Alkermes plc. - Quarter Report: 2023 June (Form 10-Q)

Indication(s)

Licensed Territory

Multiple sclerosis

10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35299

ALKERMES PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)



Ireland		98-1007018
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Connaught House

1 Burlington Road

Dublin 4, Ireland, D04 C5Y6

(Address of principal executive offices)

+ 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	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, $0.01 par value	ALKS	Nasdaq Global Select Market

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 ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of the registrant’s ordinary shares, $0.01 par value, outstanding as of July 21, 2023 was 166,558,735 shares.

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023



		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets — June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) — For the Three and Six Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2023 and 2022	7
	Condensed Consolidated Statements of Shareholders’ Equity — For the Three and Six Months Ended June 30, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	35

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

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 Quarterly Report on Form 10-Q (this “Form 10-Q”) may include, without limitation, statements regarding:

•

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 our 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 planned separation of our neuroscience business and oncology business, including anticipated timing, effects, costs, benefits and tax treatment; and

•

other expectations discussed elsewhere in this Form 10-Q.

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 Form 10-Q might not occur. You are cautioned not to place undue reliance on the forward-looking statements in this Form 10-Q, which speak only as of the date of this Form 10-Q. All subsequent written and oral forward-looking statements concerning the matters addressed in this Form 10-Q 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 “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed

with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 16, 2023, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 26, 2023 (our “Annual Report”) and “Part II, Item 1A—Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (our “Q1 Quarterly Report”).

This Form 10-Q 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 that any industry publications and third-party research, surveys and studies from which data is included in this Form 10-Q are reliable, we have not independently verified any such data. This Form 10-Q 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 “Part I, Item 1A—Risk Factors” in our Annual Report and “Part II, Item 1A—Risk Factors” in our Q1 Quarterly Report. These and other factors could cause our results to differ materially from those expressed or implied in this Form 10-Q.

Note Regarding Company and Product References

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. We have 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. Use of terms such as “us,” “we,” “our,” “Alkermes” or the “Company” in this Form 10-Q 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 Form 10-Q 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 Form 10-Q are intended to include reference to the “biotechnology industry” and/or the “pharmaceutical industry” and (c) references to “licensees” in this Form 10-Q 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®.

The following are trademarks of the respective companies listed: ANJESO®—Baudax Bio, Inc.; BYANNLI®, INVEGA®, INVEGA HAFYERA®, INVEGA SUSTENNA®, INVEGA TRINZA®, TREVICTA®, XEPLION®, and RISPERDAL CONSTA®—Johnson & Johnson or its affiliated companies; CABENUVA®—ViiV Healthcare UK (No.3) Limited; KEYTRUDA®—Merck Sharp & Dohme Corp.; and VUMERITY®—Biogen MA Inc. (together with its affiliates, “Biogen”). Other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q may be referred to without the ® and TM 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.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30, 2023			December 31, 2022
	(In thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	665,795		$	292,473
Receivables, net		334,478			287,967
Investments—short-term		163,254			315,992
Inventory		189,372			181,418
Contract assets		—			8,929
Prepaid expenses and other current assets		44,452			43,527
Total current assets		1,397,351			1,130,306
PROPERTY, PLANT AND EQUIPMENT, NET		323,801			325,361
INVESTMENTS—LONG-TERM		78,127			131,610
RIGHT-OF-USE ASSETS		107,356			115,855
INTANGIBLE ASSETS, NET		19,982			37,680
GOODWILL		92,873			92,873
DEFERRED TAX ASSETS		153,152			115,602
OTHER ASSETS		14,542			14,691
TOTAL ASSETS	$	2,187,184		$	1,963,978
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	242,923		$	220,089
Accrued sales discounts, allowances and reserves		222,768			252,115
Operating lease liabilities—short-term		15,192			15,722
Contract liabilities—short-term		3,302			6,816
Current portion of long-term debt		3,000			3,000
Total current liabilities		487,185			497,742
LONG-TERM DEBT		289,001			290,270
OPERATING LEASE LIABILITIES—LONG-TERM		82,342			89,829
OTHER LONG-TERM LIABILITIES		48,219			42,384
Total liabilities		906,747			920,225
COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
SHAREHOLDERS’ EQUITY:
Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at June 30, 2023 and December 31, 2022, respectively		—			—
Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 171,975,901 and 168,951,193 shares issued; 166,498,288 and 164,377,009 shares outstanding at June 30, 2023 and December 31, 2022, respectively		1,720			1,690
Treasury shares, at cost (5,477,613 and 4,574,184 shares at June 30, 2023 and December 31, 2022, respectively)		(186,146	)		(160,862	)
Additional paid-in capital		2,976,365			2,913,099
Accumulated other comprehensive loss		(7,437	)		(10,889	)
Accumulated deficit		(1,504,065	)		(1,699,285	)
Total shareholders’ equity		1,280,437			1,043,753
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,187,184		$	1,963,978

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(In thousands, except per share amounts)
REVENUES:
Product sales, net	$	231,477		$	190,787		$	446,204		$	362,055
Manufacturing and royalty revenues		385,913			85,326			458,775			190,496
License revenue		—			—			—			2,000
Research and development revenue		7			106			13			213
Total revenues		617,397			276,219			904,992			554,764
EXPENSES:
Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)		63,260			58,360			121,435			113,519
Research and development		100,788			92,873			194,425			188,826
Selling, general and administrative		205,258			150,377			379,735			295,429
Amortization of acquired intangible assets		8,898			9,066			17,698			18,032
Total expenses		378,204			310,676			713,293			615,806
OPERATING INCOME (LOSS)		239,193			(34,457	)		191,699			(61,042	)
OTHER INCOME (EXPENSE), NET:
Interest income		6,769			896			11,735			1,469
Interest expense		(5,684	)		(2,369	)		(10,972	)		(4,719	)
Change in the fair value of contingent consideration		—			870			—			(18,197	)
Other (expense) income, net		(525	)		1,810			(564	)		4,241
Total other income (expense), net		560			1,207			199			(17,206	)
INCOME (LOSS) BEFORE INCOME TAXES		239,753			(33,250	)		191,898			(78,248	)
INCOME TAX PROVISION (BENEFIT)		2,688			(3,114	)		(3,322	)		(12,209	)
NET INCOME (LOSS)	$	237,065		$	(30,136	)	$	195,220		$	(66,039	)
EARNINGS (LOSS) PER ORDINARY SHARE:
Basic	$	1.43		$	(0.18	)	$	1.18		$	(0.40	)
Diluted		1.38			(0.18	)		1.14			(0.40	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING:
Basic		166,279			163,839			165,686			163,165
Diluted		171,553			163,839			170,747			163,165
COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	237,065		$	(30,136	)	$	195,220		$	(66,039	)
Holding gain (loss), net of a tax provision (benefit) of $99, $326, $587 and $(1,055), respectively		692			(2,254	)		3,452			(6,765	)
COMPREHENSIVE INCOME (LOSS)	$	237,757		$	(32,390	)	$	198,672		$	(72,804	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended
	June 30,
	2023			2022
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	195,220		$	(66,039	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization		37,725			38,588
Share-based compensation expense		51,147			41,720
Deferred income taxes		(38,137	)		(40,815	)
Change in the fair value of contingent consideration		—			18,197
Other non-cash charges		691			637
Changes in assets and liabilities:
Receivables		(46,511	)		67,382
Contract assets		8,929			(3,123	)
Inventory		(6,879	)		(4,569	)
Prepaid expenses and other assets		(774	)		(1,986	)
Right-of-use assets		8,498			8,331
Accounts payable and accrued expenses		19,995			(20,802	)
Accrued sales discounts, allowances and reserves		(29,347	)		(8,243	)
Contract liabilities		(5,032	)		(4,071	)
Operating lease liabilities		(8,471	)		(8,911	)
Other long-term liabilities		7,354			3,076
Cash flows provided by operating activities		194,408			19,372
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property, plant and equipment		(16,565	)		(17,753	)
Proceeds from the sale of equipment		3			—
Proceeds from contingent consideration		—			1,043
Return of Fountain Healthcare Partners II, L.P. investment		—			485
Purchases of investments		(30,284	)		(194,879	)
Sales and maturities of investments		240,544			109,925
Cash flows provided by (used in) investing activities		193,698			(101,179	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares under share-based compensation arrangements		12,000			17,992
Employee taxes paid related to net share settlement of equity awards		(25,284	)		(17,583	)
Principal payments of long-term debt		(1,500	)		(1,500	)
Cash flows used in financing activities		(14,784	)		(1,091	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		373,322			(82,898	)
CASH AND CASH EQUIVALENTS—Beginning of period		292,473			337,544
CASH AND CASH EQUIVALENTS—End of period	$	665,795		$	254,646
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Non-cash investing and financing activities:
Purchased capital expenditures included in accounts payable and accrued expenses	$	4,863		$	4,863

