LONG‑TERM DEBT
Long‑term debt consists of the following:
(In thousands)
2026 Term Loans, due March 12, 2026
Less: current portion
Long-term debt
December 31,
2022
December 31,
2021
208,332 $
13,204
18,409
12,170
252,115 $
195,413
14,951
14,348
12,504
237,216
December 31,
2022
December 31,
2021
293,270 $
(3,000)
290,270 $
295,804
(3,000)
292,804
$
$
$
$
In March 2021, the Company amended and refinanced its existing term loan, previously referred to as the 2023 Term Loans, in order to, among
other things, provide for a new class of replacement term loans equal to $300.0 million; extend the due date of the loan from March 26, 2023 to March 12,
2026; amend the interest payable from LIBOR plus 2.25% with no LIBOR floor to LIBOR plus 2.50% with a LIBOR floor of 0.5%; and increase covenant
flexibility (such refinancing, the “Term Loan Refinancing” and the 2023 Term Loans as so amended and refinanced the “2026 Term Loans”). The 2026
Term Loans were also amended to include customary ARRC hardwired benchmark replacement language.
The 2026 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional potential amounts, provided that the
Company meets certain conditions, including a specified leverage ratio. The 2026 Term Loans include a number of restrictive covenants that, among other
things and subject to certain exceptions and baskets, impose operating and financial restrictions on the Company and certain of its subsidiaries. The 2026
Term Loans also contain customary affirmative covenants and events of default. The Company was in compliance with its debt covenants at December 31,
2022.
The Term Loan Refinancing involved multiple lenders who were considered members of a loan syndicate. In determining whether the Term Loan
Refinancing was to be accounted for as a debt extinguishment or a debt modification, the Company considered whether creditors remained the same or
changed and whether the changes 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 the new terms of the 2026 Term Loans was at least 10% different from the present value of the remaining cash flows under the
2023 Term Loans (commonly referred to as the “10% Test”). The Company performed a separate 10% Test for each individual creditor participating in the
loan syndication. With the exception of three lenders, who owned between 2%-7% of the total outstanding principal amount of the 2023 Term Loans
immediately prior to the Term Loan Refinancing whose holding amounts were accounted for as a debt extinguishment, the Term Loan Refinancing was
otherwise accounted for as a debt modification.
F-24
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Term Loan Refinancing resulted in a $2.1 million charge in the year ended December 31, 2021, which was included in “Interest expense” in the
accompanying consolidated statement of operations and comprehensive loss.
Scheduled maturities with respect to the 2026 Term Loans are as follows (in thousands):
Year Ending December 31:
2023
2024
2025
2026
Total
$
$
3,000
3,000
3,000
285,750
294,750
The Company is subject to mandatory prepayments of principal if certain excess cash flow thresholds, as defined in the 2026 Term Loans, are met.
To date, the Company has not been required to make any such mandatory prepayments.
At December 31, 2022, the Company’s balance of unamortized deferred financing costs and unamortized original issue discount costs were $0.5
million and $1.0 million, respectively. These costs are being amortized to interest expense over the estimated repayment period of the 2026 Term Loans
using the effective interest method. During each of the years ended December 31, 2022, 2021 and 2020, the Company had amortization expense of $0.5
million, $0.5 million and $0.7 million, respectively, related to deferred financing costs and original issue discount.
12. LOSS PER SHARE
Basic loss per ordinary share is calculated based upon net loss available to holders of ordinary shares divided by the weighted average number of
shares outstanding. For the years ended December 31, 2022, 2021 and 2020, as the Company was in a net loss position, the diluted loss per share
calculation did not assume conversion or exercise of stock options and restricted stock unit awards, as they would have had an anti-dilutive effect on loss
per share.
The following potential ordinary share equivalents were not included in the net loss per share calculation because the effect would have been anti-
dilutive:
(In thousands)
Stock options
Restricted stock unit awards
Total
13. SHAREHOLDERS’ EQUITY
Share Repurchase Program
2022
Year Ended December 31,
2021
2020
12,777
5,040
17,817
14,794
3,981
18,775
15,274
3,279
18,553
On September 16, 2011, the Company’s 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
negotiated transactions. At December 31, 2022, approximately $101.0 million was available to repurchase ordinary shares pursuant to the repurchase
program. All shares repurchased are recorded as treasury stock. The repurchase program has no set expiration date and may be suspended or discontinued
at any time. During the years ended December 31, 2022 and 2021, the Company did not acquire any ordinary shares under the repurchase program.
F-25
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. SHARE‑BASED COMPENSATION
Share‑Based Compensation Expense
The following table presents share‑based compensation expense included in the Company’s consolidated statements of operations and
comprehensive loss:
(In thousands)
Cost of goods manufactured and sold
Research and development
Selling, general and administrative
Total share-based compensation expense
2022
Year Ended December 31,
2021
2020
$
$
10,284 $
27,941
56,029
94,254 $
9,175 $
24,877
53,570
87,622 $
8,430
26,408
55,326
90,164
During the years ended December 31, 2022, 2021 and 2020, $3.3 million, $2.3 million and $2.6 million, respectively, of share‑based compensation
expense was capitalized and recorded as “Inventory” in the accompanying consolidated balance sheets.
Share‑Based Compensation Plans
The Company has one share-based compensation plan pursuant to which awards are currently being made: the 2018 Stock Option and Incentive
Plan, as amended (the “2018 Plan”). The Company has two share-based compensation plans pursuant to which outstanding awards have been made, but
from which no further awards can or will be made: the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended, (the “2008
Plan”) and the Alkermes plc 2011 Stock Option and Incentive Plan, as amended (the “2011 Plan”). Effective May 20, 2020, the 2018 Plan was amended
such that any shares underlying any outstanding awards granted under the 2011 Plan or the 2008 Plan that are forfeited, canceled, repurchased or otherwise
terminated (other than by exercise) from and after such date will become available for issuance pursuant to the 2018 Plan, notwithstanding anything to the
contrary in the terms of the 2011 Plan or the 2008 Plan.
The 2018 Plan allows for the issuance of non-qualified and incentive stock options, restricted stock, restricted stock unit awards, cash-based awards
and performance shares to employees, officers and directors of, and consultants to, the Company in such amounts and with such terms and conditions as
may be determined by the compensation committee of the Company's board of directors, subject to the provisions of the 2018 Plan, as applicable.
On July 7, 2022, the Company’s shareholders approved an amended version of the Alkermes plc 2018 Stock Option and Incentive Plan that served
to, among other things, increase the number of ordinary shares authorized for issuance thereunder by 8.3 million. At December 31, 2022, there were
12.9 million ordinary shares available for issuance in the aggregate under the 2018 Plan. The 2018 Plan provides 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 Options
A summary of stock option activity is presented in the following table:
Outstanding, January 1, 2022
Granted
Exercised
Expired
Forfeited
Outstanding, December 31, 2022
Exercisable, December 31, 2022
Number of
Shares
Weighted Average
Exercise Price
16,747,819 $
3,164,468 $
(1,108,772) $
(660,093) $
(546,461) $
17,596,961 $
10,138,673 $
34.02
25.39
17.70
48.03
22.75
33.32
40.52
The weighted average grant date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $12.62, $10.09
and $9.52, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $11.6
million, $8.3 million and $2.0 million, respectively.
F-26
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2022, there were 7.2 million stock options expected to vest with a weighted average exercise price of $23.46 per share, a weighted
average contractual remaining life of 8.2 years with an aggregate intrinsic value of $24.8 million. At December 31, 2022, the aggregate intrinsic value of
stock options exercisable was $14.8 million with a weighted average remaining contractual term of 4.6 years. The number of stock options expected to vest
was determined by applying the pre‑vesting forfeiture rate to the total number of outstanding options. The intrinsic value of a stock option is the amount by
which the market value of the underlying shares exceeds the exercise price of the stock option.
At December 31, 2022, there was $32.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be
recognized over a weighted average period of 1.9 years. Included within the outstanding stock option balances at December 31, 2022 consisted of 382,200
performance-based stock options that were granted in 2019 and valued using a Monte Carlo simulation model. The weighted average grant date fair value
of such performance-based stock options was $16.78. The unrecognized compensation cost related to these performance-based stock options was less than
$0.1 million at December 31, 2022 and is included in the unrecognized compensation cost noted above.
Time‑Based Restricted Stock Unit Awards
A summary of time-based RSU activity is presented in the following table:
Unvested, January 1, 2022
Granted
Vested
Forfeited
Unvested, December 31, 2022
Number of
Shares
Weighted Average
Grant Date
Fair Value
6,322,685 $
3,031,864 $
(2,051,872) $
(677,255) $
6,625,422 $
23.38
25.27
26.45
22.96
23.34
The weighted average grant date fair value of time‑vesting RSUs granted during the years ended December 31, 2022, 2021 and 2020 were $25.27,
$20.83 and $20.22, respectively. The total fair value of time-vesting RSUs that vested during the years ended December 31, 2022, 2021 and 2020, was
$54.3 million, $56.3 million and $45.9 million, respectively.
At December 31, 2022, there was $62.4 million of total unrecognized compensation cost related to unvested time-vesting RSUs, which will be
recognized over a weighted average remaining contractual term of 1.9 years.
Performance-Based Restricted Stock Unit Awards
In February 2022, 2021 and 2020, the compensation committee of the Company’s board of directors approved awards of performance-based RSUs
to employees of the Company at the Senior Vice President level and above, in each case subject to vesting based on the achievement of certain financial,
commercial and/or R&D performance criteria to be assessed over a performance period of three years from the date of the grant, and subject, at the end of
such three-year performance period, to upward or downward adjustment based on a market condition tied to relative share price performance over the
three-year performance period.
A summary of performance-based RSU activity is presented in the following table:
Unvested, January 1, 2022
Granted
Forfeited
Vested
Unvested, December 31, 2022
Number of
Shares
Weighted Average
Grant Date
Fair Value
877,862
517,683
(45,911)
—
1,349,634
$
$
$
$
$
23.20
30.73
24.46
—
26.05
The weighted average grant date fair value of performance-based RSUs granted during the years ended December 31, 2022, 2021 and 2020 were
$30.73, $23.09 and $23.43, respectively. The total fair value of performance-based RSUs that vested during the years ended December 31, 2022, 2021 and
2020 were none, $4.2 million and none, respectively. At December 31, 2022, there was $5.1 million of unrecognized compensation cost related to the
performance-based RSUs, which would be recognized in accordance with the terms of the award when the Company deems it probable that the
performance criteria will be met. The unvested awards will expire if it is determined that the performance criteria have not been met during the applicable
three-year performance period.
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Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. COLLABORATIVE ARRANGEMENTS
The 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
“Item 1— Business” of this Annual Report for information with respect to IP protection for these products. The collaboration revenue the Company has
earned in the years ended December 31, 2022, 2021 and 2020 is summarized in Note 3, Revenue from Contracts with Customers within the notes to the
consolidated financial statements in this Annual Report.
The Company’s significant collaborative arrangements are described below:
Janssen
INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI
In November 2021, the Company received notice of partial termination of an exclusive license agreement with Janssen. Under this license
agreement, the Company provided Janssen with rights to, and know-how, training and technical assistance in respect of, the Company’s small particle
pharmaceutical compound technology, known as NanoCrystal technology, which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA
TRINZA/TREVICTA, and INVEGA HAFYERA/BYANNLI. When the partial termination became effective in February 2022, Janssen ceased paying
royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. and the Company stopped recognizing
royalty revenue related to net sales of these products. In April 2022, the Company commenced binding arbitration proceedings related to, among other
things, Janssen’s partial termination of this license agreement and Janssen’s royalty and other obligations under the agreement. On December 21, 2022, we
received the Interim Award in these proceedings from the Tribunal, in which the Tribunal agreed with our position that, while Janssen may terminate the
agreement, it may not continue to sell Products (as defined in the agreement) developed during the term of the agreement without paying royalties pursuant
to the term of the agreement. This award is not yet final. We will engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal’s
issuance of a final award. Accordingly, the Company has not recognized royalty revenue related to U.S. sales of the long-acting INVEGA products since
February 2022. For additional information about these proceedings, see Note 17, Commitments and Contingent Liabilities in the “Notes to Consolidated
Financial Statements” in this Annual Report.
