Alkermes plc (ALKS) Bundle
Understanding Alkermes plc (ALKS) Revenue Streams
Understanding Alkermes plc’s Revenue Streams
Alkermes plc generates revenue primarily through its pharmaceutical products, which include VIVITROL, ARISTADA, ARISTADA INITIO, and LYBALVI. The company also earns revenue from manufacturing and royalty arrangements.
Breakdown of Primary Revenue Sources
Product | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
---|---|---|---|---|
VIVITROL | $113,650 | $99,305 | $323,182 | $298,035 |
ARISTADA and ARISTADA INITIO | $84,652 | $81,834 | $249,571 | $244,320 |
LYBALVI | $74,697 | $50,683 | $203,055 | $135,671 |
Total Product Sales, Net | $273,000 | $231,822 | $775,808 | $678,026 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the total product sales, net, shows a significant increase. The product sales increased by 17.6% from $231.8 million in Q3 2023 to $273.0 million in Q3 2024. For the nine months ended September 30, the increase was 14.4%, from $678.0 million to $775.8 million.
Contribution of Different Business Segments to Overall Revenue
- Total product sales contribute approximately 100% of the revenue, with VIVITROL, ARISTADA, and LYBALVI being the primary drivers.
- Manufacturing and royalty revenues for the three months ended September 30, 2024, totaled $105.1 million, down from $149.1 million in Q3 2023.
Analysis of Significant Changes in Revenue Streams
During the three months ended September 30, 2024, manufacturing and royalty revenues from long-acting INVEGA products decreased by $17.6 million year-over-year, contributing to the overall decline in manufacturing revenues. The revenue from VUMERITY showed a minor decrease of $1.9 million in the same period.
Overall, while product sales demonstrated growth, particularly in VIVITROL and LYBALVI, the reduction in manufacturing and royalty revenues reflects challenges in prior collaboration agreements and market competition.
Summary of Revenue Performance
Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change (in thousands) | Change (%) |
---|---|---|---|---|
Total Product Sales, Net | $273,000 | $231,822 | $41,178 | 17.6% |
Manufacturing and Royalty Revenues | $105,144 | $149,113 | ($43,969) | -29.5% |
A Deep Dive into Alkermes plc (ALKS) Profitability
A Deep Dive into Alkermes plc Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 72.5%, compared to 70.9% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 29.3%, up from 25.1% in 2023.
Net Profit Margin: The net profit margin increased to 28.4% for the nine months ended September 30, 2024, compared to 17.5% for the same period in 2023.
Trends in Profitability Over Time
Over the last three years, the profitability metrics show a positive trend:
- 2022 Net Profit Margin: 5.4%
- 2023 Net Profit Margin: 17.5%
- 2024 Net Profit Margin: 28.4%
Comparison of Profitability Ratios with Industry Averages
Alkermes plc’s profitability ratios compared to industry averages:
Metric | Alkermes plc 2024 | Industry Average |
---|---|---|
Gross Profit Margin | 72.5% | 65.0% |
Operating Profit Margin | 29.3% | 20.0% |
Net Profit Margin | 28.4% | 15.0% |
Analysis of Operational Efficiency
The operational efficiency metrics indicate strong cost management:
- Cost of Goods Sold (COGS): $150.2 million for the nine months ended September 30, 2024.
- Research and Development Expenses: $22.4 million for the nine months ended September 30, 2024, showing effective allocation of resources.
- Share-Based Compensation: $75.9 million for the nine months ended September 30, 2024, reflecting a focus on aligning employee interests with shareholder value.
The gross margin trend reflects an improvement due to increased sales and effective cost controls, leading to enhanced profitability.
Debt vs. Equity: How Alkermes plc (ALKS) Finances Its Growth
Debt vs. Equity: How Alkermes plc Finances Its Growth
Debt Levels
- Long-term debt as of September 30, 2024: $288.8 million
- Current portion of long-term debt: $3.0 million
- Total long-term debt (net of current portion): $285.8 million
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
- Total liabilities: $863.2 million
- Total shareholders' equity: $1.292 billion
- Debt-to-equity ratio: 0.67
This ratio is in line with the industry average, which typically ranges from 0.5 to 1.0 for biopharmaceutical companies.
Recent Debt Issuances and Credit Ratings
- 2026 Term Loans: Outstanding balance of $288.8 million
- Interest Rate: Secured Overnight Financing Rate plus a credit spread adjustment of 2.50%
- Credit rating: The company maintains a minimum rating of A2 (Moody’s) / A (S&P) for its corporate debt securities.
Refinancing Activity
As of September 30, 2024, the company has not engaged in any significant refinancing activity but maintains compliance with its debt covenants.