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)


	Ordinary Shares				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Capital		Loss			Deficit			Shares			Amount			Total
	(In thousands, except share data)
BALANCE — December 31, 2022		168,951,193	$	1,690	$	2,913,099	$	(10,889	)	$	(1,699,285	)		(4,574,184	)	$	(160,862	)	$	1,043,753
Issuance of ordinary shares under employee stock plans		2,567,603		25		2,849		—			—			—			—			2,874
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(885,652	)		(24,744	)		(24,744	)
Share-based compensation		—		—		22,778		—			—			—			—			22,778
Unrealized gain on marketable securities, net of tax provision of $488		—		—		—		2,760			—			—			—			2,760
Net loss		—		—		—		—			(41,845	)		—			—			(41,845	)
BALANCE — March 31, 2023		171,518,796	$	1,715	$	2,938,726	$	(8,129	)	$	(1,741,130	)		(5,459,836	)	$	(185,606	)	$	1,005,576
Issuance of ordinary shares under employee stock plans		457,105		5		9,121		—			—			—			—			9,126
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(17,777	)		(540	)		(540	)
Share-based compensation		—		—		28,518		—			—			—			—			28,518
Unrealized gain on marketable securities, net of tax provision of $99		—		—		—		692			—			—			—			692
Net income		—		—		—		—			237,065			—			—			237,065
BALANCE — June 30, 2023		171,975,901	$	1,720	$	2,976,365	$	(7,437	)	$	(1,504,065	)		(5,477,613	)	$	(186,146	)	$	1,280,437

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Ordinary Shares				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Capital		Loss			Deficit			Shares			Amount			Total
	(In thousands, except share data)
BALANCE — December 31, 2021		165,790,549	$	1,658	$	2,798,325	$	(3,723	)	$	(1,541,018	)		(3,853,222	)	$	(142,658	)	$	1,112,584
Issuance of ordinary shares under employee stock plans		1,953,293		19		1,776		—			—			—			—			1,795
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(678,209	)		(17,069	)		(17,069	)
Share-based compensation		—		—		18,494		—			—			—			—			18,494
Unrealized loss on marketable securities, net of tax benefit of $1,382		—		—		—		(4,511	)		—			—			—			(4,511	)
Net loss		—		—		—		—			(35,903	)		—			—			(35,903	)
BALANCE — March 31, 2022		167,743,842	$	1,677	$	2,818,595	$	(8,234	)	$	(1,576,921	)		(4,531,431	)	$	(159,727	)	$	1,075,390
Issuance of ordinary shares under employee stock plans		1,038,859		11		16,186		—			—			—			—			16,197
Receipt of Alkermes' shares for the exercise of stock options or to satisfy minimum tax withholding obligations related to share-based awards		—		—		—		—			—			(18,566	)		(514	)		(514	)
Share-based compensation		—		—		23,641		—			—			—			—			23,641
Unrealized loss on marketable securities, net of tax provision of $326		—		—		—		(2,254	)		—			—			—			(2,254	)
Net loss		—		—		—		—			(30,136	)		—			—			(30,136	)
BALANCE — June 30, 2022		168,782,701	$	1,688	$	2,858,422	$	(10,488	)	$	(1,607,057	)		(4,549,997	)	$	(160,241	)	$	1,082,324

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited)

1. THE COMPANY

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 planning a separation of the oncology business into an independent, publicly-traded company (referred to herein as “Mural Oncology”) following a 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, including those related to its licensed products and third-party products using its proprietary technologies under license. Mural Oncology 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 receipt of a private letter ruling from the U.S. Internal Revenue Service and/or a tax opinion from the Company’s tax advisor. Subsequent to the planned separation, the historical results of the oncology business will be reflected as discontinued operations in the Company’s consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company for the three and six months ended June 30, 2023 and 2022 are unaudited and have been prepared on a basis substantially consistent with the audited financial statements for the year ended December 31, 2022. The year-end condensed consolidated balance sheet data, which is presented for comparative purposes, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the U.S. (commonly referred to as “GAAP”). In the opinion of management, the condensed consolidated financial statements include all adjustments of a normal recurring nature that are necessary to state fairly the results of operations for the reported periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company, which are contained in the Company’s Annual Report. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for any full fiscal year.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Alkermes plc and its wholly-owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies, in the “Notes to Consolidated Financial Statements” accompanying the Company’s Annual Report. Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in accordance with 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 ongoing basis, the Company evaluates its estimates, judgments and methodologies, including, but not limited to, those related to revenue

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

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 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 conditions or using different assumptions.

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, its Chief Executive Officer and chairman of its board of directors, reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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 accounting pronouncements 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

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. During the three and six months ended June 30, 2023 and 2022, the Company recorded product sales, net, as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
VIVITROL	$	102,071	$	96,105	$	198,730	$	180,959
ARISTADA and ARISTADA INITIO		82,409		74,622		162,486		147,107
LYBALVI		46,997		20,060		84,988		33,989
Total product sales, net	$	231,477	$	190,787	$	446,204	$	362,055

Manufacturing and Royalty Revenues

During the three and six months ended June 30, 2023 and 2022, the Company recorded manufacturing and royalty revenues from its collaboration arrangements as follows:


	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
(In thousands)	Manufacturing Revenue		Royalty Revenue		Total		Manufacturing Revenue		Royalty Revenue		Total
Long-acting INVEGA products(1)	$	—	$	321,239	$	321,239	$	—	$	334,801	$	334,801
VUMERITY		10,369		21,926		32,295		23,018		38,151		61,169
RISPERDAL CONSTA		4,901		240		5,141		15,317		806		16,123
Other		16,628		10,610		27,238		32,003		14,679		46,682
	$	31,898	$	354,015	$	385,913	$	70,338	$	388,437	$	458,775


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
(In thousands)	Manufacturing Revenue		Royalty Revenue		Total		Manufacturing Revenue		Royalty Revenue		Total
Long-acting INVEGA products(1)	$	—	$	26,648	$	26,648	$	—	$	63,702	$	63,702
VUMERITY		5,650		20,520		26,170		17,045		39,720		56,765
RISPERDAL CONSTA		8,571		1,820		10,391		24,149		3,668		27,817
Other		11,353		10,764		22,117		23,207		19,005		42,212
	$	25,574	$	59,752	$	85,326	$	64,401	$	126,095	$	190,496

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

(1)

“Long-acting INVEGA products”: INVEGA SUSTENNA/XEPLION (paliperidone palmitate), INVEGA TRINZA/TREVICTA (paliperidone palmitate) and INVEGA HAFYERA/BYANNLI (paliperidone palmitate)