Under this license agreement, the Company granted Janssen a worldwide exclusive license under the Company’s NanoCrystal technology to
develop, commercialize and manufacture injectable pharmaceutical products containing paliperidone palmitate, which include the long-acting INVEGA
products, and the Company received milestone payments from Janssen upon the achievement of certain development goals from Janssen; there are no
further milestones to be earned under this agreement. The agreement also provides for tiered royalty payments between 5% and 9% of net sales of products
subject to this agreement in each country where the license is in effect, with the exact royalty percentage determined based on aggregate worldwide 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‑country basis. 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 such country.
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 million and
$500 million, and greater than $500 million, respectively. The know‑how royalty rate resets to 3.5% at the beginning of each calendar year and is payable
until 15 years from first commercial sale of a product in each individual country, subject to expiry of the agreement. These royalty payments may be
reduced in any country based on patent litigation or on competing products achieving certain minimum sales thresholds. The license agreement, unless
earlier terminated, terminates upon 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, subject to certain surviving obligations.
Janssen may terminate the license agreement in whole or in part upon three months’ notice to the Company. The Company and Janssen have the
right to 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 or insolvency.
F-28
Table of Contents
RISPERDAL CONSTA
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under a product development agreement, the Company collaborated with Janssen on the development of RISPERDAL CONSTA. Under the
development agreement, Janssen provided funding to the Company for the development of RISPERDAL CONSTA and Janssen is responsible for securing
all necessary 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 RISPERDAL
CONSTA. Under its license agreements with Janssen, the Company receives royalty payments equal to 2.5% of Janssen’s end-market net sales of
RISPERDAL CONSTA 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 country based on lack of patent coverage and significant competition from generic versions of the product. Janssen can terminate the license
agreements upon 30 days’ prior written notice to the Company. Either party may terminate the license agreements by written notice following a breach
which continues for 90 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 basis upon 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 the product in such country, provided that in 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 pertain regardless. After expiration, Janssen retains a non‑exclusive, royalty‑free license to manufacture,
use and sell RISPERDAL CONSTA.
The Company exclusively manufactures RISPERDAL CONSTA for commercial sale. Under its manufacturing and supply agreement with Janssen,
the Company records manufacturing revenues when product is fully manufactured and approved for shipment by both Janssen and the Company. Revenue
is based on a percentage of Janssen’s net unit sales price for RISPERDAL CONSTA for the applicable calendar year. This percentage is determined based
on Janssen’s unit demand for such calendar year and varies based on the volume of units shipped, with a minimum manufacturing fee of 7.5%. Either party
may terminate the manufacturing and supply agreement 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 or upon written notice in the event of the other party’s insolvency or bankruptcy. Janssen may terminate the
agreement upon six months’ written notice to the Company. In the event that Janssen terminates the manufacturing and supply agreement without
terminating the license agreements, the royalty rate payable to the Company on Janssen’s net sales of RISPERDAL CONSTA would increase from 2.5% to
5.0%.
Biogen
Under a license and collaboration agreement with Biogen, the Company granted Biogen a worldwide, exclusive, sublicensable license to develop,
manufacture and commercialize VUMERITY and other products covered by patents licensed to Biogen under the agreement.
Under this license and collaboration agreement, the Company received an upfront cash payment and milestone payments related to the achievement
of certain milestones, including FDA approval of the NDA for VUMERITY and amendment of the license and collaboration agreement. The Company is
also eligible to receive additional payments upon achievement of certain milestones, including milestones relating to the first two products, other than
VUMERITY, covered by patents licensed to Biogen under the license and collaboration agreement.
In addition, the Company receives a 15% royalty on worldwide net sales of VUMERITY, subject to increases for VUMERITY manufactured and/or
packaged by Biogen or its designees, and subject to, under certain circumstances, minimum annual payments for the first five years following FDA
approval of VUMERITY. The Company is also entitled to receive royalties on net sales of products other than VUMERITY covered by patents licensed to
Biogen under the license and collaboration agreement, at tiered royalty rates calculated as percentages 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-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 the applicable product in the
applicable country. Royalties for all products and the minimum annual payments for VUMERITY are subject to customary reductions, as set forth in the
license and collaboration agreement.
Under the license and collaboration agreement, Biogen appointed the Company as the toll manufacturer of clinical and commercial supplies of
VUMERITY, subject to Biogen’s right to manufacture or have manufactured commercial supplies as a back-up manufacturer and subject to good faith
agreement by the parties on the terms of such manufacturing arrangements. In October 2019, the Company entered into a commercial supply agreement
with Biogen for the commercial supply of VUMERITY, an amendment to such commercial supply agreement and an amendment to the license and
collaboration agreement with Biogen, pursuant to which Biogen has elected to conduct a technology transfer and, following a transition period, assume
responsibility for the manufacture (itself or through a designee) of clinical supplies of VUMERITY and up to 100% of commercial supplies of
VUMERITY in exchange for an increase in the royalty rate to be paid by Biogen to the Company on net sales of that portion of product that is
manufactured by Biogen or its designee.
F-29
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unless earlier terminated, the license and collaboration agreement will remain in effect until the expiry of all royalty obligations. Biogen has the
right to terminate the license and collaboration agreement at will, on a product-by-product basis or in its entirety upon 180 days’ prior notice to the
Company. Either party has the right to terminate the license and collaboration agreement following any governmental prohibition of the transactions
effected by the agreement, or in connection with an insolvency event involving the other party. Upon termination of the license and collaboration
agreement by either party, then, at the Company’s request, the VUMERITY program will revert to the Company.
16. INCOME TAXES
The Company’s (benefit) provision for income taxes consists of the following:
(In thousands)
Current income tax provision:
U.S. federal
U.S. state
Rest of world
Deferred income tax (benefit) provision:
U.S. federal
U.S. state
Ireland
Total tax (benefit) provision
2022
Year Ended December 31,
2021
2020
$
$
18,105 $
5,653
—
(28,123)
(4,672)
—
(9,037) $
2,700 $
1,079
3
5,908
(827)
—
8,863 $
2,943
1,396
—
9,876
109
—
14,324
The income tax benefit in 2022 was primarily due to an enhanced foreign derived intangible income deduction as a result of a change to Section 174
of the Tax Cuts and Jobs Act in relation to capitalization and amortization of R&D expenses. The income tax provisions in 2021 and 2020 were primarily
due to U.S. federal and state taxes on income earned in the U.S. and the tax impact of employee equity activity.
No provision for income tax has been provided on undistributed earnings of the Company’s foreign subsidiaries because such earnings are
indefinitely reinvested in the foreign operations. Cumulative unremitted earnings of U.S. subsidiaries totaled approximately $812.8 million at December
31, 2022. In the event of a repatriation of those earnings in the form of dividends or otherwise, the Company may be liable for income taxes, subject to
adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreign tax authorities. The Company estimates that approximately
$55.0 million of income taxes would be payable on the repatriation of the unremitted earnings to Ireland.
The distribution of the Company’s loss before income taxes by geographical area consists of the following:
(In thousands)
Ireland
U.S.
Rest of world
Loss before income taxes
2022
Year Ended December 31,
2021
$
$
(183,828) $
16,524
—
(167,304) $
(54,070) $
14,764
—
(39,306) $
2020
(138,070)
41,599
(66)
(96,537)
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Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the Company’s net deferred tax assets consist of the following:
(In thousands)
Deferred tax assets:
NOL carryforwards
Research and development expenses
Accrued expenses and reserves
Share-based compensation
Tax credits
Other
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Other
Total deferred tax liabilities
Net deferred tax assets
December 31,
2022
December 31,
2021
$
$
238,128 $
66,464
55,755
41,075
22,932
9,993
(271,517)
162,830
(46,274)
(1,502)
(47,776)
115,054 $
222,508
—
52,308
40,455
58,704
7,758
(249,112)
132,621
(50,187)
(1,150)
(51,337)
81,284
The activity in the valuation allowance associated with deferred taxes consists of the following:
(In thousands)
Deferred tax asset valuation allowance for the year ended December 31, 2020
Deferred tax asset valuation allowance for the year ended December 31, 2021
Deferred tax asset valuation allowance for the year ended December 31, 2022
(1)
The (additions)/reductions in each of the periods presented relate primarily to Irish NOLs.
Balance at
Beginning of
Period
(Additions) /
Reduc ons (1)
$
$
$
(242,059) $
(253,649) $
(249,112) $
(11,590) $
4,537 $
(22,405) $
Balance at
End of Period
(253,649)
(249,112)
(271,517)
At December 31, 2022, the Company maintained a valuation allowance of $25.7 million against certain U.S. state deferred tax assets and $245.8
million 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 be
realized. If the Company demonstrates consistent profitability in the future, the evaluation of the recoverability of these deferred tax assets could change
and the remaining valuation allowances could be released in part or in whole. If the Company incurs losses in the U.S. in the future, the evaluation of the
recoverability of the U.S. deferred tax assets 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, 2022, the Company had $1.7 billion of Irish NOL carryforwards, $1
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Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5.1 million of U.S. federal NOL carryforwards, $43.2 million of state NOL carryforwards, $5.7 million of federal R&D credits and $29.0 million of state
tax credits which will either expire on various dates through 2042 or can be carried forward indefinitely. These loss and credit carryforwards are available
to reduce certain future Irish and foreign taxable income and tax. These loss and credit carryforwards are subject to review and possible adjustment by the
appropriate taxing authorities. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based upon
changes in the ownership of the Company's ordinary shares. Included within these loss and credit carryforwards are $15.1 million of U.S. federal NOL
carryforwards and $6.8 million of state NOL carryforwards, acquired as part of the acquisition of Rodin, each of which are subject to a $0.5 million annual
limitation.
A reconciliation of the Company’s statutory tax rate to its effective tax rate is as follows:
(In thousands, except percentage amounts)
Statutory tax rate
2022
Year Ended December 31,
2021
2020
12.5 %
12.5 %
12.5 %
Loss before income taxes at statutory rate
$
(20,913)
$
(4,913)
$
(12,067)
Share-based compensation
Foreign rate differential(1)
Change in valuation allowance
Intercompany amounts(2)
Irish rate differential(3)
Uncertain tax positions
Non-deductible lobbying expenses
U.S. state income taxes, net of U.S. federal benefit
In-process R&D(4)
Foreign derived intangible income
R&D credit
Other permanent items(5)
Income tax (benefit) provision
4,461
(2,122)
21,455
(1,694)
4,926
602
775
598
—
(10,405)
(7,863)
1,143
(9,037)
$
7,841
5,811
(4,537)
10,707
1,817
704
637
248
2,724
(3,875)
(8,488)
187
8,863
$
8,972
7,798
11,590
6,234
2,511
811
683
1,298
332
(3,125)
(11,198)
485
14,324
$
Effective tax rate
5.4 %
(22.5) %
(14.8) %
(1)
(2)
(3)
(4)
(5)
Represents income or losses of U.S. subsidiaries, subject to tax at a rate other than the Irish statutory rate.
Intercompany amounts include cross-territory eliminations, the pre-tax effect of which has been eliminated in arriving at the Company's
consolidated loss before taxes.
Represents income or losses of Irish companies subject to tax at a rate other than the Irish statutory rate.
Represents the tax effect of the research and development expense recorded in connection with the acquisition of Rodin.
Other permanent items include, but are not limited to, non-deductible meals and entertainment 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:
(In thousands)
Balance, December 31, 2019
Additions based on tax positions related to prior periods
Additions based on tax positions related to the current period
Balance, December 31, 2020
Reductions based on tax positions related to prior periods
Additions based on tax positions related to the current period
Balance, December 31, 2021
Reductions based on the lapse of applicable statues of limitations
Additions based on tax positions related to prior periods
Additions based on tax positions related to the current period
Balance, December 31, 2022
Unrecognized
Tax Benefits
6,857
15
796
7,668
(27)
731
8,372
(438)
449
590
8,973
$
$
$
$
The unrecognized tax benefits at December 31, 2022, if recognized, would affect the Company's effective tax rate. The Company does not anticipate
that the amount of existing unrecognized tax benefits will materially increase or decrease within the next 12 months. The Company has elected to include
interest and penalties related to uncertain tax positions as a component of its provision for taxes. For the years ended December 31, 2022, 2021 and 2020,
the Company's accrued interest and penalties related to uncertain tax positions were not material.
