Q3 2026 Alkermes plc Earnings Conference Call - ALKERMES PLC

Financial Performance:

• Third quarter total revenues reached $480.1 million, with proprietary product net sales increasing 31% year-over-year to $417.3 million, driven by the inclusion of Lumerize and growth across established franchises.
• Proprietary product sales breakdown: Vivitrol ($127.6M), Aristada ($103.9M), Levolvi ($95.9M), and Lumerize ($89.9M).
• Manufacturing and royalty revenues totaled $62.9 million, including $29.5 million from Brinerity and $26.4 million from long-acting Invega products.
• Cost of goods sold (COGS) rose to $94.2 million due to the fair value accounting of Lumerize inventory; R&D expenses increased to $121.1 million reflecting pipeline investment; SG&A rose to $208.5 million primarily due to Avidel commercial infrastructure integration.
• Reported GAAP net income was $16.3 million, with Adjusted EBITDA at $120.1 million; balance sheet remained strong with approximately $787.6 million in cash and investments.
• Full-year 2026 financial expectations remain unchanged as previously stated in July.

Guidance and Future Outlook:

• 2026 proprietary product net sales are expected to reach nearly $1.6 billion, with Q4 2026 proprietary sales projected between $400–$420 million.
• Full-year 2026 specific guidance: Vivitrol ($460–$480M), Aristada ($365–$385M), Levolvi ($380–$400M), and Lumerize ($350–$370M; with Alkermes accounting for $315–$335M post-Avidel close).
• Levolvi gross-to-net adjustments expected to be ~42% for 2026 and 45% for 2027; volume growth anticipated to accelerate to ~20% in 2027.
• 2027 outlook projects normalized COGS and SG&A expense profiles, with continued high R&D investment to support an expanding pipeline and strong adjusted EBITDA generation.
• Lumerize FDA submission for Idiopathic Hypersomnia (IH) is targeted with a potential launch in March 2028, pending approval.
• Clinical readouts expected in 2027: Elixirexin Phase 3 results for Narcolepsy (mid-2027), ALK7290 Phase 2 data for ADHD (H2 2027), and ALK4510 Phase 2 data for fatigue (end of 2026).

Business Segments and Product Lines:

• Addiction: Vivitrol demonstrated strong demand in alcohol dependence with favorable patient mix and gross-to-net improvements; full-year sales guidance reiterated.
• Psychiatry: Aristada franchise grew via HCP adoption; Levolvi showed 18% underlying TRX growth with expanded market access (80% of covered lives) and inventory benefits.
• Sleep Medicine: Lumerize sales reached $89.9 million with 4,100 patients on therapy; positive Phase 3 Revitalized data presented for IH at Sleep Europe meeting supports upcoming FDA submission.
• Pipeline Expansion: Elixirexin (orexin-2 agonist) has Phase 3 Brilliant studies underway for Narcolepsy Types 1 & 2; Phase 2 Vibrance 3 for Idiopathic Hypersomnia enrollment completed.
• New Indications: ALK7290 announced expansion into Major Depressive Disorder (MDD) via a new Phase 2 study; ALK4510 Phase 2 study to begin for fatigue associated with Multiple Sclerosis or Parkinson's disease.
• Commercial Infrastructure: Integration of Avidel assets has enhanced the sleep medicine platform and commercial capabilities.

Market and Competitive Landscape:

• Anticipated entry of Takeda's orexin-1/orexin-2 agonist (Dayvigo/Oxervate? Context implies a competitive orexin antagonist) is expected to set the market pricing range; Alkermes plans to adjust its pricing dynamically.
• Management views orexin agonists and oxibates as complementary mechanisms with HCPs expressing a desire to use both; expects durable oxibate market growth despite competition.
• Initial impact from Takeda's product expected to be on new starts in earlier lines of therapy, with Lumerize retaining stable existing patients.
• Lumerize faces competition for new starts and switch patients in the IH market in 2028, targeting both new patient acquisition and switching from existing oxibate users.
• Alkermes emphasizes a differentiated profile for Elixirexin with a wide therapeutic range and dosing optionality (QD and split-dose) compared to competitors.

Risks and Challenges:

• Regulatory risk regarding the FDA submission and approval timeline for Lumerize in the IH indication.
• Clinical development risk associated with proving efficacy in new indications (ADHD, MDD, fatigue) where competition is fierce.
• Market competition risks from Takeda's upcoming orexin launch and potential pricing pressure across the sleep disorder landscape.
• Gross-to-net adjustments remain a significant factor in Levolvi revenue recognition, expected to increase in 2027.
• Integration of Avidel transaction costs impacted 2026 financials, though expected to normalize in 2027.

Management Commentary and Tone:

• CEO Blair Jackson expressed high confidence and pride in the company's transition, emphasizing a strategy of "execution" with a clear focus on advancing the orexin pipeline and capital allocation.
• Tone is optimistic and data-driven, highlighting significant momentum across the clinical pipeline and strong commercial performance in existing franchises.
• Management stressed the "complementary" nature of orexins and oxibates, countering market fears of cannibalization.
• Confidence in the ability to fund future growth while maintaining financial discipline and delivering strong cash generation in 2027.

Analyst Questions and Answers:

• IH Data Expectations: Management expects the Vibrance 3 Phase 2 data (split-dose and once-daily) to provide insights on efficacy in "long sleepers" and inform Phase 3 design; regulatory meeting is the rate-limiting step.
• Pricing Strategy: Alkermes plans to adjust Elixirexin pricing based on Takeda's entry, leveraging their own flexibility and differentiated profile to ensure broad access for both products.
• ADHD Mechanism Rationale: Management corrected misconceptions regarding efficacy requirements, noting broad response profiles and strong Phase 1b data; confirmed no need to modify trial design or target specific subtypes.
• Orexin vs. Antagonists: Clarified that Alkermes' agonists directly target mood circuits, whereas antagonists (J&J) target sleep to indirectly affect mood; MDD study will analyze subgroups with excessive daytime sleepiness.
• Inpatient vs. Outpatient: Explained Phase 1b inpatient setting was necessary to gather comprehensive PK/PD and biomarker data without patient burden; Phase 2 will be outpatient.
• Combination Therapy: Confirmed plans to study orexin agonist combined with oxibates (likely Lumerize) post-registration to support clinical and payer value propositions.
• Lumerize Performance: Q3 growth attributed to seasonality, new patient starts, conversions, and persistence; no significant pricing pressure observed.

Other Key Points:

• Elixirexin is the most advanced orexin candidate, with top-line Phase 3 Narcolepsy data anticipated in mid-2027.
• ALK7290 Phase 1b ADHD data showed dose-dependent improvements on attention and hyperactivity/in impulsivity subscales as early as Day 6.
• The company aims to become a leader in sleep medicine across multiple modalities using its established platform.
• Six important clinical studies are expected to read out over the next year, significantly expanding the understanding of orexin biology.
• The "long sleeper" subset of IH patients (approx. 25% of the population) is a specific area of interest for the new clinical data.
• Management reaffirmed commitment to delivering 2026 objectives while building the foundation for long-term value creation.