In November 2021, the Company received notice of partial termination of an exclusive license agreement with Janssen Pharmaceutica N.V., a subsidiary of Johnson & Johnson (“Janssen Pharmaceutica”). Under this license agreement, the Company provided Janssen Pharmaceutica 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 the Long-acting INVEGA products. When the partial termination became effective in February 2022, Janssen Pharmaceutica ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in the U.S. Accordingly, the Company ceased recognizing royalty revenue related to U.S. sales of these products in February 2022. In April 2022, the Company commenced binding arbitration proceedings related to, among other things, Janssen Pharmaceutica’s partial termination of this license agreement and its royalty and other obligations under the agreement. On May 31, 2023, the arbitral tribunal (the “Tribunal”) in the arbitration proceedings issued a final award (the “Final Award”) which concluded the arbitration proceedings. The Final Award provided, among other things, that the Company was due back royalties of $195.4 million, inclusive of $8.1 million in late-payment interest related to 2022 U.S. net sales of the Long-acting INVEGA products, which amount the Company received from Janssen Pharmaceutica in the second quarter of 2023, and is entitled to 2023 and future royalty revenues from Janssen Pharmaceutica related to net sales of INVEGA SUSTENNA through August 20, 2024, INVEGA TRINZA through the second quarter of 2030 (but no later than May 2030 when the license agreement expires) and INVEGA HAFYERA through May 2030 (when the license agreement expires).

Following issuance of the Final Award, the Company recognized royalty revenues related to the back royalties noted above and resumed recognizing royalty revenue related to ongoing U.S. sales of the Long-acting INVEGA products. During the three months ended June 30, 2023, the Company recorded $195.4 million in royalty revenue related to the back royalties, $50.2 million in royalty revenue related to U.S. net sales of the Long-acting INVEGA products earned during the first quarter of 2023 and $75.7 million in royalty revenue related to worldwide net sales of the Long-acting INVEGA products earned during the second quarter of 2023. Refer to Note 15, Commitments and Contingent Liabilities within the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for additional information regarding the arbitration proceedings with Janssen Pharmaceutica.

Contract Assets

Contract assets include unbilled amounts resulting from sales under certain of the Company’s manufacturing contracts where revenue is recognized over time. The amounts included in the contract assets table below are classified as “Current assets” in the accompanying condensed consolidated balance sheets, as they relate to manufacturing processes that are completed in ten days to eight weeks.

Total contract assets at June 30, 2023 were as follows:


(In thousands)	Contract Assets
Contract assets at December 31, 2022	$	8,929
Additions		10,115
Transferred to receivables, net		(19,044	)
Contract assets at June 30, 2023	$	—

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

Contract Liabilities

Contract liabilities consist of contractual obligations related to deferred revenue. At June 30, 2023 and December 31, 2022, $3.3 million and $6.8 million of the contract liabilities, respectively, were classified as “Contract liabilities–short-term” in the accompanying condensed consolidated balance sheets and $2.4 million and $3.9 million of the contract liabilities, respectively, were classified as “Other long-term liabilities” in the accompanying condensed consolidated balance sheets.

Total contract liabilities at June 30, 2023 were as follows:


(In thousands)	Contract Liabilities
Contract liabilities at December 31, 2022	$	10,701
Additions		(932	)
Amounts recognized into revenue		(4,101	)
Contract liabilities at June 30, 2023	$	5,668

4. INVESTMENTS

Investments consisted of the following (in thousands):


			Gross Unrealized
					Losses
	Amortized				Less than			Greater than			Estimated
June 30, 2023	Cost		Gains		One Year			One Year			Fair Value
Short-term investments:
Available-for-sale securities:
Corporate debt securities	$	77,279	$	—	$	(82	)	$	(1,106	)	$	76,091
U.S. government and agency debt securities		73,188		1		(116	)		(991	)		72,082
Non-U.S. government debt securities		15,359		—		—			(278	)		15,081
Total short-term investments		165,826		1		(198	)		(2,375	)		163,254
Long-term investments:
Available-for-sale securities:
Corporate debt securities		38,825		—		(529	)		(765	)		37,531
U.S. government and agency debt securities		40,219		—		(463	)		(980	)		38,776
		79,044		—		(992	)		(1,745	)		76,307
Held-to-maturity securities:
Certificates of deposit		1,820		—		—			—			1,820
Total long-term investments		80,864		—		(992	)		(1,745	)		78,127
Total investments	$	246,690	$	1	$	(1,190	)	$	(4,120	)	$	241,381

December 31, 2022
Short-term investments:
Available-for-sale securities:
Corporate debt securities	$	141,418	$	—	$	(424	)	$	(2,054	)	$	138,940
U.S. government and agency debt securities		143,710		16		(266	)		(1,289	)		142,171
Non-U.S. government debt securities		35,455		—		(28	)		(546	)		34,881
Total short-term investments		320,583		16		(718	)		(3,889	)		315,992
Long-term investments:
Available-for-sale securities:
Corporate debt securities		68,229		—		(1,550	)		(676	)		66,003
U.S. government and agency debt securities		62,220		—		(917	)		(1,424	)		59,879
Non-U.S. government debt securities		4,099		—		—			(191	)		3,908
		134,548		—		(2,467	)		(2,291	)		129,790
Held-to-maturity securities:
Certificates of deposit		1,820		—		—			—			1,820
Total long-term investments		136,368		—		(2,467	)		(2,291	)		131,610
Total investments	$	456,951	$	16	$	(3,185	)	$	(6,180	)	$	447,602

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

At June 30, 2023, 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 and backed by U.S. agencies and the U.S. government. At June 30, 2023, 156 of the Company’s 163 investment securities were in an unrealized loss position and had an aggregate estimated fair value of $231.1 million. Approximately 46% of the Company’s investment securities at June 30, 2023 are in each of 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. 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 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.

Realized gains and losses on the sales and maturities of investments, which were identified using the specific identification method, were as follows:


	Six Months Ended June 30,
(In thousands)	2023		2022
Proceeds from the sales and maturities of investments	$	240,544	$	109,925
Realized gains	$	—	$	—
Realized losses	$	—	$	—

The Company’s available-for-sale and held-to-maturity securities at June 30, 2023 had contractual maturities in the following periods:


	Available-for-sale				Held-to-maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Within 1 year	$	165,826	$	163,254	$	1,820	$	1,820
After 1 year through 5 years		79,044		76,307		—		—
Total	$	244,870	$	239,561	$	1,820	$	1,820

5. FAIR VALUE

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 that the Company utilized to determine such fair value:


	June 30,
(In thousands)	2023		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	42,386	$	42,386	$	—	$	—
U.S. government and agency debt securities		110,858		83,270		27,588		—
Corporate debt securities		113,622		—		113,622		—
Non-U.S. government debt securities		15,081		—		15,081		—
Total	$	281,947	$	125,656	$	156,291	$	—


	December 31,
	2022		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	19,857	$	19,857	$	—	$	—
U.S. government and agency debt securities		202,050		168,639		33,411		—
Corporate debt securities		204,943		—		204,943		—
Non-U.S. government debt securities		38,789		—		38,789		—
Total	$	465,639	$	188,496	$	277,143	$	—

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

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 six months ended June 30, 2023. At June 30, 2023, the Company had no investments with fair values that were determined using Level 3 inputs.

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 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 intravenous/intramuscular (“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, including milestone payments and royalties on net sales of the IV/IM and parenteral forms of Meloxicam and other products covered under the relevant agreements (such products, the “Meloxicam Products”).