F-32
Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s major taxing jurisdictions include Ireland and the U.S. (federal and state). These jurisdictions have varying statutes of limitations. In
the U.S., the 2019 through 2022 fiscal years remain subject to examination by the respective tax authorities, however, some states have longer statutes of
limitations and additional fiscal years remain subject to examination. In Ireland, the 2018 through 2022 fiscal years remain subject to examination by the
Irish tax authorities. Additionally, because of the Company’s Irish and U.S. loss carryforwards and credit carryforwards, certain tax returns from fiscal
years 2002 onward may also be examined. These years generally remain open for three to four years after the loss carryforwards and credit carryforwards
have been utilized.
The years ended December 31, 2018 and 2017 for Alkermes Finance S.à.r.l, a former indirect subsidiary of Alkermes plc that was liquidated during
the year ended December 31, 2020, are currently under examination by the Tax Authorities in Luxembourg (the “LTA”). In November 2022, the Company
received a notice of assessment in the amount of €2.2 million for the year ended December 31, 2017 from the LTA. The Company disagrees with this
assessment and believes this assessment to be incorrect. The Company will timely appeal the notice of assessment and pursue available administrative and
judicial avenues as may be necessary or appropriate. As of December 31, 2022, the Company had not received a notice of assessment from the LTA in
relation to the year ended December 31, 2018.
17. COMMITMENTS AND CONTINGENT LIABILITIES
Litigation
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. On a quarterly basis, the
Company reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim, asserted or
unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated
loss. Because of uncertainties related to claims and litigation, accruals are based on the Company’s best estimates, utilizing all available information. On a
periodic basis, as additional information becomes available, or based on specific events such as the outcome of litigation or settlement of claims, the
Company may reassess the potential liability related to these matters and may revise these estimates, which could result in material adverse adjustments to
the Company’s operating results. At December 31, 2022, there were no potential material losses from claims, asserted or unasserted, or legal proceedings
that the Company determined were probable of occurring.
Janssen Arbitration Proceedings
In April 2022, Alkermes Pharma Ireland Limited commenced binding arbitration proceedings to settle, among other things, whether,
notwithstanding Janssen Pharmaceutica N.V.’s partial termination of two license agreements with the Company, Janssen Pharmaceutica has a continuing
obligation to pay royalties on sales in the U.S. of INVEGA SUSTENNA, INVEGA TRINZA, INVEGA HAFYERA and CABENUVA. The request for
arbitration seeks, among other remedies, a declaration that Janssen Pharmaceutica N.V. is in breach of the license agreements and a resumption of royalty
payments for sales of the relevant products in the U.S. On December 21, 2022, the Company received the Interim Award in these proceedings from the
Tribunal. In the Interim Award, the Tribunal agreed with the Company’s position that, while Janssen Pharmaceutica N.V. may terminate the agreements, it
may not continue to sell Products (as defined in the agreements) developed during the term of the agreements without paying royalties pursuant to the
terms of the respective agreements. The Company will engage with Janssen Pharmaceutica N.V. and the Tribunal in additional proceedings prior to the
Tribunal’s issuance of a final award. The arbitration is to be conducted pursuant to the Institute for Conflict Prevention and Resolution (CPR) Rules for
Non-Administered Arbitration.
INVEGA SUSTENNA ANDA Litigation
Janssen Pharmaceutica N.V. and Janssen Pharmaceuticals, Inc. initiated patent infringement lawsuits in the U.S. District Court for the District of
New Jersey (the “NJ District Court”) in January 2018 against Teva Pharmaceuticals USA, Inc. (“Teva”) and Teva Pharmaceuticals Industries, Ltd. (“Teva
PI”) (such lawsuit, the “Teva Lawsuit”), in August 2019 against Mylan Laboratories Limited (“Mylan Labs”) and other Mylan entities (the “Mylan
Lawsuit”) and in December 2019 against Pharmascience, Inc. (“Pharmascience”), Mallinckrodt plc, and SpecGX LLC (the “Pharmascience Lawsuit”), and
in the U.S. District Court for the District of Delaware in December 2021 against Tolmar Holding, Inc., Tolmar Pharmaceuticals, Inc., Tolmar Therapeutics,
Inc., and Tolmar, Inc. (“Tolmar” and such lawsuit, the “Tolmar Lawsuit”), following the respective filings by each of Teva, Mylan Labs, Pharmascience
and Tolmar of an Abbreviated New Drug Application (“ANDA”) seeking approval from the FDA to market a generic version of INVEGA SUSTENNA
before the expiration of U.S. Patent No. 9,439,906. In October 2021, the NJ District Court entered a judgment in favor of the Janssen entities in the Teva
Lawsuit. In December 2021, the NJ District Court entered a judgment in favor of the Janssen entities in the Mylan Lawsuit, based on the parties’ prior
stipulation to be bound by the judgment in the Teva Lawsuit. The Teva entities and Mylan Labs each filed notices of appeal of their respective judgments
with the U.S. Court of Appeals for the Federal Circuit, which were consolidated in January 2022 (the “Teva Appeal”). A trial has been scheduled in the
Tolmar Lawsuit for October 2023. The Pharmascience Lawsuit was administratively terminated in July 2022, pending the outcome of the Teva Appeal. The
Company is not a party to any of these proceedings.
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Table of Contents
ALKERMES PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INVEGA TRINZA ANDA Litigation
In September 2020, Janssen Pharmaceutica N.V., Janssen Pharmaceuticals, Inc., and Janssen Research & Development, LLC, initiated a patent
infringement lawsuit in the NJ District Court against Mylan Labs, Mylan, and Mylan Institutional LLC following the filing by Mylan Labs of an ANDA
seeking approval from the FDA to market a generic version of INVEGA TRINZA before the expiration of U.S. Patent No. 10,143,693. Requested judicial
remedies include recovery of litigation costs and injunctive relief. A bench trial concluded on December 9, 2022. The Company is not a party to this
proceeding.
VIVITROL ANDA Litigation
In September 2020, Alkermes, Inc. and Alkermes Pharma Ireland Limited filed a patent infringement lawsuit in the NJ District Court against Teva
and Teva PI following the filing by Teva of an ANDA seeking approval from the FDA to engage in the commercial manufacture, use or sale of a generic
version of VIVITROL (naltrexone for extended-release injectable suspension) before the expiration of the Company’s U.S. Patent No. 7,919,499. A bench
trial, adjourned from its prior scheduled start date due to COVID-19, is now scheduled to begin on February 16, 2023. The Company intends to vigorously
defend its IP.
Government Matters
The Company has received a subpoena and civil investigative demands from U.S. state and federal governmental authorities for documents related
to VIVITROL. The Company is cooperating with the investigations.
Product Liability and Other Legal Proceedings
The Company is involved in litigation and other legal proceedings incidental to its normal business activities, including product liability cases
alleging that the FDA-approved VIVITROL labeling was inadequate and caused the users of the product to suffer from opioid overdose and death. The
Company intends to vigorously defend itself in these matters. In addition, on January 10, 2023, Acorda filed a petition with the U.S. District Court for the
Southern District of New York asking the court to confirm in part and modify in part the final arbitral award rendered by an arbitration panel in October
2022 and, as part of the requested modification, seeking an additional approximately $66.0 million in damages. The Company intends to contest this
petition and believes it is without merit. While the outcome of any of these proceedings cannot be accurately predicted, the Company does not believe the
ultimate resolution of any of these existing proceedings would have a material adverse effect on the Company’s business or financial condition.
Purchase Commitments
The Company has open purchase orders for plant and equipment as part of its normal course of business. At December 31, 2022, the Company’s
open purchase orders were $9.9 million for capital commitments.
F-34
DESCRIPTION OF ALKERMES PLC ORDINARY SHARES
The following is a summary description of the ordinary shares of Alkermes plc. This summary does not purport to be complete and is
qualified in its entirety by reference to the Irish Companies Act 2014 (the “Companies Act”) and the complete text of our memorandum and
articles of association, as they may be amended from time to time (together, the “Constitution”). A copy of the Constitution has been filed
with the Securities and Exchange Commission (the “SEC”) as exhibit 3.1 to the Annual Report on Form 10-K of which this Exhibit 4.1 is a
part. You should read the Companies Act and our Constitution carefully. Use of terms such as “us,” “we,” “our,” “Alkermes” or the
“Company” in this Exhibit 4.1 is meant to refer to Alkermes plc.
Exhibit 4.1
Capital Structure
Authorized Share Capital
Our authorized share capital is €40,000 and $5,000,000, which is divided into 40,000 ordinary shares of €1.00 each, 450,000,000
ordinary shares of $0.01 each and 50,000,000 undesignated preferred shares of $0.01 each. Our ordinary shares are registered under Section
12(b) of the Securities Exchange Act of 1934, as amended.
We may issue shares subject to the maximum authorized share capital contained in our Constitution, and subject to the issuance and
allotment authorities approved by our shareholders. Our authorized share capital may be increased or reduced by a resolution approved by a
simple majority of the votes of our shareholders cast at a general meeting (referred to under Irish law as an “ordinary resolution”). As a
matter of Irish law, the board of directors of a company may issue new ordinary or preferred shares without shareholder approval once
authorized to do so by the constitution or by an ordinary resolution adopted by the shareholders at a general meeting. The authorization may
be granted for a maximum period of five years, after which it must be renewed by the shareholders by an ordinary resolution. In July 2022,
our shareholders authorized the board of directors of the Company (the “Board”) to allot and issue up to a maximum of 54,712,200 shares
(being equivalent to approximately 33% of our issued ordinary share capital as at the latest practicable date prior to our 2022 annual general
meeting of shareholders). This current authorization extends until January 7, 2024, at which point it will lapse unless renewed by our
shareholders.
The rights and restrictions applicable to our ordinary shares are prescribed in our Constitution. Our Constitution permits the Board,
without shareholder approval, to determine the terms of any preferred shares issued by us. Our Board is authorized, without obtaining any
vote or consent of the holders of any class or series of shares, unless expressly provided by the terms of that class or series of shares, to
provide from time to time for the issuance of other classes or series of preferred shares and to establish the characteristics of each class or
series, including the number of shares, designations, relative voting rights, dividend rights, liquidation and other rights, redemption,
repurchase or exchange rights and any other preferences and relative, participating, optional or other rights and limitations not inconsistent
with applicable law.
Irish law does not recognize fractional shares held of record. Accordingly, our Constitution does not provide for the issuance of
fractional shares, and our official Irish register of members will not reflect any fractional shares.
Pre-emption Rights, Share Warrants and Share Options
Under Irish law, unless otherwise authorized, when an Irish public limited company issues shares for cash to new shareholders, it is
required first to offer those shares on the same or more favorable terms to existing shareholders of the company on a pro rata basis,
commonly referred to as the statutory pre-emption right. However, Irish law permits companies to opt out of the statutory pre-emption right,
for a period of up to five years, where it is authorized by a resolution approved by not less than 75% of the votes of shareholders cast at a
general meeting (referred to under Irish law as a “special resolution”). In July 2022, our shareholders authorized our Board to allot and issue
shares for cash on a non-pre-emptive basis up to the amount of approximately 5% of our issued share capital (as at the latest practicable date
prior to our 2022 annual general meeting of shareholders) or approximately 10% of our issued share capital (as at the latest practicable date
prior to our 2022 annual general meeting of shareholders) under certain specified circumstances. This current authorization extends until
January 7, 2024, at which point it will lapse unless renewed by our shareholders. The statutory pre-emption rights do not apply where shares
are issued for non-cash consideration (such as in a stock-for-stock acquisition) and do not apply to the issue of non-equity shares (that is,
shares that have the right to participate only up to a specified amount in any income or capital distribution) or where shares are issued
pursuant to an employee stock option or similar equity plan.
Our Constitution provides that, subject to any shareholder approval requirement under any laws, regulations or the rules of any stock
exchange to which we are subject, the Board is authorized, from time to time, in its discretion, to grant such persons, for such periods and
upon such terms as the Board deems advisable, options to purchase such number of shares of any class or classes or of any series of any class
as the Board may deem advisable, and to cause warrants or other appropriate instruments evidencing such options to be issued. The
Companies Act provides that a board of directors may issue share warrants or options without shareholder approval once authorized to do so
by its constitution or an ordinary resolution of shareholders. We are subject to the applicable rules and regulations of The Nasdaq Stock
Market (“Nasdaq”) and the Internal Revenue Code of 1986, as amended, that require shareholder approval of certain equity plan and share
issuances. Our Board may issue shares upon exercise of warrants or options without shareholder approval or authorization (up to the relevant
authorized share capital limit).