Debt vs. Equity Financing
The company employs a balanced approach to financing, utilizing both debt and equity funding. Recent share repurchase activities indicate a strategic shift towards equity management. The details are as follows:
Activity | Amount ($ million) | Shares Repurchased | Average Price per Share ($) |
---|---|---|---|
Three Months Ended September 30, 2024 | 115.3 | 4.4 million | 26.22 |
Nine Months Ended September 30, 2024 | 200.0 | 7.9 million | 25.33 |
The remaining amount authorized under the share repurchase program as of September 30, 2024, is $200 million.
This structured financing strategy supports the company's ongoing growth while managing its overall leverage and maintaining financial flexibility.
Assessing Alkermes plc (ALKS) Liquidity
Assessing Alkermes plc's Liquidity
Current and Quick Ratios
The current ratio as of September 30, 2024, is 2.83, indicating a strong liquidity position. The quick ratio, which excludes inventory, stands at 2.71, reflecting a solid ability to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is reported at $1.29 billion, compared to $1.25 billion as of June 30, 2024. This represents a positive trend, showcasing an increase in available short-term financial resources.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $248.7 million, a decrease from $294.1 million in the same period of 2023. Key components include:
- Net income of $220.6 million
- Depreciation and amortization of $21.7 million
- Share-based compensation of $75.9 million
- Changes in working capital totaling $(105.1 million)
Investing Activities
Cash flows used in investing activities for the same period totaled $(97.4 million), driven primarily by:
- Net purchases of investments at $(172.1 million)
- Purchase of property, plant, and equipment amounting to $(23.7 million)
- Proceeds from the sale of the Athlone Facility of approximately $97.9 million
Financing Activities
Cash flows used in financing activities were $(212.5 million), largely due to:
- Repurchase of ordinary shares amounting to $(200.0 million)
- Employee taxes paid related to net share settlements of $(29.3 million)
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $396.3 million, down from $457.5 million at the beginning of the period. Total investments, including short-term and long-term, amounted to $531.5 million. The company maintains a solid liquidity position, evidenced by the ability to finance working capital and other cash requirements over the next 12 months without immediate concerns.
Financial Metric | September 30, 2024 | June 30, 2024 | September 30, 2023 |
---|---|---|---|
Current Ratio | 2.83 | 2.71 | 2.59 |
Quick Ratio | 2.71 | 2.55 | 2.45 |
Working Capital | $1.29 billion | $1.25 billion | $1.20 billion |
Operating Cash Flow | $248.7 million | $294.1 million | $243.0 million |
Investing Cash Flow | $(97.4 million) | $74.3 million | $(105.4 million) |
Financing Cash Flow | $(212.5 million) | $(13.2 million) | $(26.1 million) |
Cash and Cash Equivalents | $396.3 million | $457.5 million | $647.7 million |
Is Alkermes plc (ALKS) Overvalued or Undervalued?
Valuation Analysis
Determining whether the company is overvalued or undervalued involves analyzing key financial ratios and metrics. Below is a detailed overview of the company's valuation metrics as of 2024.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 29.1, based on the latest earnings report. This indicates a premium valuation compared to the industry average P/E of 25.0.
Price-to-Book (P/B) Ratio
The company's P/B ratio is reported at 4.2, which is significantly higher than the industry average of 3.0. This suggests that the market values the company's equity at a premium.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 17.5, compared to the industry average of 15.0. This indicates that the company may be overvalued on this metric relative to its peers.
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations:
- 12-month high: $30.50
- 12-month low: $20.75
- Current stock price: $26.00
Year-to-date, the stock has appreciated by approximately 15%.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, indicating a focus on reinvesting profits into growth opportunities. The payout ratio is thus 0%.
Analyst Consensus
According to recent analyst ratings, the consensus is as follows:
- Buy: 8 analysts
- Hold: 4 analysts
- Sell: 1 analyst
This consensus indicates a general optimism regarding the company's future performance.
Metric | Company Value | Industry Average |
---|---|---|
P/E Ratio | 29.1 | 25.0 |
P/B Ratio | 4.2 | 3.0 |
EV/EBITDA Ratio | 17.5 | 15.0 |
12-Month High | $30.50 | |
12-Month Low | $20.75 | |
Current Stock Price | $26.00 | |
Year-to-Date Price Appreciation | 15% | |
Dividend Yield | 0% |
Key Risks Facing Alkermes plc (ALKS)
Key Risks Facing Alkermes plc
Alkermes plc operates in a highly competitive biopharmaceutical industry, facing several internal and external risks that can impact its financial health.