In November 2019, 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 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, at March 31, 2022, Baudax had only paid $0.5 million of the $6.4 million 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 within “Change in the fair value of contingent consideration” in the accompanying condensed consolidated statements of operations and comprehensive loss in the six months ended June 30, 2022. In September 2022, the Company determined that it was unlikely to collect any further proceeds under this arrangement and reduced the fair value of the contingent consideration to zero. In December 2022, Baudax announced that it would discontinue sales of ANJESO, the first approved Meloxicam Product, and on December 28, 2022, the U.S. Food and Drug Administration (“FDA”) acknowledged the discontinuation of sales of ANJESO via listing in the Orange Book.

In March 2023, the Company and Baudax entered into an agreement pursuant to which Baudax transferred to the Company the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO and agreed to the termination of all prior agreements between the parties and any and all financial and other obligations thereunder.

The carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, contract assets, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term nature.

The estimated fair value of the Company’s long-term debt under its amended and restated credit agreement (such debt, the “2026 Term Loans”), 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 $281.5 million and $278.9 million at June 30, 2023 and December 31, 2022, respectively.

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

6. INVENTORY

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Inventory consisted of the following:


	June 30,		December 31,
(In thousands)	2023		2022
Raw materials	$	57,867	$	61,064
Work in process		78,934		76,228
Finished goods(1)		52,571		44,126
Total inventory	$	189,372	$	181,418

(1)

At June 30, 2023 and December 31, 2022, the Company had $37.4 million and $30.9 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 consisted of the following:


	June 30,			December 31,
(In thousands)	2023			2022
Land	$	6,570		$	6,560
Building and improvements		195,685			195,144
Furniture, fixtures and equipment		431,774			418,448
Leasehold improvements		52,811			54,152
Construction in progress		90,591			84,715
Subtotal		777,431			759,019
Less: accumulated depreciation		(453,630	)		(433,658	)
Total property, plant and equipment, net	$	323,801		$	325,361

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets consisted of the following:


		June 30, 2023
(In thousands)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Goodwill		$	92,873	$	—		$	92,873
Finite-lived intangible assets:
Collaboration agreements	12	$	465,590	$	(450,698	)	$	14,892
Capitalized IP	11-13		118,160		(113,070	)		5,090
Total		$	583,750	$	(563,768	)	$	19,982

Based on the Company’s most recent analysis, amortization of intangible assets included in the accompanying condensed consolidated balance sheet at June 30, 2023 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 that such analysis, and the available information and assumptions underlying such analysis, 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.

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

9. LEASES

Future lease payments under non-cancelable leases at June 30, 2023 and December 31, 2022 consisted of the following:


	June 30,			December 31,
(In thousands)	2023			2022
2023	$	8,213		$	16,665
2024		16,626			16,608
2025		16,873			16,855
2026		12,785			12,767
2027		9,507			9,506
Thereafter		69,474			69,474
Total operating lease payments	$	133,478		$	141,875
Less: imputed interest		(35,944	)		(36,324	)
Total operating lease liabilities	$	97,534		$	105,551

At June 30, 2023, the weighted average incremental borrowing rate and the weighted average remaining lease term for all operating leases held by the Company were 5.3% and 8.3 years, respectively. Cash paid for lease liabilities was $4.1 million and $8.5 million during the three and six months ended June 30, 2023, respectively, compared to $4.5 million and $8.9 million during the three and six months ended June 30, 2022, respectively. The Company recorded operating lease expense of $4.2 million and $8.5 million during the three and six months ended June 30, 2023, respectively, as compared to $4.2 million and $8.3 million during the three and six months ended June 30, 2022, respectively.

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:


	June 30,		December 31,
(In thousands)	2023		2022
Accounts payable	$	84,616	$	32,843
Accrued compensation		59,959		79,085
Accrued other		98,348		108,161
Total accounts payable and accrued expenses	$	242,923	$	220,089

A summary of the Company’s current provision for sales discounts, allowances and reserves is as follows:


	June 30,		December 31,
(In thousands)	2023		2022
Medicaid rebates	$	177,487	$	208,332
Product discounts		16,679		13,204
Medicare Part D		17,181		18,409
Other		11,421		12,170
Total accrued sales discounts, allowances and reserves	$	222,768	$	252,115

Included in accounts payable was approximately $27.4 million and $0.8 million of amounts payable related to state Medicaid rebates as of June 30, 2023 and December 31, 2022, respectively.

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

11. LONG-TERM DEBT

Long-term debt consisted of the following:


	June 30,			December 31,
(In thousands)	2023			2022
2026 Term Loans, due March 12, 2026	$	292,001		$	293,270
Less: current portion		(3,000	)		(3,000	)
Long-term debt	$	289,001		$	290,270

The 2026 Term Loans mature on March 12, 2026. In June 2023, the Company amended the 2026 Terms Loans to transition the interest rate available for borrowings thereunder from a London Interbank Offered Rate (“LIBOR”)-based interest rate to an interest rate based on the Secured Overnight Financing Rate (“SOFR”) and to make other conforming and mechanical changes. The 2026 Term Loans bear interest at SOFR plus a credit spread adjustment applicable to the interest period and an applicable margin of 2.50% with a floor of 0.5%.

The 2026 Term Loans have an incremental facility capacity in the amount of $175.0 million plus additional amounts, provided that the Company meets certain conditions, including a specified leverage ratio. The Company was in compliance with its debt covenants at June 30, 2023.

12. SHARE-BASED COMPENSATION

The following table presents share-based compensation expense included in the accompanying condensed consolidated statements of operations and comprehensive loss:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Cost of goods manufactured and sold	$	2,921	$	2,401	$	5,603	$	4,783
Research and development		7,506		7,222		14,413		12,830
Selling, general and administrative		18,077		13,754		31,131		24,107
Total share-based compensation expense	$	28,504	$	23,377	$	51,147	$	41,720

At June 30, 2023 and December 31, 2022, $3.4 million and $3.3 million, respectively, of share-based compensation expense was capitalized and recorded as “Inventory” in the accompanying condensed consolidated balance sheets.

13. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per ordinary share is calculated based upon net income (loss) available to holders of ordinary shares divided by the weighted average number of ordinary shares outstanding. For the calculation of diluted earnings (loss) per ordinary share, the Company adjusts the weighted average number of ordinary shares outstanding for the effect of outstanding ordinary share equivalents such as stock options and restricted stock unit awards.


	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2023		2022			2023		2022
Numerator:
Net income (loss)	$	237,065	$	(30,136	)	$	195,220	$	(66,039	)
Denominator:
Weighted average number of ordinary shares outstanding		166,279		163,839			165,686		163,165
Effect of dilutive securities:
Stock options		1,896		—			1,634		—
Restricted stock unit awards		3,378		—			3,427		—
Dilutive ordinary share equivalents		5,274		—			5,061		—
Shares used in calculating diluted earnings (loss) per share		171,553		163,839			170,747		163,165

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

The following potential ordinary share equivalents were not included in the net earnings (loss) per share calculation because the effect would have been anti-dilutive:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Stock options		12,138		12,781		12,288		12,677
Restricted stock unit awards		1,180		4,718		3,024		6,251
Total		13,318		17,499		15,312		18,928

14. 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 determining future taxable income, the Company is responsible for assumptions that it utilizes, 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 uses to manage the underlying business.

The Company recorded an income tax provision of $2.7 million and an income tax benefit of $3.3 million during the three and six months ended June 30, 2023, respectively. The income tax provision in was related to U.S. federal and state taxes, due primarily to a $2.0 million discrete tax expense related to employee equity activity. The income tax benefit primarily related to enhanced foreign derived intangible income (“FDII”) deductions arising from the capitalization of research and development expenses in accordance with Section 174 of the U.S. Internal Revenue Code of 1986, as amended.