Dividends
Under Irish law, dividends and distributions may only be made from distributable reserves. Distributable reserves generally means
accumulated realized profits less accumulated realized losses and includes reserves created by way of capital reduction. In addition, no
distribution or dividend may be made unless our net assets are equal to, or in excess of, the aggregate of our called-up share capital plus
undistributable reserves and the distribution does not reduce our net assets below such aggregate. Undistributable reserves include: (i) our
undenominated capital; (ii) the amount by which our accumulated unrealized profits, so far as not previously utilized by any capitalization,
exceed our accumulated unrealized losses, so far as not previously written off in a reduction or reorganization of capital; and (iii) any other
reserve we are prohibited, at law, from distributing.
The determination as to whether or not we have sufficient distributable reserves to fund a dividend must be made by reference to our
“relevant accounts.” The “relevant accounts” will be either the last set of unconsolidated annual audited financial statements or other
financial statements properly prepared in accordance with the Companies Act, which give a “true and fair view” of our unconsolidated
financial position and accord with accepted accounting practice. The relevant accounts must be filed in the Companies Registration Office
(the official public registry for companies in Ireland).
Our Constitution authorizes the Board to declare dividends, out of funds lawfully available for distribution, without shareholder
approval to the extent they appear justified by the profits of the Company. The Board may also recommend a dividend to be approved and
declared by the shareholders at a general meeting. The Board may direct that the payment be made by distribution of assets, shares or cash
and no dividend issued may exceed the amount recommended by the Board. Dividends may be declared and paid in the form of cash or non-
cash assets and may be paid in United States Dollars or any other currency.
Our Board may deduct from any dividend payable to any shareholder any amounts payable by such shareholder to us in relation to
our shares.
The Board may also authorize us to issue shares with preferred rights to participate in dividends we declare. The holders of preferred
shares may, depending on their terms, rank senior to our ordinary shares in terms of dividend rights and/or be entitled to claim arrears of a
declared dividend out of subsequently declared dividends in priority to ordinary shareholders.
Share Repurchases, Redemptions and Conversions
Overview
Our Constitution provides that any ordinary share that Alkermes has agreed to acquire shall be deemed to be a redeemable share,
unless the Board elects to treat such share acquisition otherwise. Accordingly, for Irish law purposes, a repurchase of ordinary shares by us
would technically be effected as a redemption of those shares as described below under “—Our Repurchases and Redemptions.” If our
Constitution did not contain such provision, our repurchases would be subject to many of the same rules that apply to purchases of our
ordinary shares by subsidiaries described below under “—Purchases by Our Subsidiaries” including the shareholder approval requirements
described below and the requirement that any open-market purchases be effected on a “recognized stock exchange.” Except where otherwise
noted, references elsewhere in this prospectus to repurchasing or buying back our ordinary shares refer to our or one of our subsidiaries’
redemption of ordinary shares, in each case in accordance with our Constitution and Irish law as described below.
Our Repurchases and Redemptions
Under Irish law, a company may issue redeemable shares and redeem them out of distributable reserves or the proceeds of a new issue
of shares for that purpose. Please see also the “—Dividends” section above. We may only issue redeemable shares if the nominal value of the
issued share capital that is not redeemable is not less than 10% of the nominal value of our total issued share capital. All redeemable shares
must also be fully-paid. Redeemable shares may, upon redemption, be canceled or held in treasury. Based on the provision of our
Constitution described above, shareholder approval will not be required to redeem our shares.
We may also be given an additional general authority to purchase our own shares on-market which would take effect on the same
terms and be subject to the same conditions as applicable to purchases by our subsidiaries as described below.
Our Board may also issue preferred shares that may be redeemed at our option or the option of the preferred shareholder, depending
on the terms of such preferred shares. Please see “—Authorized Share Capital” above for additional information on preferred shares.
Under Irish law, repurchased and redeemed shares may be canceled or held as treasury shares. The nominal value of treasury shares
held by us at any time must not exceed 10% of the nominal value of our issued share capital. We may not exercise any voting rights in
respect of any shares held as treasury shares. Treasury shares may be canceled by us or re-issued subject to certain conditions.
Purchases by Our Subsidiaries
Under Irish law, a subsidiary may purchase our shares either on-market (an overseas market purchase) or off-market. For one of our
subsidiaries to make on-market purchases of our ordinary shares, our shareholders must provide general authorization for such purchase by
way of ordinary resolution. However, as long as this general authority has been granted, no specific shareholder authority for a particular on-
market purchase by a subsidiary of our ordinary shares is required. For an off-market purchase by one of our subsidiaries, the proposed
purchase contract must be authorized by special resolution of the shareholders before the contract is entered into. The person whose shares
are to be bought back cannot vote in favor of the special resolution and, for at least 21 days prior to the special resolution being passed, the
purchase contract must be on display or must be available for inspection by shareholders at our registered office.
In order for one of our subsidiaries to make an overseas market purchase of our shares, such shares must be purchased on a
“recognized stock exchange.” The Nasdaq Global Select Market, on which our shares are listed, is specified as a recognized stock exchange
for this purpose by Irish law.
The number of shares held by our subsidiaries at any time will be included in any calculation of the permitted treasury share threshold
of 10% of the nominal value of our issued share capital. While a subsidiary holds our shares, it cannot exercise any voting rights in respect of
those shares. The acquisition of our shares by a subsidiary must be funded out of distributable reserves of the subsidiary.
Share Repurchase Program
Our share repurchase program authorizes us to repurchase up to $215 million of our ordinary shares at the discretion of management
from time to time in the open market or through privately negotiated transactions. The repurchase program has no set expiration date and
may be suspended or discontinued at any time. As of December 31, 2022, we had purchased a total of 8,866,342 ordinary shares under this
program at a cost of $114,029,664.
As noted above, shareholder approval for such repurchases will not be required because a repurchase of our shares will be effected as
a redemption pursuant to our Constitution.
Bonus Shares
Under our Constitution, the Board may resolve to capitalize any amount standing to the credit of the reserves of the Company
(including, but not limited to, the share premium account, capital redemption reserve, capital conversion reserve and profit and loss account),
whether or not available for distribution, for any purpose, including, but not limited to, for the purposes of effecting any exchange of any
rights and applying any such sum arising from such capitalization to pay up any shares of the Company and allot them, credited as fully paid,
to any holders of such rights.
Lien on Shares, Calls on Shares and Forfeiture of Shares
Our Constitution provides that we will have a first and paramount lien on every share that is not a fully paid up share for all amounts
payable at a fixed time or called in respect of that share. Subject to the terms of their allotment, our Board may call for any unpaid amounts in
respect of any shares to be paid, and if payment is not made, the shares may be forfeited. These provisions are standard inclusions in the
constitution of an Irish company limited by shares such as ours and will only be applicable to our shares that have not been fully paid up.
Consolidation and Division; Subdivision
Under our Constitution, we may, by ordinary resolution, consolidate and divide all or any of our share capital into shares of larger
nominal value than our existing shares or subdivide our shares into smaller amounts than is fixed by our Constitution.
Reduction of Share Capital
We may, by ordinary resolution, reduce our authorized share capital in any way provided that such resolution does not reduce the
authorized share capital to an amount less than the issued share capital at such time. We also may, by special resolution and subject to
confirmation by the Irish High Court, reduce or cancel our issued share capital in any way we think expedient.
Annual Meetings of Shareholders
We are required to hold annual general meetings at intervals of no more than 15 months, provided that an annual general meeting is
held in each calendar year and no more than nine months after our fiscal year-end. Any annual general meeting may be held outside Ireland,
provided that the Company makes all necessary arrangements to ensure that shareholders can participate in such meeting by technological
means without leaving Ireland.
Notice of each annual general meeting must be given to all our shareholders and to our auditors. Our Constitution provides for a
minimum notice period of 21 days, which is the minimum permitted under Irish law.
The only matters which must, as a matter of Irish law, be transacted at an annual general meeting are: (i) the consideration of the
Company’s statutory financial statements and the report of the Board and the report of the statutory auditors on those statements and that
report; (ii) the review by the members of the Company’s affairs; (iii) the authorization of the Board to approve the remuneration of the
statutory auditors; and (iv) the election and/or re-election of members of the Board in accordance with our Constitution. If no resolution is
made in respect of the reappointment of an existing auditor at an annual general meeting, the existing auditor will be deemed to have
continued in office.
Extraordinary General Meetings of Shareholders
Extraordinary general meetings of our shareholders may be convened by: (i) the Board; (ii) at the request of shareholders holding not
less than 10% of our paid-up share capital carrying voting rights; or (iii) at the request of our auditors in certain circumstances in accordance
with the Companies Act. Extraordinary general meetings are generally held for the purposes of approving shareholder resolutions as may be
required from time to time. At any extraordinary general meeting only such business shall be conducted as is set forth in the notice thereof.
Notice of an extraordinary general meeting must be given to our shareholders and to our auditors. Under Irish law and our
Constitution, the minimum notice periods are 21 days’ notice in writing for an extraordinary general meeting to approve a special resolution
and 14 days’ notice in writing for any other extraordinary general meeting.
In the case of an extraordinary general meeting convened on the requisition of our shareholders, the proposed purpose of the meeting
must be set out in the requisition notice. Upon receipt of this required notice, the Board has 21 days to convene a meeting of our shareholders
to vote on the matters set out in the required notice. This meeting must be held within two months of the receipt of the requisition notice.
If the Board does not convene the meeting within such 21-day period, the requisitioning shareholders, or any of them representing more than
one half of the total voting rights of all of them, may themselves convene a meeting, which meeting must be held within three months of our
receipt of the requisition notice.
If the Board becomes aware that our net assets are not greater than half of the amount of our called-up share capital, our Board must
convene an extraordinary general meeting of our shareholders not later than 28 days from the date that they learn of this fact to consider how
to address the situation.
Quorum for General Meetings
Our Constitution provides that no business shall be transacted at any general meeting unless a quorum is present. One or more
shareholders present in person or by proxy holding not less than a majority of our issued and outstanding shares entitled to vote at the
meeting in question constitute a quorum for such meeting.
Voting
Our Constitution provides that the Board or the chairman of the Board may determine the manner in which the poll is to be taken at
each meeting and the manner in which the votes are to be counted.
Every shareholder is entitled to one vote for each ordinary share that s/he holds as of the record date for the meeting. Voting rights
may be exercised by shareholders registered in our share register as of the record date for the meeting or by a duly appointed proxy, which
proxy need not be a shareholder. Where interests in shares are held by a nominee trust company, this company may exercise the rights of the
beneficial holders on their behalf as their proxy. All proxies must be appointed in the manner prescribed by our Constitution, which permit
shareholders to notify us of their proxy appointments electronically in such manner as may be approved by the Board.
In accordance with our Constitution, our Board may from time to time authorize us to issue preferred shares. These preferred shares
may have such voting rights as may be specified in the terms of such preferred shares (e.g., they may carry more votes per share than
ordinary shares or may entitle their holders to a class vote on such matters as may be specified in the terms of the preferred shares). Treasury
shares or shares of the Company that are held by our subsidiaries will not be entitled to be voted at general meetings of shareholders.
Irish law requires special resolutions of the shareholders at a general meeting to approve certain matters. Examples of matters
requiring special resolutions include:
a)
b)
c)
amending our Constitution;
approving a change of our name;
authorizing the entering into of a guarantee or provision of security in connection with a loan, quasi-loan or credit transaction
to a director or connected person;
d)
opting out of pre-emption rights on the issuance of new shares;
e)
f)
creating a new class of shares;
our re-registration from a public limited company to a private company;
g)
h)
i)
j)
variation of class rights attaching to classes of shares (where the Constitution do not provide otherwise);
purchase of our own shares off-market;
reduction of issued share capital;
sanctioning a compromise/scheme of arrangement;
k)
resolving that we be wound up by the Irish courts;
l)
resolving in favor of a shareholders’ voluntary winding-up;
m)
re-designation of shares into different share classes; and
n)
setting the re-issue price of treasury shares.