Industry Competition
The company competes with major pharmaceutical firms, including Johnson & Johnson, Pfizer, and Eli Lilly. The competitive landscape is influenced by rapid advancements in drug development and significant investments in research and development. As of September 30, 2024, the company reported a net income of $92.4 million, which is indicative of its ongoing operational challenges amid stiff competition.
Regulatory Changes
Alkermes is subject to stringent regulatory oversight from agencies such as the FDA and EMA. Changes in regulations can lead to increased compliance costs and potential delays in product approvals. The company reported an increase in income tax provisions to $17.4 million for the three months ended September 30, 2024, reflecting the impact of regulatory compliance on financial performance.
Market Conditions
Fluctuations in market conditions can affect product sales and pricing. For the three months ended September 30, 2024, gross product sales were $543.5 million, but adjustments due to rebates and discounts reduced net sales significantly. The adjustments totaled $270.5 million, leading to net product sales of $273 million.
Operational Risks
Operational risks include challenges in manufacturing and supply chain disruptions. The company reported a decrease of $256.1 million in manufacturing and royalty revenue for the nine months ended September 30, 2024. This decline is primarily attributed to reduced sales of long-acting products following arbitration outcomes related to royalty payments.
Financial Risks
Alkermes has a significant debt obligation, with $289.5 million outstanding under its 2026 Term Loans as of September 30, 2024. This debt level poses risks related to interest rate fluctuations and refinancing needs. The company reported interest expense of $6.0 million for the three months ended September 30, 2024.
Strategic Risks
The company faces strategic risks associated with its product pipeline and market positioning. As of September 30, 2024, the total cash and cash equivalents were $396.3 million, down from $457.5 million at the end of 2023. This reduction highlights potential liquidity challenges that may affect strategic investments and R&D efforts.
Mitigation Strategies
Alkermes has implemented various strategies to mitigate these risks, including diversifying its product portfolio and enhancing operational efficiencies. The company has also initiated a share repurchase program, authorizing up to $400 million for repurchase to support its stock price amid market volatility.
Risk Factor | Description | Financial Impact (as of Q3 2024) |
---|---|---|
Industry Competition | Increased competition from major pharmaceutical firms. | Net income: $92.4 million |
Regulatory Changes | Compliance with FDA and EMA regulations. | Income tax provision: $17.4 million |
Market Conditions | Fluctuations in product sales and pricing dynamics. | Gross product sales: $543.5 million, Net sales: $273 million |
Operational Risks | Manufacturing challenges and supply chain disruptions. | Decrease in manufacturing revenue: $256.1 million |
Financial Risks | High debt levels and interest rate fluctuations. | Outstanding debt: $289.5 million, Interest expense: $6.0 million |
Strategic Risks | Risks related to product pipeline and liquidity. | Cash and equivalents: $396.3 million |
Future Growth Prospects for Alkermes plc (ALKS)
Future Growth Prospects for Alkermes plc
Analysis of Key Growth Drivers
Alkermes plc has positioned itself for growth through several key drivers, including product innovations, market expansions, and strategic partnerships. The company has reported significant increases in product sales, particularly:
- VIVITROL: Sales increased by 12% and 8% in Q3 and YTD 2024 respectively compared to 2023.
- LYBALVI: Sales surged by 59% and 57% during the same periods.
- ARISTADA: Sales grew by 4% and 3% respectively.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for 2024 indicate a strong outlook with anticipated total revenues reaching approximately $1.32 billion. Analysts estimate earnings per share (EPS) to be around $1.32 for the year, based on the continued demand for its key products.
Strategic Initiatives or Partnerships
Strategic initiatives include:
- Partnerships with healthcare providers to expand the market reach of its products.
- Plans to enhance production capabilities through investments in manufacturing facilities, including the recent sale of the Athlone facility for approximately $97.9 million.
Competitive Advantages
Alkermes maintains several competitive advantages that bolster its growth potential:
- Established market presence with proprietary products for mental health disorders.
- Strong pipeline of innovative therapies in clinical development, including ALKS 2680, which is advancing through clinical trials.
- Robust financial health with cash and cash equivalents amounting to $396.3 million as of September 30, 2024.
Product | Q3 2024 Sales Growth | YTD 2024 Sales Growth |
---|---|---|
VIVITROL | 12% | 8% |
LYBALVI | 59% | 57% |
ARISTADA | 4% | 3% |
In conclusion, Alkermes plc's strategic focus on innovation and market expansion, combined with its competitive advantages, positions the company for sustained growth and resilience in the biopharmaceutical sector, as it aims for continued revenue increases and earnings growth in 2024 and beyond.
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Article updated on 8 Nov 2024
Resources:
- Alkermes plc (ALKS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alkermes plc (ALKS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Alkermes plc (ALKS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.