At December 31, 2022, the Company maintained a valuation allowance of $245.8 million against Irish deferred tax assets. During the three and six months ended June 30, 2023, the Company recorded a profit. Should the Company continue to demonstrate profitability in the future, the evaluation of the recoverability of such deferred tax assets may change and a portion of the valuation allowance could be released.

15. 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 June 30, 2023, there were no potential material losses from claims, asserted or unasserted, or legal proceedings that the Company determined were probable of occurring.

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

Janssen Arbitration Proceedings

In April 2022, Alkermes Pharma Ireland Limited commenced binding arbitration proceedings to settle, among other things, whether, notwithstanding Janssen Pharmaceutica’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. On May 31, 2023, the Company received a Final Award from the Tribunal in these arbitration proceedings. The Final Award reiterated the Tribunal’s findings from, and incorporated by reference, the first interim award and second interim award issued by the Tribunal on December 21, 2022 and April 19, 2023, respectively. As a result of the Final Award, in June 2023 the Company received payment for back royalties, including certain late-payment interest, related to 2022 U.S. net sales of INVEGA SUSTENNA, INVEGA TRINZA, INVEGA HAFYERA and CABENUVA and is entitled to 2023 and future royalty revenues from Janssen Pharmaceutica related to net sales of INVEGA SUSTENNA through August 20, 2024, INVEGA TRINZA through the second quarter of 2030 (but no later than May 2030 when the applicable license agreement expires), INVEGA HAFYERA through May 2030 (when the applicable license agreement expires) and CABENUVA through December 31, 2036. Refer to Note 3, Revenue from Contracts with Customers within the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for additional information regarding royalty revenue recognized following the issuance of the Final Award. The arbitration was conducted pursuant to the Institute for Conflict Prevention and Resolution (CPR) Rules for Non-Administered Arbitration before a panel of three arbitrators. On June 28, 2023, the Company filed an unopposed petition to confirm the Final Award and enter judgment thereon with the U.S. District Court for the Southern District of New York, and on June 30, 2023, Janssen filed a notice of non-opposition to such petition.

INVEGA SUSTENNA ANDA Litigation

Janssen Pharmaceutica 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”), in December 2019 against Pharmascience, Inc. (“Pharmascience”), Mallinckrodt plc, and SpecGX LLC (the “Pharmascience Lawsuit”), and in February 2022 against Accord Healthcare, Inc., Accord Healthcare, Ltd. and Intas Pharmaceuticals, Ltd (“Accord” and such lawsuit, the “Accord Lawsuit”), and in the U.S. District Court for the District of Delaware (the “DE District Court”) 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, Accord 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 and the Accord Lawsuit were administratively terminated in July 2022, pending the outcome of the Teva Appeal. The Company is not a party to any of these proceedings.

INVEGA TRINZA ANDA Litigation

In September 2020, Janssen Pharmaceutica, 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 (the “’693 Patent”). Requested judicial remedies include recovery of litigation costs and injunctive relief. On May 15, 2023, the NJ District Court issued an opinion in favor of the Janssen entities on the issues of infringement and validity of the ’693 Patent. On May 23, 2023, the Mylan entities filed a notice of appeal of the decision. 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

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) (Continued)

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 was held in February 2023 and closing arguments were heard in June 2023. The Company anticipates a decision in the third quarter of 2023. The Company intends to continue to vigorously defend its IP.

VUMERITY ANDA Litigation

On July 6, 2023, Biogen Inc., Biogen Swiss Manufacturing GmbH and Alkermes Pharma Ireland Limited filed a patent infringement lawsuit in the DE District Court against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc. and Zydus Lifesciences Limited (collectively, “Zydus”) following the filing by Zydus of an ANDA seeking approval from the FDA to engage in the commercial manufacture, use or sale of a generic version of VUMERITY (diroximel fumarate) delayed-release capsules for oral use, 231 mg, before expiration of the Company’s U.S. Patent Nos. 8,669,281; 9,090,558; and 10,080,733. The filing of the lawsuit triggered a stay of FDA approval of the ANDA for up to 30 months in accordance with the U.S. Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”).

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 Therapeutics, Inc. 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 believes the petition is without merit and filed opposition papers asking the court to deny the petition and confirm the final arbitration award unchanged. 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.

16. SUBSEQUENT EVENT

On July 12, 2023, in conjunction with the Company’s ongoing review of operations and the planned separation of the oncology business, the Company executed a restructuring plan, which included the elimination of approximately 60 positions across the Company (the “Restructuring”). The Company expects to record a charge of approximately $6.5 million in the third quarter of 2023 as a result of the Restructuring, consisting of one-time termination benefits for employee severance, benefits and related costs, all of which are expected to result in cash expenditures, and substantially all of which will be paid out over the next 12 months.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying condensed consolidated financial statements and related notes beginning on page 5 in this Form 10-Q, and “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements and notes thereto accompanying our Annual Report.

Executive Summary

Net income was $237.1 million and $195.2 million or $1.43 and $1.18 per ordinary share—basic and $1.38 and $1.14 per ordinary share—diluted, for the three and six months ended June 30, 2023, respectively, as compared to net loss of $30.1 million and $66.0 million or $0.18 and $0.40 per ordinary share—basic and diluted, for the three and six months ended June 30, 2022, respectively.

The net income during the three and six months ended June 30, 2023, as compared to the net loss during the three and six months ended June 30, 2022, was primarily due to increases of $300.6 million and $268.3 million, respectively, in manufacturing and royalty revenues, primarily from the Long-acting INVEGA products following the successful outcome of the arbitration proceedings in respect of such products, and increases of $40.7 million and $84.1 million, respectively, in product sales, net, partially offset by increases of $54.9 million and $84.3 million, respectively, in selling, general and administrative expense, and increases of $7.9 million and $5.6 million, respectively, in R&D expenses.

These items are discussed in greater detail later in the “Results of Operations” section in this “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.

COVID-19 Impact

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 adversely impacted to varying degrees as a result of COVID-19 related closures, restrictions, labor shortages and other disruptions that transpired during the pandemic.

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, we have at times 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 manner or at all. In addition, while we have continued to conduct R&D activities, including our ongoing clinical trials, the COVID-19 pandemic at times impacted the timelines of certain of our early-stage discovery efforts and clinical trials, and may continue to impact such timelines if the pandemic persists. We have worked with our internal teams, our clinical investigators, R&D vendors and critical supply chain vendors, and will continue to do so as needed, to assess, and mitigate, any potential impacts 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 manner in which it may continue to evolve, including the emergence, prevalence and severity of new COVID-19 variants, and future developments in response thereto. For 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 our 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.”

Products

Marketed Products

The key marketed products discussed below have generated, or are expected to generate, significant revenues for us. See the descriptions of the marketed products below and “Part I, Item 1A—Risk Factors” in our Annual Report for important factors that could adversely affect our marketed products. See the “Patents and Proprietary Rights” section in

“Part I, Item 1—Business” in our Annual Report for information with respect to the IP protection for these marketed products.

Proprietary Products

The following provides summary information regarding our proprietary products that we commercialize:


Product	Indication(s)	Territory

	Initiation or re-initiation of ARISTADA for the treatment of Schizophrenia	U.S.
	Schizophrenia	U.S.


	Schizophrenia; Bipolar I disorder	U.S.


	Alcohol dependence; Opioid dependence	U.S.