Variation of Rights Attaching to a Class or Series of Shares
Under our Constitution and the Companies Act, any variation of class rights attaching to our issued shares must be approved by a
special resolution of the shareholders of the affected class or with the consent in writing of the holders of three-quarters of all the votes of that
class of shares.
The provisions of our Constitution relating to general meetings apply to general meetings of the holders of any class of shares except
that the necessary quorum is determined by reference to the shares of the holders of the class. Accordingly, for general meetings of holders of
a particular class of shares, a quorum consists of the holders present in person or by proxy representing not less than a majority of the issued
shares of that class entitled to vote at the meeting.
Acquisitions
An Irish public limited company may be acquired in a number of ways, including:
a)
b)
c)
a court-approved scheme of arrangement under the Companies Act. A scheme of arrangement with shareholders requires a
court order from the Irish High Court and the approval of a majority in number representing 75% in value of the shareholders
present and voting in person or by proxy at a meeting called to approve the scheme;
through a tender or takeover offer by a third party for all of our shares. Where the holders of 80% or more of our shares have
accepted an offer for such shares, the remaining shareholders may also be statutorily required to transfer their shares. If the
bidder does not exercise its “squeeze out” right, then the non-accepting shareholders also have a statutory right to require the
bidder to acquire their shares on the same terms. If our shares were to be listed on the Irish Stock Exchange or another
regulated stock exchange in the EU, this threshold would be increased to 90%; and
by way of a merger with a company incorporated in the European Economic Area (“EEA”) under the EU Cross-Border
Mergers Directive (EU) 2017/1132 or with another Irish company under the Companies Act. Such a merger must be
approved by a special resolution of the shareholders. Under certain circumstances, shareholders also may be entitled to have
their shares acquired for cash.
Irish law does not generally require shareholder approval for a sale, lease or exchange of all or substantially all of a company’s
property and assets.
Appraisal Rights
Irish law generally does not provide for “appraisal rights”. However, it does provide for dissenters’ rights in certain situations, as
described below.
Under a tender or takeover offer, the bidder may require any remaining shareholders to transfer their shares on the terms of the offer
(i.e., a “squeeze out”) if it has acquired, pursuant to the offer, not less than 80% of the target shares to which the offer relates (in the case of a
company that is not listed on an EEA regulated market). Dissenting shareholders have the right to apply to the Irish High Court for relief.
A scheme of arrangement which has been approved by the requisite shareholder majority and sanctioned by the Irish High Court will
be binding on all shareholders. Dissenting shareholders have the right to appear at the Irish High Court hearing and make representations in
objection to the scheme.
Under the European Communities (Cross-Border Mergers) Regulations 2008 governing the merger of an Irish company limited by
shares such as we are and a company incorporated in the EEA, a shareholder: (i) who voted against the special resolution approving the
merger; or (ii) of a company in which 90% of the shares are held by the other party to the merger, has the right to request that the company
acquire its shares for cash at a price determined in accordance with the share exchange ratio set out in the merger agreement.
Similar rights apply in the case of a merger of an Irish public limited company into another company to which the provisions of the
Companies Act apply.
Disclosure of Interests in Shares
Under the Companies Act, shareholders must notify us if, as a result of a transaction, the shareholder will become interested in 3% or
more of our shares; or if as a result of a transaction a shareholder who was interested in more than 3% of our shares ceases to be so interested.
Where a shareholder is interested in more than 3% of our shares, the shareholder must notify us of any alteration of his or her interest that
brings his or her total holding through the nearest whole percentage number, whether an increase or a reduction. The relevant percentage
figure is calculated by reference to the aggregate nominal value of the shares in which the shareholder is interested as a proportion of the
entire nominal value of our issued share capital of (or any such class of share capital in issue). Where the percentage level of the
shareholder’s interest does not amount to a whole percentage this figure may be rounded down to the next whole number. We must be
notified within five business days of the transaction or alteration of the shareholder’s interests that gave rise to the notification requirement. If
a shareholder fails to comply with these notification requirements, the shareholder’s rights in respect of any shares it holds will not be
enforceable, either directly or indirectly. However, such person may apply to the court to have the rights attaching to such shares reinstated.
In addition to these disclosure requirements, we may, under the Companies Act, by notice in writing, require a person whom we know
or have reasonable cause to believe to be, or at any time during the three years immediately preceding the date on which such notice is issued
to have been, interested in shares comprised in our relevant share capital to: (i) indicate whether or not it is the case; and (ii) where such
person holds or has during that time held an interest in our shares, to provide additional information, including the person’s own past or
present interests in our shares. If the recipient of the notice fails to respond within the reasonable time period specified in the notice, we may
apply to court for an order directing that the affected shares be subject to certain restrictions, as prescribed by the Companies Act, as follows:
a)
b)
c)
d)
any transfer of those shares or, in the case of unissued shares, any transfer of the right to be issued with shares and any issue
of shares, shall be void;
no voting rights shall be exercisable in respect of those shares;
no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder of those shares; and
no payment shall be made of any sums due from us on those shares, whether in respect of capital or otherwise.
The court may also order that shares subject to any of these restrictions be sold with the restrictions terminating upon the completion
of the sale.
In the event that we are in an offer period pursuant to the Irish Takeover Rules made under the Irish Takeover Panel Act 1997 (the
“Irish Takeover Rules”), accelerated disclosure provisions apply for persons holding an interest in our securities of 1% or more.
In addition, the beneficial ownership disclosures of the U.S. federal securities laws will apply with respect to beneficial ownership of
our shares.
Anti-Takeover Provisions
Irish Takeover Rules and Substantial Acquisition Rules
A transaction in which a third party seeks to acquire 30% or more of our voting rights will be governed by the Irish Takeover Panel
Act 1997 and the Irish Takeover Rules made thereunder and will be regulated by the Irish Takeover Panel. The “General Principles” of the
Irish Takeover Rules and certain important aspects of the Irish Takeover Rules are described below.
General Principles
The Irish Takeover Rules are built on the following general principles (the “General Principles”), which will apply to any transaction
regulated by the Irish Takeover Panel:
a)
b)
c)
d)
in the event of an offer, all holders of securities of the target company should be afforded equivalent treatment and, if a
person acquires control of a company, the other holders of securities must be protected;
the holders of the securities of the target company must have sufficient time and information to enable them to reach a
properly informed decision on the offer; where it advises the holders of securities, the board of the target company must give
its views on the effects of implementation of the offer on employment, conditions of employment and the locations of the
target company’s places of business;
the board of the target company must act in the interests of the company as a whole and must not deny the holders of
securities the opportunity to decide on the merits of the offer;
false markets must not be created in the securities of the target company, the bidder or of any other company concerned by
the offer in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the
markets is distorted;
e)
f)
g)
Mandatory Bid
a bidder must announce an offer only after ensuring that it can fulfill in full, any cash consideration, if such is offered, and
after taking all reasonable measures to secure the implementation of any other type of consideration;
a target company must not be hindered in the conduct of its affairs for longer than is reasonable by an offer for its securities;
and
a substantial acquisition of securities (whether such acquisition is to be effected by one transaction or a series of transactions)
shall take place only at an acceptable speed and shall be subject to adequate and timely disclosure.
Under certain circumstances, a person who acquires our shares may be required under the Irish Takeover Rules to make a mandatory
cash offer for our remaining outstanding shares at a price not less than the highest price paid for the shares by that acquirer (or any parties
acting in concert with the acquirer) during the previous twelve months. This mandatory bid requirement is triggered if an acquisition of
shares would increase the aggregate holding of an acquirer (including the holdings of any parties acting in concert with the acquirer) to shares
representing 30% or more of our voting rights, unless the Irish Takeover Panel otherwise consents. An acquisition of shares by a person
holding (together with its concert parties) shares representing between 30% and 50% of our voting rights would also trigger the mandatory
bid requirement if, after giving effect to the acquisition, the percentage of the voting rights held by that person (together with its concert
parties) would increase by 0.05% within a twelve-month period. Any person (excluding any parties acting in concert with the holder) holding
shares representing more than 50% of the voting rights of a company is not subject to these mandatory offer requirements.
Voluntary Bid; Requirements to Make a Cash Offer and Minimum Price Requirements
If a person makes a voluntary offer to acquire our outstanding ordinary shares, the offer price must be no less than the highest price
paid for our ordinary shares by the bidder or its concert parties during the three-month period prior to the commencement of the offer period.
The Irish Takeover Panel has the power to extend the “look back” period to twelve months if the Irish Takeover Panel, taking into account the
General Principles, believes it is appropriate to do so.
If the bidder or any of its concert parties has acquired our ordinary shares: (i) during the period of twelve months prior to the
commencement of the offer period which represent more than 10% of our total ordinary shares; or (ii) at any time after the commencement of
the offer period, the offer must be in cash (or accompanied by a full cash alternative) and the price per ordinary share must not be less than
the highest price paid by the bidder or its concert parties during, in the case of (i), the 12-month period prior to the commencement of the
offer period and, in the case of (ii), the offer period. The Irish Takeover Panel may apply this rule to a bidder who, together with its concert
parties, has acquired less than 10% of our total ordinary shares in the 12-month period prior to the commencement of the offer period if the
Irish Takeover Panel, taking into account the General Principles, considers it just and proper to do so.
An offer period will generally commence from the date of the first announcement of the offer or proposed offer.
Any announcement by us which commences an offer period must identify the potential bidder with which we are in talks or from
which an approach was received. Any such bidder will then have a period of 42 days following such announcement (i.e. the announcement in
which they are first identified) to announce a firm intention to make an offer or announce that they do not intend to do so, in which case they
will then be restricted from making an offer for six months.
Substantial Acquisition Rules
The Irish Takeover Rules also contain rules governing substantial acquisitions of shares which restrict the speed at which a person
may increase his or her holding of shares and rights over shares to an aggregate of between 15% and 30% of our voting rights. Except in
certain circumstances, an acquisition or series of acquisitions of shares or rights over shares representing 10% or more of our voting rights is
prohibited, if such acquisition(s), when aggregated with shares or rights already held, would result in the acquirer holding 15% or more but
less than 30% of our voting rights and such acquisitions are made within a period of seven days. These rules also require accelerated
disclosure of acquisitions of shares or rights over shares relating to such holdings.
Shareholder Rights Plan
Under our Constitution, the Board is authorized to adopt a shareholder rights plan (a “Shareholder Rights Plan”), upon such terms and
conditions as the Board deems expedient and in the best interests of the Company, subject to applicable law, including the grant of rights
(including approving the execution of any documents relating to the grant of such rights) to subscribe for ordinary shares or preferred shares
in the share capital of the Company in accordance with the terms of any Shareholder Rights Plan. The Board or any duly appointed
committee thereof may effect an exchange of rights in accordance with such Shareholder Rights Plan.
Frustrating Action
Under the Irish Takeover Rules, our Board is not permitted to take any action which might frustrate an offer for our shares once the
Board has received an approach which may lead to an offer or has reason to believe an offer is or may be imminent, subject to certain
exceptions. Potentially frustrating actions such as: (i) the issue of shares, options or convertible securities; (ii) material acquisitions or
disposals; (iii) entering into contracts other than in the ordinary course of business; or (iv) any action, other than seeking alternative offers,
which may result in frustration of an offer, are prohibited during the course of an offer or at any time during which the Board has reason to
believe an offer is imminent. Exceptions to this prohibition are available where:
a)
b)
the action is approved by our shareholders at a general meeting; or
the Irish Takeover Panel has given its consent, where:
1.
2.
3.
4.
it is satisfied the action would not constitute frustrating action;
the holders of 50% of the voting rights state in writing that they approve the proposed action and would vote in favor
of it at a general meeting;
the action is taken in accordance with a contract entered into prior to the announcement of the offer; or
the decision to take such action was made before the announcement of the offer and either has been at least partially
implemented or is in the ordinary course of business.
Certain other provisions of Irish law or our Constitution may be considered to have anti-takeover effects, including those described
under the following captions: “—Authorized Share Capital” (regarding issuance of preferred shares), “—Pre-emption Rights, Share Warrants
and Share Options,” “—Disclosure of Interests in Shares,” and “—Corporate Governance.”