Key Third-Party Products Using Our Proprietary Technologies

The following provides summary information regarding certain key third-party products using our proprietary technologies under license and our key licensed product, in each case that are commercialized by our licensees:


Product	Indication(s)	Licensee	Licensed Territory

RISPERDAL CONSTA	Schizophrenia; Bipolar I disorder	Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica International, a division of Cilag International AG (“Janssen International”)	Worldwide

INVEGA SUSTENNA / XEPLION	INVEGA SUSTENNA: Schizophrenia; Schizoaffective disorder XEPLION: Schizophrenia	Janssen Pharmaceutica (together with Janssen Pharmaceuticals, Inc., Janssen International and their affiliates “Janssen”)	Worldwide
INVEGA TRINZA / TREVICTA	Schizophrenia	Janssen	Worldwide
INVEGA HAFYERA / BYANNLI	Schizophrenia	Janssen	Worldwide

Our Key Licensed Product

The following sections provide more detailed information regarding our proprietary products, licensed products and products using our proprietary technology.

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 “Part I, Item 1—Business” in our 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.

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 a combination of olanzapine, an atypical antipsychotic, and samidorphan, an opioid antagonist, 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.

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 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our 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”.

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 “Part I, Item 1—Business” in our 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:

Key Products Using Our Proprietary Technologies

INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI

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.

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 information about the arbitration proceedings related to the Long-acting INVEGA Products, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for information about risks relating to our collaborative arrangements, see “Part I, Item 1A—Risk Factors” in our 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.” For a discussion of legal proceedings related to certain of the patents covering INVEGA SUSTENNA and INVEGA TRINZA, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our 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.”

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 the “Collaborative Arrangements—Biogen” section in “Part I, Item 1—Business” in our Annual Report. For a discussion of legal proceedings related to certain of the patents covering VUMERITY, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q and for

information about risks relating to such legal proceedings, see “Part I, Item 1A—Risk Factors” in our 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.”

Key Development Programs

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 programs. 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 “Part I, Item 1A—Risk Factors” in our Annual Report. See the “Patents and Proprietary Rights” section in “Part I, Item 1—Business” in our Annual Report for information with respect to the IP protection for our key development programs.

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”), had granted an Innovation Passport designation for nemvaleukin for the treatment of mucosal melanoma under the UK’s Innovative Licensing and Access Pathway (“ILAP”).

Results of Operations

Product Sales, Net

Our product sales, net, consist of sales of VIVITROL, ARISTADA and ARISTADA INITIO, and, following its commercial launch in the U.S. 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 during the three and six months ended June 30, 2023 and 2022:


	Three Months Ended														Six Months Ended
	June 30,														June 30,
(In millions, except for % of Sales)	2023			% of Sales				2022			% of Sales				2023			% of Sales				2022			% of Sales
Product sales, gross	$	469.8			100.0		%	$	386.8			100.0		%	$	903.7			100.0		%	$	729.2			100.0		%
Adjustments to product sales, gross:
Medicaid rebates		(112.4	)		(23.9	)	%		(88.7	)		(22.9	)	%		(210.3	)		(23.3	)	%		(165.2	)		(22.7	)	%
Chargebacks		(46.9	)		(10.0	)	%		(41.5	)		(10.7	)	%		(92.5	)		(10.2	)	%		(75.3	)		(10.3	)	%
Product discounts		(34.8	)		(7.4	)	%		(30.8	)		(8.0	)	%		(69.1	)		(7.6	)	%		(57.7	)		(7.9	)	%
Medicare Part D		(18.2	)		(3.9	)	%		(16.5	)		(4.3	)	%		(37.1	)		(4.1	)	%		(32.5	)		(4.5	)	%
Other		(26.0	)		(5.5	)	%		(18.5	)		(4.8	)	%		(48.5	)		(5.4	)	%		(36.4	)		(4.9	)	%
Total adjustments		(238.3	)		(50.7	)	%		(196.0	)		(50.7	)	%		(457.5	)		(50.6	)	%		(367.1	)		(50.3	)	%
Product sales, net	$	231.5			49.3		%	$	190.8			49.3		%	$	446.2			49.4		%	$	362.1			49.7		%

The following table compares product sales, net earned during the three and six months ended June 30, 2023 and 2022:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2023		2022		Change		2023		2022		Change
VIVITROL	$	102.0	$	96.1	$	5.9	$	198.7	$	181.0	$	17.7
ARISTADA and ARISTADA INITIO		82.4		74.6		7.8		162.5		147.1		15.4
LYBALVI		47.1		20.1		27.0		85.0		34.0		51.0
Product sales, net	$	231.5	$	190.8	$	40.7	$	446.2	$	362.1	$	84.1

VIVITROL product sales, gross, increased by 12% and 17% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 5% and 7%, respectively, in the number of VIVITROL units sold and a 6% increase in the selling price of VIVITROL that went into effect in January 2023. ARISTADA and ARISTADA INITIO product sales, gross, increased by 15% and 14% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 11% and 10%, respectively, 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 January 2023. LYBALVI product sales, gross, increased by 134% and 148% during the three and six months ended June 30, 2023, respectively, as compared to the three and six months ended June 30, 2022, primarily due to increases of 121% and 145%, respectively, in the number of LYBALVI units sold and a 6% increase in the selling price of LYBALVI that went into effect in November 2022.

Manufacturing and Royalty Revenues

The following table compares manufacturing and royalty revenues earned during the three and six months ended June 30, 2023 and 2022:


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In millions)	2023		2022		Change			2023		2022		Change
Manufacturing and royalty revenues:
Long-acting INVEGA products	$	321.2	$	26.6	$	294.6		$	334.8	$	63.7	$	271.1
VUMERITY		32.3		26.2		6.1			61.2		56.8		4.4
RISPERDAL CONSTA		5.1		10.4		(5.3	)		16.1		27.8		(11.7	)
Other		27.3		22.1		5.2			46.7		42.2		4.5
Manufacturing and royalty revenues	$	385.9	$	85.3	$	300.6		$	458.8	$	190.5	$	268.3

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 the “Collaborative Arrangements—Janssen” section in “Part I, Item 1—Business” in our 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 the Long-acting INVEGA products. 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. Accordingly, we ceased recognizing royalty revenue related to U.S. sales of these products in February 2022. 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 May 31, 2023, the Tribunal issued the Final Award, which concluded the arbitration proceedings. The Final Award provided that we were due back royalties of $195.4 million, inclusive of $8.1 million in late-payment interest, related to 2022 U.S. net sales of the Long-acting INVEGA products, which we received from Janssen in the second quarter of 2023, and are entitled to 2023 and future royalty revenues from Janssen related to net sales of INVEGA SUSTENNA through August 20, 2024, INVEGA TRINZA through the second quarter of 2030 (but no later than May 2030 when the license agreement expires) and INVEGA HAFYERA through May 2030 (when the license agreement expires).

Following issuance of the Final Award, we recognized royalty revenues related to the back royalties noted above and resumed recognizing royalty revenue related to U.S. sales of the Long-acting INVEGA products. During the three months ended June 30, 2023, we recorded $195.4 million in royalty revenue related to the back royalties, $50.2 million of royalty revenue related to U.S. net sales of the Long-acting INVEGA products earned during the first quarter of 2023 and $75.7 million of royalty revenue related to worldwide net sales of the Long-acting INVEGA products earned during the second quarter of 2023. During the three and six months ended June 30, 2023, Janssen’s worldwide net sales of the Long-acting INVEGA products were $1,031.0 million and $2,075.0 million, respectively, as compared to $1,054.0 million and $2,102.0 million during the three and six months ended June 30, 2022, respectively.

For additional information regarding the arbitration proceedings with Janssen, see Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q. For information about risks relating to our collaborative arrangements, see “Part I, Item 1A—Risk Factors” in our 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.”

We expect royalty revenues from net sales of the Long-acting INVEGA products to decrease over time, as 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 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, and for information about risks relating to these legal proceedings, see “Part I, Item 1A—Risk Factors” in our 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 receive a 15% royalty on worldwide net sales of VUMERITY manufactured and packaged by us, subject to increases in such royalty rate 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 increases of $4.7 million and $6.0 million in manufacturing revenue from VUMERITY during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, respectively, were due to increases in the number of bulk and packaged batches made available to Biogen. Royalty revenue related to VUMERITY increased by $1.4 million during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, and decreased by $1.6 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The changes in royalty revenue were due to an increase in net sales of VUMERITY from $136.8 million during three months ended June 30, 2022 to $146.2 million during the three months ended June 30, 2023, and a decrease in net sales of VUMERITY from $264.8 million during the six months ended June 30, 2022 to $254.3 million during the six months ended June 30, 2023.

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. We expect revenues from RISPERDAL CONSTA to continue to decrease over time as patents covering RISPERDAL CONSTA expire in markets where end-market net sales of RISPERDAL CONSTA occur. The latest to expire patent covering RISPERDAL CONSTA expired in 2021 in the EU and in January 2023 in the U.S., and we are aware of potential generic and other competition to RISPERDAL CONSTA that may lead to reduced unit sales and increased pricing pressure. The decreases in revenue from RISPERDAL CONSTA during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to decreases of $3.9 million and $9.0 million, respectively, in manufacturing revenue, which were primarily due to 45% and 13% decreases, respectively, in the average selling price for the product.

Costs and Expenses

Cost of Goods Manufactured and Sold


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2023		2022		Change		2023		2022		Change
Cost of goods manufactured and sold	$	63.2	$	58.4	$	4.8	$	121.4	$	113.5	$	7.9

The increase in cost of goods manufactured and sold during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 was primarily due to an increase of $5.8 million in the cost of goods sold for VIVITROL and an increase of $2.2 million in the cost of goods manufactured for VUMERITY due to increases in the number of units manufactured and sold for each product as discussed above. These increases were partially offset by a decrease in the cost of goods manufactured for certain legacy products that we manufacture due to a decrease in volume of such products.

The increase in cost of goods manufactured and sold during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to increases of $9.7 million and $2.4 million in the cost of goods sold for VIVITROL and LYBALVI, respectively, and an increase of $5.0 million in the cost of goods manufactured for VUMERITY due to increases in the number of units manufactured and sold for each product as discussed above, partially offset by a decrease in the cost of goods manufactured for certain legacy products that we manufacture, as noted 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 contract research organizations, 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, with the exception of our oncology-related development programs, internal R&D expenses are not tracked by individual program as they can benefit multiple programs or our technologies in general. We began tracking internal R&D expenses for our oncology-related development programs following the announcement of our intent to explore a separation of our neuroscience business and oncology business.

The following table sets forth our external R&D expenses for the three and six months ended June 30, 2023 and 2022 relating to our then current development programs and our internal R&D expenses, listed by the nature of such expenses:


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In millions)	2023		2022		Change			2023		2022		Change
External R&D expenses:
Development programs:
nemvaleukin	$	21.3	$	17.1	$	4.2		$	39.0	$	36.6	$	2.4
LYBALVI		3.3		3.4		(0.1	)		6.6		9.2		(2.6	)
ALKS 2680		10.6		3.1		7.5			12.3		4.5		7.8
Other external R&D expenses		12.7		15.5		(2.8	)		28.3		31.5		(3.2	)
Total external R&D expenses		47.9		39.1		8.8			86.2		81.8		4.4
Internal R&D expenses:
Employee-related		39.2		40.6		(1.4	)		81.2		80.7		0.5
Occupancy		4.7		4.5		0.2			9.1		8.7		0.4
Depreciation		2.7		2.9		(0.2	)		5.4		5.7		(0.3	)
Other		6.3		5.7		0.6			12.5		11.9		0.6
Total internal R&D expenses		52.9		53.7		(0.8	)		108.2		107.0		1.2
Research and development expenses	$	100.8	$	92.8	$	8.0		$	194.4	$	188.8	$	5.6

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 increases in expenses related to nemvaleukin in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increased spend on the ARTISTRY-7 study, partially offset by a decrease in spend on the ARTISTRY-1 study. For additional detail on the ARTISTRY development program for nemvaleukin, see the “Key Development Program” section of this “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. The decrease in expenses related to LYBALVI in the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, 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 increases in expenses related to ALKS 2680 in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in early-stage development expenses, including chemistry manufacturing and controls expenses and the initiation of a phase 1b proof-of-concept study.

Selling, General and Administrative Expense


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2023		2022		Change		2023		2022		Change
Selling and marketing expense	$	137.9	$	95.3	$	42.6	$	256.4	$	191.5	$	64.9
General and administrative expense		67.3		55.0		12.3		123.3		103.9		19.4
Selling, general and administrative expense	$	205.2	$	150.3	$	54.9	$	379.7	$	295.4	$	84.3

The increases in selling and marketing expense during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in marketing expense of $35.2 million and $49.0 million, respectively, following the launch of the direct-to-consumer campaign for LYBALVI and increases in employee-related expenses of $7.3 million and $15.3 million, respectively, due to a 6% increase in sales and marketing headcount and increases in salaries.

The increases in general and administrative expense during the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in employee-related expenses of $6.8 million and $10.7 million, respectively, and increases in professional service fees of $5.6 million and $8.9 million, respectively. The increases in employee-related expenses in the three and six months ended June 20, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in share-based compensation expense of $4.3 million and $6.3 million, respectively, due to the timing of our annual non-employee director grant as compared to the prior year and increases in salary expense of $2.1 million and $2.8 million, respectively, due to a 6% increase in general and administrative headcount and increases in salaries. The increases in professional service fees in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increased spend on fees related to the planned separation of our oncology business and expenses related to activist shareholder activities.

Other Income (Expense), Net


	Three Months Ended									Six Months Ended
	June 30,									June 30,
(In millions)	2023			2022			Change			2023			2022			Change
Interest income	$	6.7		$	0.9		$	5.8		$	11.7		$	1.5		$	10.2
Interest expense		(5.7	)		(2.3	)		(3.4	)		(11.0	)		(4.7	)		(6.3	)
Change in the fair value of contingent consideration		—			0.9			(0.9	)		—			(18.2	)		18.2
Other (expense) income, net		(0.4	)		1.7			(2.1	)		(0.5	)		4.2			(4.7	)
Total other income (expense), net	$	0.6		$	1.2		$	(0.6	)	$	0.2		$	(17.2	)	$	17.4

Interest income consists primarily of interest earned on our available-for-sale investments. Interest expense consists of interest incurred on our 2026 Term Loans. The increases in interest income and interest expense in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, were primarily due to increases in interest rates over the past twelve months, as we are in a rising interest rate environment.

The decrease in the change in the fair value of contingent consideration was due to our applying a 100% likelihood that Baudax would default on its obligations and using a 9% recovery rate to amounts owed to us under the arrangement with Baudax in the three months ended March 31, 2022, resulting in a $19.1 million decrease in the fair value of contingent consideration. In the three months ended September 30, 2022, we reduced the remaining fair value under the arrangement to zero and in December 2022, Baudax announced that it would discontinue the sale of ANJESO.

Income Tax Provision (Benefit)


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In millions)	2023		2022			Change		2023			2022			Change
Income tax provision (benefit)		2.7	$	(3.1	)	$	5.8	$	(3.3	)	$	(12.2	)	$	8.9

The income tax provision in the three months ended June 30, 2023 related to U.S. federal and state taxes, due primarily to a $2.0 million discrete tax expense related to employee equity activity. The income tax benefit in the six

months ended June 30, 2023 and the three and six months ended June 30, 2022 primarily related to enhanced FDII deductions arising from the capitalization of research and development expenses in accordance with Section 174 of the U.S. Internal Revenue Code of 1986, as amended.