Appointment of Directors of the Board
Until the close of our 2024 annual general meeting of shareholders (the “2024 annual general meeting”), the directors of the Board
shall be divided into three classes, designated Class I, Class II and Class III. Any allocation of the directors into such classes shall be made by
the decision of the affirmative vote of a majority of the Board then in office. The current term of the Class I directors shall terminate on the
date of our 2024 annual general meeting and the current term of the Class II and Class III directors shall terminate on the date of our 2023
annual general meeting of shareholders. Since 2022, at each annual general meeting of shareholders, each director whose term expires at that
annual general meeting of shareholders shall be eligible for re-election for a one-year term. Except as otherwise set forth in our Constitution,
directors will be elected by way of ordinary resolution at a general meeting. In the event of a contested election (where the number of persons
validly nominated for election exceeds the number of available director positions to be elected), only those directors in number equal to the
number of available director positions and who receive the highest number of votes in favour of their election shall be elected. In no case will
a decrease in the size of the Board shorten the term of any incumbent director. A director shall hold office until the close of the annual
general meeting of shareholders for the year in which their term expires and until their successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board, including a vacancy that
results from an increase in the size of the Board or from the death, resignation, retirement, disqualification or removal of a director, shall be
deemed a casual vacancy, and subject to the terms of any one or more classes or series of preferred shares (if any), shall only be filled by
decision of a majority of the Board then in office. Until the 2024 annual general meeting, any director appointed to fill a vacancy shall hold
office for the same remaining term as that of the class that she has been designated in accordance with the Company’s articles of association.
After the 2024 annual general meeting, any director appointed to fill a vacancy shall hold office until the next annual general meeting. A
director retiring from the Board at a general meeting shall retain office until the close or adjournment of such meeting.
During any vacancy in the Board, the remaining directors have full power to act as the Board. If, at any general meeting of the
Company, the number of directors is reduced below the minimum prescribed by the Board due to the failure of any persons nominated to be
directors to be elected, then in those circumstances, the nominee or nominees who receive the highest number of votes in favor of election
shall be elected in order to maintain the prescribed minimum number of directors and each such director shall remain a director (subject to
the provisions of the Companies Act and our Constitution) only until the conclusion of the next annual general meeting of the Company
unless such director is elected by the Members (as defined in our Constitution) during such meeting.
Duration; Dissolution; Rights upon Liquidation
Our duration is unlimited. We may be dissolved and wound up at any time by way of a shareholders’ voluntary winding up or a
creditors’ winding up. In the case of a shareholders’ voluntary winding-up, a special resolution of shareholders is required. We may also be
dissolved by way of court order on the application of a creditor, or by the Companies Registration Office as an enforcement measure where
we have failed to file certain returns.
The rights of the shareholders to a return of our assets on dissolution or winding up, following the settlement of all claims of creditors,
may be prescribed in our Constitution or the terms of any preferred shares issued by our Board from time to time. The holders of preferred
shares in particular may have the right to priority in our dissolution or winding up. If the Constitution contains no specific provisions in
respect of a dissolution or winding up then, subject to the priorities of
any creditors, the assets will be distributed to shareholders in proportion to the paid-up nominal value of the shares held. Our Constitution
provides that our ordinary shareholders are entitled to participate pro rata in a winding up, but their right to do so may be subject to the rights
of any preferred shareholders to participate under the terms of any series or class of preferred shares.
Uncertificated Shares
Pursuant to the Companies Act, a shareholder is entitled to be issued a share certificate on request and subject to payment of a
nominal fee.
No Sinking Fund
Our ordinary shares have no sinking fund provisions.
No Liability for Further Calls or Assessments
Our ordinary shares are duly and validly issued and fully-paid.
Transfer and Registration of Shares
Our transfer agent maintains our share register, which is determinative of ownership of our shares. Our shareholders who hold shares
beneficially are not the holders of record of such shares. Instead, the depository (for example, Cede & Co., as nominee for DTC) or other
nominee is the holder of record of those shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a
person who also holds such shares beneficially through a depository or other nominee will not be registered in our official share register, as
the depository or other nominee will remain the record holder of any such shares.
A written instrument of transfer is required under Irish law in order to register on our official share register any transfer of shares:
(i) from a person who holds such shares directly to any other person; (ii) from a person who holds such shares beneficially to a person who
holds such shares directly; or (iii) from a person who holds such shares beneficially to another person who holds such shares beneficially
where the transfer involves a change in the depository or other nominee that is the record owner of the transferred shares. An instrument of
transfer is also required for a shareholder who directly holds shares to transfer those shares into his or her own broker account (or vice versa).
Such instruments of transfer may give rise to Irish stamp duty, which must be paid prior to registration of the transfer on our official Irish
share register. However, a shareholder who directly holds shares may transfer those shares into his or her own broker account (or vice versa)
without giving rise to Irish stamp duty provided there is no change in the ultimate beneficial ownership of the shares as a result of the transfer
and the transfer is not made in contemplation of a sale of the shares.
Any transfer of our ordinary shares that is subject to Irish stamp duty will not be registered in the name of the buyer unless an
instrument of transfer is duly stamped and provided to the transfer agent. Our Constitution allows us, in our absolute discretion, to create an
instrument of transfer and pay (or procure the payment of) any stamp duty, which is the legal obligation of a buyer. In the event of any such
payment, we are (on our behalf or on behalf of our affiliates) entitled to: (i) seek reimbursement from the buyer or seller (at our discretion);
(ii) set-off the amount of the stamp duty against future dividends payable to the buyer or seller (at our discretion); and (iii) claim a lien
against the ordinary shares on which we have paid stamp duty. Parties to a share transfer may assume that any stamp duty arising in respect
of a transaction in our ordinary shares has been paid unless one or both of such parties is otherwise notified by us.
Our Constitution delegates to our secretary the authority to execute an instrument of transfer on behalf of a transferring party.
In order to help ensure that the official share register is regularly updated to reflect trading of our ordinary shares occurring through
normal electronic systems, we intend to regularly produce any required instruments of transfer in connection with any transactions for which
we pay stamp duty (subject to the reimbursement and set-off rights described above). In the event that we notify one or both of the parties to
a share transfer that we believe stamp duty is required to be paid in connection with the transfer and that we will not pay the stamp duty, the
parties may either themselves arrange for the execution of the required instrument of transfer (and may request a form of instrument of
transfer from us for this purpose) or request that we execute an instrument of transfer on behalf of the transferring party in a form determined
by us. In either event, if the parties to the share transfer have the instrument of transfer duly stamped (to the extent required) and then provide
it to our transfer agent, the buyer will be registered as the legal owner of the relevant shares on our official Irish share register (subject to the
matters described below).
The Board may suspend registration of transfers from time to time, with such suspensions not to exceed 30 days in aggregate each
year.
2018 Plan Award Certificate – Incentive Stock Option (Reporting Officer)
Exhibit 10.19-9
Alkermes plc
Connaught House
1 Burlington Road
Dublin 4, Ireland
Name: Participant Name
Address: Participant Address
Grant ID: Grant ID
Plan: Plan ID
ID: Optionee ID
Effective [Grant Date] (the “Grant Date”), you have been granted an incentive stock option (the “Incentive Stock Option”) to buy
[Award Grant Amount] ordinary shares, par value $0.01 per share (the “Shares”), of Alkermes plc (the “Company”) with an exercise
price of $[Grant Price] per share.
The Incentive Stock Option was granted under the Alkermes plc 2018 Stock Option and Incentive Plan (the “Plan”), and is governed
by the terms and conditions thereof and of this award certificate (this “Award Certificate”). A copy of the Plan is posted on your local
human resources page of the Company’s website. Unless otherwise defined in this Award Certificate, all capitalized terms used in this
Award Certificate shall have the respective meanings ascribed to them in the Plan.
Vesting details for the Incentive Stock Option are available via your Bank of America Merrill Lynch Benefits Online account. Unless
provided otherwise below, the Incentive Stock Option shall expire on the earlier to occur of: (i) the 10th anniversary of the Grant Date
or (ii) three months after the termination of your employment or other service relationship with the Company as described in the Plan.
For purposes of the Incentive Stock Option, and as set forth in Section 14 of the Plan, you will continue to be deemed employed by
the Company for so long as you (x) remain employed by the Company or any Subsidiary, regardless of any transfer between the
Company or such Subsidiary or between Subsidiaries, or any transfer from one eligibility category under Section 4 of the Plan to
another, or (y) are on an approved leave of absence from the Company or any Subsidiary.
In the event of the termination of your employment or other service relationship with the Company by reason of death or permanent
disability, the Incentive Stock Option shall automatically vest and be exercisable in full effective upon such termination, and the
period during which the Incentive Stock Option may be exercised (to the extent that it is exercisable on the date of such termination)
shall be three years following the date of such termination, provided, however, that in no event shall such three-year period extend
beyond the original term of the Incentive Stock Option.
In the event of a Sale Event, the following provisions shall apply in lieu of and expressly supersede Section 3(d) of the Plan:
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) does not assume or continue the Incentive Stock Option, or substitute a similar award for the Incentive Stock
Option, then (i) to the extent the Incentive Stock Option is outstanding and not vested immediately prior to the effective
time of the Sale Event, the Incentive Stock Option shall become fully vested and exercisable as of the effective time of
the Sale Event, provided that your employment or other service
1
relationship with the Company has not terminated prior to the effective time of the Sale Event, (ii) the Incentive Stock
Option will terminate upon the effective time of the Sale Event, and (iii) in the event of such termination, the last
sentence of Section 3(d) of the Plan shall be applicable.
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) assumes or continues the Incentive Stock Option or substitutes a similar award for the Incentive Stock Option,
then upon such Sale Event (if such Sale Event is a Change in Control, as such term is defined in your employment
agreement with the Company or any of its Subsidiaries (“Employment Agreement”)) or upon a Change in Control
following such Sale Event (if such Sale Event is not a Change in Control), these provisions shall apply regarding the
vesting and exercisability of the Incentive Stock Option upon your termination of employment with the Company or any
of its Subsidiaries (or its successor in interest), if such termination of employment occurs within twenty-four (24) months
after the occurrence of the first event constituting a Change in Control, provided that such first event occurs during the
Period of Employment, as such term is defined in your Employment Agreement. These provisions shall terminate and be
of no further force or effect beginning twenty-four (24) months after the occurrence of a Change in Control.
If within twenty-four (24) months after a Change in Control occurs, your employment is terminated by the Company or
any of its Subsidiaries (or its successor in interest) without Cause (as such term is defined in your Employment
Agreement) or you terminate your employment for Good Reason (as such term is defined in your Employment
Agreement), then, to the extent the Incentive Stock Option is outstanding and not vested immediately prior to the Date of
Termination (as defined in your Employment Agreement), it shall become fully vested and exercisable on the Date of
Termination; provided, however, that if such Change in Control is not a Sale Event, the effective date of such vesting
shall be the later of (i) the Date of Termination or (ii) the one-year anniversary of the Grant Date. For purposes of the
foregoing, the determination of whether your employment is terminated without Cause or for Good Reason will be made
by the Company (or its successor in interest) in accordance with the terms of your Employment Agreement.
Notwithstanding anything in this Award Certificate to the contrary, (i) if you continue to provide services to the Company or any
Subsidiary after your employment relationship terminates or if you otherwise exercise the Incentive Stock Option more than three
months after the termination of such employment relationship, the Incentive Stock Option may not qualify as an “incentive stock
option” under Section 422 of the Code, and (ii) for purposes of the foregoing clause (i), “employment relationship” means
employment with the Company or any Subsidiary that is a “subsidiary corporation” (within the meaning of Section 424(f) of the
Code) and does not include any other type of service relationship.
The grant of the Incentive Stock Option does not infer any right to, or expectation of, the grant of any additional Options or other
Awards on the same basis or at all, in any future year. Participation in the Plan shall in no way give you any rights to compensation
for any claim of loss in relation to the Plan, including without limitation:
(a)
(b)
(c)
any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason
(including lawful or unlawful termination of an employment relationship);
any exercise of a discretion or a decision taken in relation to an Award or to the Plan, or any failure to exercise
a discretion or take a decision; or
the operation, suspension, termination or amendment of the Plan.