At December 31, 2022, we maintained a valuation allowance of $245.8 million against Irish deferred tax assets. During the three and six months ended June 30, 2023, we recorded a taxable profit. Should we continue to demonstrate taxable profitability in the future, the evaluation of the recoverability of such deferred tax assets may change and a portion of the valuation allowance could be released.

Liquidity and Financial Condition

Our financial condition is summarized as follows:


	June 30, 2023						December 31, 2022
(In millions)	U.S.		Ireland		Total		U.S.		Ireland		Total
Cash and cash equivalents	$	304.4	$	361.4	$	665.8	$	208.4	$	84.1	$	292.5
Investments—short-term		105.6		57.7		163.3		207.6		108.4		316.0
Investments—long-term		41.4		36.7		78.1		70.3		61.3		131.6
Total cash and investments	$	451.4	$	455.8	$	907.2	$	486.3	$	253.8	$	740.1
Outstanding borrowings—short and long-term	$	292.0	$	—	$	292.0	$	293.3	$	—	$	293.3

At June 30, 2023 our investments consisted of the following:


			Gross
	Amortized		Unrealized					Allowance for		Estimated
(In millions)	Cost		Gains		Losses			Credit Losses		Fair Value
Investments—short-term available-for-sale	$	165.9	$	—	$	(2.6	)	$	—	$	163.3
Investments—long-term available-for-sale		79.0		—		(2.7	)		—		76.3
Investments—long-term held-to-maturity		1.8		—		—			—		1.8
Total	$	246.7	$	—	$	(5.3	)	$	—	$	241.4

Sources and Uses of Cash

We generated $194.4 million and $19.4 million of cash from operating activities during the six months ended June 30, 2023 and 2022, 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 twelve 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. At June 30, 2023, we performed an analysis of our investments with unrealized losses for impairment and determined that they were not impaired.

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.

The following table summarizes our cash flows for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
(In millions)	2023			2022
Cash and cash equivalents, beginning of period	$	292.5		$	337.5
Cash flows provided by operating activities		194.4			19.4
Cash flows provided by (used in) investing activities		193.7			(101.2	)
Cash flows used in financing activities		(14.8	)		(1.1	)
Cash and cash equivalents, end of period	$	665.8		$	254.6

Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income (loss) for non-cash operating items such as depreciation, amortization and share-based compensation and 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.

Operating Activities

Cash flows provided by operating activities for the six months ended June 30, 2023 were $194.4 million and primarily consisted of a net income of $195.2 million adjusted for non-cash items, including share-based compensation of $51.1 million and depreciation and amortization of $37.7 million, partially offset by changes in working capital of $52.2 million and deferred income taxes of $38.1 million. During the six months ended June 30, 2023, net income included receipt of $195.4 million from Janssen, inclusive of $8.1 million in late-payment interest, related to 2022 U.S. net sales of the Long-acting INVEGA products following the successful outcome of the arbitration proceedings in respect of such products.

Cash flows provided by operating activities for the six months ended June 30, 2022 were $19.4 million and primarily consisted of a net loss of $66.0 million, adjusted for non-cash items including share-based compensation of $41.7 million, depreciation and amortization of $38.6 million, change in the fair value of contingent consideration of $18.2 million and changes in working capital of $27.1 million, partially offset by deferred income taxes of $40.8 million.

Investing Activities

Cash flows provided by investing activities for the six months ended June 30, 2023 were primarily due to $210.3 million in net sales of investments, offset by the purchase of $16.6 million of property, plant and equipment. Cash flows used in investing activities for the six months ended June 30, 2022 were primarily due to $85.0 million in net purchases of investments and the purchase of $17.8 million of property, plant and equipment.

Financing Activities

Cash flows used in financing activities for the six months ended June 30, 2023 and 2022 primarily related to $25.3 million and $17.6 million of employee taxes paid related to the net share settlement of equity awards, respectively, partially offset by $12.0 million and $18.0 million of cash that we received upon exercises of employee stock options, respectively.

Debt

At June 30, 2023, the principal balance of our borrowings consisted of $293.3 million outstanding under our 2026 Term Loans. See Note 11, Long-Term Debt, in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for further discussion of our 2026 Term Loans.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different conditions or using different assumptions. See the “Critical Accounting Estimates” section in “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for a discussion of our critical accounting estimates.

New Accounting Standards

See the “New Accounting Pronouncements” section in Note 2, Summary of Significant Accounting Policies in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q for discussion of certain recent accounting standards applicable to us.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risks related to our investment portfolio, and the ways we manage such risks, are summarized in “Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report. We regularly review our marketable securities holdings and shift our investment holdings to those that best meet our investment objectives, which are to preserve capital, provide sufficient liquidity to satisfy operating requirements and generate investment income. Apart from such adjustments to our investment portfolio, there have been no material changes to our market risks since December 31, 2022, and we do not anticipate any near-term changes in the nature of our market risk exposures or in our management’s objectives and strategies with respect to managing such exposures.

We are exposed to non-U.S. currency exchange risk related to manufacturing and royalty revenues that we receive on certain of our products, partially offset by certain operating costs arising from expenses and payables in connection with our Irish operations that are settled predominantly in Euro. These non-U.S. currency exchange rate risks are summarized in “Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report. There has been no material change in our assessment of our sensitivity to non-U.S. currency exchange rate risk since December 31, 2022.

Item 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that our disclosure controls and procedures were effective as of June 30, 2023 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief 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.

b) Change in Internal Control Over Financial Reporting

During the three months ended June 30, 2023, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see the discussion of legal proceedings in Note 15, Commitments and Contingent Liabilities in the “Notes to Condensed Consolidated Financial Statements” in this Form 10-Q, which discussion is incorporated into this Part II, Item 1 by reference.

Item 1A. Risk Factors

For a discussion of our risk factors, see “Part I, Item 1A—Risk Factors” in our Annual Report and “Part II, Item 1A—Risk Factors” in our Q1 Quarterly Report. There have been no material changes from the risk factors disclosed in such reports.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 six months ended June 30, 2023. As of June 30, 2023, we had purchased a total of 8,866,342 shares under this program at an aggregate cost of $114.0 million.

During the three months ended June 30, 2023, we acquired 17,822 of our ordinary shares, at an average price of $30.40 per share, to satisfy withholding tax obligations related to the vesting of employee equity awards.

Item 5. Other Information

During the three months ended June 30, 2023, none of the directors or executive officers of the Company adopted, terminated or materially modified a trading plan intended to comply with Rule 10b5-1 or a trading plan not intended to comply with Rule 10b5-1.

Item 6. Exhibits

The following exhibits are filed or furnished as part of this Form 10-Q:

EXHIBIT INDEX


Exhibit No.		Description of Exhibit
10.1 #		Amendment No. 7, dated as of June 28, 2023, 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, as amended by Amendment No. 5 dated as of March 26, 2018, and as amended by Amendment No. 6 dated as of March 12, 2021, 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.
10.2 †		Alkermes plc 2018 Stock Option and Incentive Plan, as amended (incorporated by reference from Exhibit 10.1 to the Alkermes plc Current Report on From 8-K (File No. 001-35299) filed on July 6, 2023).
31.1 #		Rule 13a-14(a)/15d-14(a) Certification.
31.2 #		Rule 13a-14(a)/15d-14(a) Certification.
32.1 ‡		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH #		Inline XBRL Taxonomy Extension Schema Document.
101.CAL #		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB #		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE #		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF #		Inline XBRL Taxonomy Extension Definition Linkbase Document.
104 #		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

# Filed herewith.

‡ Furnished herewith.

† Indicates a management contract or any compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements 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.



	ALKERMES PLC

	(Registrant)


	By:	/s/ Richard F. Pops
		Richard F. Pops
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


	By:	/s/ Iain M. Brown
		Iain M. Brown
		Senior Vice President, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Date: July 26, 2023