2
Any controversy or claim arising out of or relating to this Award Certificate and/or the Incentive Stock Option shall, to the fullest
extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an
agreement, under the auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts, USA, in accordance with
the Employment Arbitration Rules and Mediation Procedures of the AAA, including, but not limited to, the rules and procedures
applicable to the selection of arbitrators. Judgment upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
You may not be issued any Shares in respect of the Incentive Stock Option unless either (i) the Shares are registered under the
Securities Act of 1933, as amended (the “Securities Act”); or (ii) the Company has determined that such issuance would be exempt
from the registration requirements of the Securities Act. The Incentive Stock Option also must comply with other applicable laws and
regulations governing the Incentive Stock Option, and you will not receive such Shares if the Company determines that such receipt
would not be in material compliance with such laws and regulations.
The Company has no duty or obligation to minimize the tax consequences to you of the Incentive Stock Option and will not be liable
to you for any adverse tax consequences to you arising in connection with the Incentive Stock Option. You are advised to consult with
your own personal tax, financial and/or legal advisors regarding the tax consequences of the Incentive Stock Option.
This Award Certificate may not be modified or amended except in a writing signed by you and a duly authorized officer of the
Company. Notwithstanding the foregoing, the Administrator reserves the right to modify or amend, by written notice to you, the terms
of the Incentive Stock Option and/or this Award Certificate in any way it may deem necessary or advisable (i) as a result of any
change in applicable laws or regulations, or any future law, regulation, ruling, or judicial decision, in each case applicable to the
Incentive Stock Option, or (ii) for any other legal purpose, provided that (in each case of (i) or (ii) above), no such modification or
amendment shall adversely affect your rights under the Incentive Stock Option and/or this Award Certificate without your written
consent.
Alkermes plc
By:
3
2018 Plan Award Certificate –Non-Qualified Stock Option (Reporting Officer)
Exhibit 10.19-10
Alkermes plc
Connaught House
1 Burlington Road
Dublin 4, Ireland
Name: Participant Name
Address: Participant Address
Grant ID: Grant ID
Plan: Plan ID
ID: Optionee ID
Effective [Grant Date] (the “Grant Date”), you have been granted a non-qualified stock option (the “NQ Option”) to buy [Award
Grant Amount] ordinary shares, par value $0.01 per share (the “Shares”), of Alkermes plc (the “Company”) with an exercise price of
$[Grant Price] per share.
The NQ Option was granted under the Alkermes plc 2018 Stock Option and Incentive Plan (the “Plan”), and is governed by the terms
and conditions thereof and of this award certificate (this “Award Certificate”). A copy of the Plan is posted on your local human
resources page of the Company’s website. Unless otherwise defined in this Award Certificate, all capitalized terms used in this Award
Certificate shall have the respective meanings ascribed to them in the Plan.
Vesting details for the NQ Option are available via your Bank of America Merrill Lynch Benefits Online account. Unless provided
otherwise below, the NQ Option shall expire on the earlier to occur of: (i) the 10th anniversary of the Grant Date or (ii) three months
after the termination of your employment or other service relationship with the Company as described in the Plan
For purposes of the NQ Option, and as set forth in Section 14 of the Plan, you will continue to be deemed employed by the Company
for so long as you (x) remain employed by the Company or any Subsidiary, regardless of any transfer between the Company or such
Subsidiary or between Subsidiaries, or any transfer from one eligibility category under Section 4 of the Plan to another, or (y) are on
an approved leave of absence from the Company or any Subsidiary.
In the event of the termination of your employment or other service relationship with the Company by reason of death or permanent
disability, the NQ Option shall automatically vest and be exercisable in full effective upon such termination, and the period during
which the NQ may be exercised (to the extent that it is exercisable on the date of such termination) shall be three years following the
date of such termination, provided, however, that in no event shall such three-year period extend beyond the original term of the NQ
Option.
In the event of a Sale Event, the following provisions shall apply in lieu of and expressly supersede Section 3(d) of the Plan:
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) does not assume or continue the NQ Option, or substitute a similar award for the NQ Option, then (i) to the extent
the NQ Option is outstanding and not vested immediately prior to the effective time of the Sale Event, the NQ Option shall
become fully vested and exercisable as of the effective time of the Sale Event,
1
provided that your employment or other service relationship with the Company has not terminated prior to the effective time
of the Sale Event, (ii) the NQ Option will terminate upon the effective time of the Sale Event, and (iii) in the event of such
termination, the last sentence of Section 3(d) of the Plan shall be applicable.
•
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) assumes or continues the NQ Option or substitutes a similar award for the NQ Option, then upon such Sale Event
(if such Sale Event a Change in Control, as such term is defined in your employment agreement with the Company or any of
its Subsidiaries (“Employment Agreement”)) or upon a Change in Control following such Sale Event (if such Sale Event is
not a Change in Control), these provisions shall apply regarding the vesting and exercisability of the NQ Option upon your
termination of employment with the Company or any of its Subsidiaries (or its successor in interest) , if such termination of
employment occurs within twenty-four (24) months after the occurrence of the first event constituting a Change in Control,
provided that such first event occurs during the Period of Employment, as such term is defined in your Employment
Agreement. These provisions shall terminate and be of no further force or effect beginning twenty-four (24) months after
the occurrence of a Change in Control.
If within twenty-four (24) months after a Change in Control occurs, your employment is terminated by the Company or any
of its Subsidiaries (or its successor in interest) without Cause, (as such term is defined in your Employment Agreement) or
you terminate your employment for Good Reason (as such term is defined in your Employment Agreement) then, to the
extent the NQ Option is outstanding and not vested immediately prior to the Date of Termination (as defined in your
Employment Agreement), it shall become fully vested and exercisable on the Date of Termination; provided, however, that if
such Change in Control is not a Sale Event, the effective date of such vesting shall be the later of (i) the Date of Termination
or (ii) the one-year anniversary of the Grant Date. For purposes of the foregoing, the determination of whether your
employment is terminated without Cause or for Good Reason will be made by the Company (or its successor in interest) in
accordance with the terms of your Employment Agreement.
Notwithstanding anything in this Award Certificate to the contrary, (i) if you continue to provide services to the Company or any
Subsidiary after your employment relationship terminates or if you otherwise exercise the Incentive Stock Option more than three
months after the termination of such employment relationship, the Incentive Stock Option may not qualify as an “incentive stock
option” under Section 422 of the Code, and (ii) for purposes of the foregoing clause (i), “employment relationship” means
employment with the Company or any Subsidiary that is a “subsidiary corporation” (within the meaning of Section 424(f) of the
Code) and does not include any other type of service relationship.
The grant of the NQ Option does not infer any right to, or expectation of, the grant of any additional Options or other Awards on the
same basis or at all, in any future year. Participation in the Plan shall in no way give you any rights to compensation for any claim of
loss in relation to the Plan, including without limitation:
(a)
(b)
(c)
any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason
(including lawful or unlawful termination of an employment relationship);
any exercise of a discretion or a decision taken in relation to an Award or to the Plan, or any failure to exercise
a discretion or take a decision; or
the operation, suspension, termination or amendment of the Plan.
2
Any controversy or claim arising out of or relating to this Award Certificate and/or the NQ Option shall, to the fullest extent permitted
by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts, USA, in accordance with the Employment
Arbitration Rules and Mediation Procedures of the AAA, including, but not limited to, the rules and procedures applicable to the
selection of arbitrators. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
You may not be issued any Shares in respect of the NQ Option unless either (i) the Shares are registered under the Securities Act of
1933, as amended (the “Securities Act”); or (ii) the Company has determined that such issuance would be exempt from the
registration requirements of the Securities Act. The NQ Option also must comply with other applicable laws and regulations
governing the NQ Option, and you will not receive such Shares if the Company determines that such receipt would not be in material
compliance with such laws and regulations.
The Company has no duty or obligation to minimize the tax consequences to you of the NQ Option and will not be liable to you for
any adverse tax consequences to you arising in connection with the NQ Option. You are advised to consult with your own personal
tax, financial and/or legal advisors regarding the tax consequences of the NQ Option.
This Award Certificate may not be modified or amended except in a writing signed by you and a duly authorized officer of the
Company. Notwithstanding the foregoing, the Administrator reserves the right to modify or amend, by written notice to you, the terms
of the NQ Option and/or this Award Certificate in any way it may deem necessary or advisable (i) as a result of any change in
applicable laws or regulations, or any future law, regulation, ruling, or judicial decision, in each case applicable to the NQ Option, or
(ii) for any other legal purpose, provided that (in each case of (i) or (ii) above), no such modification or amendment shall adversely
affect your rights under the NQ Option and/or this Award Certificate without your written consent.
Alkermes plc
By:
3
2018 Plan Award Certificate –Time-Vesting Restricted Stock Unit Award (Reporting Officer)
Exhibit 10.19-11
Alkermes plc
Connaught House
1 Burlington Road
Dublin 4, Ireland
Name: Participant Name
Address: Participant Address
Grant ID: Grant ID
Plan: Plan ID
ID: Optionee ID
Effective [Grant Date] (the “Grant Date”), you have been granted a time-vesting restricted stock unit award (the "RSU"). The RSU is
for a total of [Award Grant Amount] ordinary shares, par value $0.01 per share (the “Shares”), of Alkermes plc (the “Company”).
The RSU was granted under the Alkermes plc 2018 Stock Option and Incentive Plan (the “Plan”), and is governed by the terms and
conditions thereof and of this award certificate (this “Award Certificate”). A copy of the Plan is posted on your local human resources
page of the Company’s website. Unless otherwise defined in this Award Certificate, all capitalized terms used in this Award
Certificate shall have the respective meanings ascribed to them in the Plan.
Vesting details for the RSU are available via your Bank of America Merrill Lynch Benefits Online account.
You must be employed by the Company on each vesting date in order to receive the Shares that vest on each such date, except as
otherwise provided below. For purposes of the RSU, and as set forth in Section 14 of the Plan, you will continue to be deemed
employed by the Company for so long as you (x) remain employed by the Company or any Subsidiary, regardless of any transfer
between the Company or such Subsidiary or between Subsidiaries, or any transfer from one eligibility category under Section 4 of the
Plan to another, or (y) are on an approved leave of absence from the Company or any Subsidiary.
The Company will deliver to you a number of Shares equal to the number of vested Shares underlying your RSU, subject to the
satisfaction of tax withholding obligations as set forth in the Plan, within three business days of each applicable vesting date. Delivery
of the Shares in settlement of your RSU is intended to comply with the requirements for the short-term deferral exemption available
under Treasury Regulations Section 1.409A-1(b)(4) and shall be construed and administered in such manner.
In the event of the termination of your employment or other service relationship with the Company by reason of death or permanent
disability, the RSU shall automatically vest and be exercisable in full effective upon such termination.
In the event of a Sale Event, the following provisions shall apply in lieu of and expressly supersede Section 3(d) of the Plan:
1
•
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) does not assume or continue the RSU, or substitute a similar award for the RSU, then (i) to the extent the RSU
is outstanding and not vested immediately prior to the effective time of the Sale Event, the RSU shall become fully
vested as of the effective time of the Sale Event, provided that your employment or other service relationship with the
Company has not terminated prior to the effective time of the Sale Event, (ii) the RSU will terminate upon the effective
time of the Sale Event.
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) assumes or continues the RSU or substitutes a similar award for the RSU, then upon such Sale Event (if such
Sale Event is a Change in Control, as such term is defined in your employment agreement with the Company or any of its
Subsidiaries (“Employment Agreement”)) or upon a Change in Control following such Sale Event (if such Sale Event is
not a Change in Control), these provisions shall apply regarding the vesting of the RSU upon your termination of
employment with the Company or any of its Subsidiaries (or its successor in interest), if such termination of employment
occurs within twenty-four (24) months after the occurrence of the first event constituting a Change in Control, provided
that such first event occurs during the Period of Employment, as such term is defined in your Employment
Agreement. These provisions shall terminate and be of no further force or effect beginning twenty-four (24) months after
the occurrence of a Change in Control.
If within twenty-four (24) months after a Change in Control occurs, your employment is terminated by the Company or
any of its Subsidiaries (or its successor in interest) without Cause (as such term is defined in your Employment
Agreement) or you terminate your employment for Good Reason (as such term is defined in your Employment
Agreement), then, to the extent the RSU is outstanding and not vested immediately prior to the Date of Termination (as
defined in your Employment Agreement), it shall become fully vested on the Date of Termination; provided, however,
that if such Change in Control is not a Sale Event, the effective date of such vesting shall be the later of (i) the Date of
Termination or (ii) the one-year anniversary of the Grant Date. For purposes of the foregoing, the determination of
whether your employment is terminated without Cause or for Good Reason will be made by the Company (or its
successor in interest) in accordance with the terms of your Employment Agreement.
The grant of the RSU does not infer any right to, or expectation of, the grant of any additional Options or other Awards on the same
basis or at all, in any future year. Participation in the Plan shall in no way give you any rights to compensation for any claim of loss in
relation to the Plan, including without limitation:
(a)
(b)
(c)
any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason
(including lawful or unlawful termination of an employment relationship);
any exercise of a discretion or a decision taken in relation to an Award or to the Plan, or any failure to exercise
a discretion or take a decision; or
the operation, suspension, termination or amendment of the Plan.
Any controversy or claim arising out of or relating to this Award Certificate and/or the RSU shall, to the fullest extent permitted by
law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts, USA, in accordance with the Employment
Arbitration Rules and Mediation Procedures of the AAA, including, but not limited to, the rules and procedures applicable to the
selection of arbitrators. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
2
You may not be issued any Shares in respect of the RSU unless either (i) the Shares are registered under the Securities Act of 1933, as
amended (the “Securities Act”); or (ii) the Company has determined that such issuance would be exempt from the registration
requirements of the Securities Act. The RSU also must comply with other applicable laws and regulations governing the RSU, and
you will not receive such Shares if the Company determines that such receipt would not be in material compliance with such laws and
regulations.
The Company has no duty or obligation to minimize the tax consequences to you of the RSU and will not be liable to you for any
adverse tax consequences to you arising in connection with the RSU. You are advised to consult with your own personal tax, financial
and/or legal advisors regarding the tax consequences of the RSU.
This Award Certificate may not be modified or amended except in a writing signed by you and a duly authorized officer of the
Company. Notwithstanding the foregoing, the Administrator reserves the right to modify or amend, by written notice to you, the terms
of the RSU and/or this Award Certificate in any way it may deem necessary or advisable (i) as a result of any change in applicable
laws or regulations, or any future law, regulation, ruling, or judicial decision, in each case applicable to the RSU, or (ii) for any other
legal purpose, provided that (in each case of (i) or (ii) above), no such modification or amendment shall adversely affect your rights
under the RSU and/or this Award Certificate without your written consent.
Alkermes plc
By:
3
2018 Plan Award Certificate –Performance-Vesting Restricted Stock Unit Award (Reporting Officer)
Exhibit 10.19-12
Alkermes plc
Connaught House
1 Burlington Road
Dublin 4, Ireland
Name: Participant Name
Address: Participant Address
Grant ID: Grant ID
Plan: Plan ID
ID: Optionee ID
Effective [Grant Date] (the “Grant Date”), you have been granted a performance-vesting restricted stock unit award (the “PRSU”).
The PRSU is for a total of [Award Grant Amount] ordinary shares, par value $0.01 per share (the “Shares”), of Alkermes plc (the
“Company”).
The PRSU was granted under the Alkermes plc 2018 Stock Option and Incentive Plan (the “Plan”) and is governed by the terms and
conditions thereof and of this award certificate (this “Award Certificate”). A copy of the Plan is posted on your local human resources
page of the Company’s website. Unless otherwise defined in this Award Certificate, all capitalized terms used in this Award
Certificate shall have the respective meanings ascribed to them in the Plan.
Vesting details for the PRSU are as set forth on Exhibit A attached to this Award Certificate.
You must be employed by the Company on each vesting date in order to receive the Shares that vest on each such date, except as
otherwise provided below. For purposes of the PRSU, and as set forth in Section 14 of the Plan, you will continue to be deemed
employed by the Company for so long as you (x) remain employed by the Company or any Subsidiary, regardless of any transfer
between the Company or such Subsidiary or between Subsidiaries, or any transfer from one eligibility category under Section 4 of the
Plan to another, or (y) are on an approved leave of absence from the Company or any Subsidiary.
No portion of the PRSU shall vest prior to the one-year anniversary of the Grant Date, except as set forth in Section 7(a) of the Plan.
Subject to this exception, if a vesting event or milestone is achieved and the compensation committee of the Company’s board of
directors acknowledges and recognizes the achievement of such vesting event or milestone during the 12-month period between the
Grant Date and the one year anniversary of the Grant Date, the portion of the Shares subject to such vesting event or milestone shall
vest on the first business day immediately following the one year anniversary of the Grant Date.
The Company will deliver to you a number of Shares equal to the number of vested Shares underlying your PRSU, subject to the
satisfaction of tax withholding obligations as set forth in the Plan, within three business days of each applicable vesting date. Delivery
of the Shares in settlement of your PRSU is intended to comply with the requirements for the short-term deferral exemption available
under Treasury Regulations Section 1.409A-1(b)(4) and shall be construed and administered in such manner.
In the event of the termination of your employment with the Company by reason of death or permanent disability prior to the end of
the PRSU’s performance period, the PRSU shall vest as follows at the end of the performance period:
1
(a)
(b)
if the termination of employment due to death or permanent disability occurs in a calendar year subsequent to the
calendar year in which the Grant Date falls, you will be entitled to the full amount of the PRSU to which you would
otherwise have been entitled absent such termination, if any, as determined based on the terms of the PRSU at the
end of the performance period; and
if the termination of employment due to death or permanent disability occurs in the calendar year in which the Grant
Date falls, then you will be entitled to a pro-rata amount of the PRSU to which you would have otherwise been
entitled absent such termination, if any, as determined based on the terms of the PRSU at the end of the performance
period, with such pro-rated amount equal to the product of the full amount to which you would otherwise have been
entitled multiplied by the fraction which has as its numerator the number of full months of employment completed
in the calendar year in which such termination of employment due to death or disability occurs, and has as its
denominator 36 (being the number of months in the performance period).
In the event of a Sale Event, the following provisions shall apply in lieu of and expressly supersede Section 3(d) of the Plan:
•
•
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) does not assume or continue the PRSU, or substitute a similar award for the PRSU, then (i) to the extent the
PRSU is outstanding and not vested immediately prior to the effective time of the Sale Event, the PRSU shall become
fully vested as determined in accordance with Exhibit A attached to this Award Certificate as of the effective time of the
Sale Event, provided that your employment or other service relationship with the Company has not terminated prior to the
effective time of the Sale Event and (ii) the PRSU will terminate upon the effective time of the Sale Event.
In the event of a Sale Event in which the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent
company) assumes or continues the PRSU or substitutes a similar award for the PRSU, then upon such Sale Event (if
such Sale Event is a Change in Control, as such term is defined in your employment agreement with the Company or any
of its Subsidiaries (“Employment Agreement”)) or upon a Change in Control following such Sale Event (if such Sale
Event is not a Change in Control), these provisions shall apply regarding the vesting of the PRSU upon your termination
of employment with the Company or any of its Subsidiaries (or its successor in interest), if such termination of
employment occurs within twenty-four (24) months after the occurrence of the first event constituting a Change in
Control, provided that such first event occurs during the Period of Employment, as such term is defined in your
Employment Agreement. These provisions shall terminate and be of no further force or effect beginning twenty-four
(24) months after the occurrence of a Change in Control.
If within twenty-four (24) months after a Change in Control occurs, your employment is terminated by the Company or
any of its Subsidiaries (or its successor in interest) without Cause (as such term is defined in your Employment
Agreement) or you terminate your employment for Good Reason (as such term is defined in your Employment
Agreement), then, to the extent the PRSU is outstanding and not vested immediately prior to the Date of Termination (as
defined in your Employment Agreement), it shall become fully vested as determined in accordance with Exhibit A
attached to this Award Certificate on the Date of Termination; provided, however, that if such Change in Control is not a
Sale Event, the effective date of such vesting shall be the later of (i) the Date of Termination or (ii) the one-year
anniversary of the Grant Date. For purposes of the foregoing, the determination of whether your employment is
terminated without Cause or for Good Reason will be made by the Company (or its successor in interest) in accordance
with the terms of your Employment Agreement.
2
The grant of the PRSU does not infer any right to, or expectation of, the grant of any additional Options or other Awards on the same
basis or at all, in any future year. Participation in the Plan shall in no way give you any rights to compensation for any claim of loss in
relation to the Plan, including without limitation:
(a)
(b)
(c)
any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason
(including lawful or unlawful termination of an employment relationship);
any exercise of a discretion or a decision taken in relation to an Award or to the Plan, or any failure to exercise
a discretion or take a decision; or
the operation, suspension, termination or amendment of the Plan.
Any controversy or claim arising out of or relating to this Award Certificate and/or the PRSU shall, to the fullest extent permitted by
law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts, USA, in accordance with the Employment
Arbitration Rules and Mediation Procedures of the AAA, including, but not limited to, the rules and procedures applicable to the
selection of arbitrators. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
You may not be issued any Shares in respect of the PRSU unless either (i) the Shares are registered under the Securities Act of 1933,
as amended (the “Securities Act”); or (ii) the Company has determined that such issuance would be exempt from the registration
requirements of the Securities Act. The PRSU also must comply with other applicable laws and regulations governing the PRSU, and
you will not receive such Shares if the Company determines that such receipt would not be in material compliance with such laws and
regulations.
The Company has no duty or obligation to minimize the tax consequences to you of the PRSU and will not be liable to you for any
adverse tax consequences to you arising in connection with the PRSU. You are advised to consult with your own personal tax,
financial and/or legal advisors regarding the tax consequences of the PRSU.
This Award Certificate may not be modified or amended except in a writing signed by you and a duly authorized officer of the
Company. Notwithstanding the foregoing, the Administrator reserves the right to modify or amend, by written notice to you, the terms
of the PRSU and/or this Award Certificate in any way it may deem necessary or advisable (i) as a result of any change in applicable
laws or regulations, or any future law, regulation, ruling, or judicial decision, in each case applicable to the PRSU, or (ii) for any other
legal purpose, provided that (in each case of (i) or (ii) above), no such modification or amendment shall adversely affect your rights
under the PRSU and/or this Award Certificate without your written consent.
Alkermes plc
By:
3
Name
Alkermes Ireland Holdings Limited
Alkermes Pharma Ireland Limited
Daravita Pharma Ireland Limited
Alkermes Finance Ireland (No 3) Limited
Alkermes Science Four Limited
Alkermes Science Five Limited
Alkermes US Holdings, Inc.
Alkermes, Inc.
Alkermes Controlled Therapeutics, Inc.
Rodin Therapeutics, Inc.
SUBSIDIARIES
Exhibit 21.1
Jurisdiction
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Delaware
Pennsylvania
Pennsylvania
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S‑8 (Nos. 333‑179545, 333‑184621, 333‑200777,
333-214952, 333-226359, 333-232831, 333-240170, 333-258229 and 333-266350) of Alkermes plc of our report dated February 16, 2023 relating to the
financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2023
I, Richard F. Pops, certify that:
CERTIFICATIONS
Exhibit 31.1
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Alkermes plc;
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
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange 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 our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others 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
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for 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 the
effectiveness 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 most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely 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,
to the 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 are
reasonably 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
internal control over financial reporting.
Date: February 16, 2023
/s/ Richard F. Pops
Richard F. Pops
Chairman and Chief Executive Officer
(Principal Executive Officer)
I, Iain M. Brown, certify that:
1.
I have reviewed this annual report on Form 10-K of Alkermes plc;
CERTIFICATIONS
Exhibit 31.2
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 the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
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 in
Exchange 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 our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others 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
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for 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 the
effectiveness 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 most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely 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, to
the 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 are
reasonably 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
internal control over financial reporting.
Date: February 16, 2023
/s/ Iain M. Brown
Iain M. Brown
Senior Vice President, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Alkermes plc (the "Company") for the period ended December 31, 2022 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), we, Richard F. Pops, Chairman and Chief Executive Officer of the Company, and
Iain M. Brown, Senior Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 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.
Date: February 16, 2023
/s/ Richard F. Pops
Richard F. Pops
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: February 16, 2023
/s/ Iain M. Brown
Iain M. Brown
Senior Vice President, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)