Alkermes plc (ALKS) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates strong financial performance, with expectations of record revenues and profitability. Product development shows promise with ongoing trials and potential market expansion. Market strategy focuses on expanding orexin portfolio, which is promising. Expenses and financial health appear stable, and the shareholder return plan is not explicitly negative. Q&A insights reveal optimism for product growth and strategic developments, though some guidance was withheld. Overall, the sentiment is positive, suggesting a potential stock price increase in the short term.

Key Financial Performance

Total Revenues $394.2 million, driven primarily by proprietary products, reflecting 16% year-over-year growth. Reasons for growth include strong underlying demand and gross-to-net favorability, primarily related to Medicaid utilization rates.

Net Sales from Proprietary Products $317.4 million, reflecting 16% year-over-year growth. Reasons for growth include strong demand and gross-to-net favorability.

Manufacturing and Royalty Revenues $76.8 million, including $35.6 million from VUMERITY and $30.2 million from long-acting INVEGA products. No specific reasons for change mentioned.

Cost of Goods Sold $51.6 million, compared to $63.1 million in Q3 last year, reflecting efficiencies following the sale of the Athlone-based manufacturing business.

R&D Expenses $81.7 million, compared to $59.9 million in Q3 last year, reflecting investments in Vibrance Phase II studies and first-in-human studies for orexin 2 receptor agonist candidates.

SG&A Expenses $171.8 million, compared to $150.4 million in Q3 last year, reflecting the expansion of the psychiatry field organization and promotional activities related to LYBALVI.

GAAP Net Income $82.8 million. No specific year-over-year comparison or reasons for change mentioned.

EBITDA $96.9 million. No specific year-over-year comparison or reasons for change mentioned.

Adjusted EBITDA $121.5 million. No specific year-over-year comparison or reasons for change mentioned.

Net Sales of VIVITROL $121.1 million, driven by growth in the alcohol dependence indication market and localized market dynamics in certain states and payer systems.

Net Sales of ARISTADA $98.1 million, driven by increased prescriber breadth and strong new-to-brand prescriptions.

Net Sales of LYBALVI $98.2 million, reflecting 32% year-over-year growth, driven by new patient starts and prescriber breadth.

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Operating Highlights

LUMRYZ: FDA-approved, once-at-bedtime oxybate for cataplexy or excessive daytime sleepiness in narcolepsy patients aged 7 or older. Expected to generate $265–$275 million in net revenue in 2025.

Alixorexton: Promising orexin 2 receptor agonist in development for narcolepsy and idiopathic hypersomnia. Positive Phase II data in narcolepsy type 1 presented, with plans for a global Phase III program in early 2026.

ALKS 4510 and ALKS 7290: Additional orexin 2 receptor agonist candidates recently entered clinical trials.

Sleep Medicine Market: Acquisition of Avadel Pharmaceuticals accelerates entry into the sleep medicine market, leveraging Avadel's expertise and commercial organization.

Revenue Growth: Total revenues of $394.2 million in Q3 2025, with proprietary products generating $317.4 million, reflecting 16% year-over-year growth.

Cost Efficiencies: Cost of goods sold reduced to $51.6 million from $63.1 million in Q3 2024, following the sale of the Athlone-based manufacturing business.

SG&A Expenses: Increased to $171.8 million from $150.4 million in Q3 2024, reflecting psychiatry field expansion and promotional activities.

Avadel Pharmaceuticals Acquisition: Proposed acquisition to diversify commercial portfolio, strengthen profitability, and enhance development strategy in sleep disorders.

Orexin Platform Development: Advancing orexin 2 receptor agonist programs, including alixorexton and new candidates ALKS 4510 and ALKS 7290, to address sleep disorders and other conditions.

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Risk or Challenges

Proposed acquisition of Avadel Pharmaceuticals: The acquisition involves financial risks, including the use of cash and bank debt to finance the transaction. There is also uncertainty regarding the integration of Avadel's operations and the realization of expected synergies, as well as potential challenges in scaling the combined commercial organization.

Expansion into the sleep medicine market: The company faces competitive pressures and execution risks in entering a new market segment. There is also uncertainty regarding the success of the new product launches and the ability to establish a strong market presence.

Increased R&D expenses: The rise in R&D expenses, particularly for the Vibrance Phase II studies and new orexin 2 receptor agonist candidates, poses financial risks if the outcomes do not meet expectations or lead to viable products.

Dependence on U.S. market: The company’s strategy of manufacturing and commercializing products exclusively in the U.S. exposes it to risks related to changes in U.S. payer and policy environments, which could impact demand and profitability.

Financing of Avadel acquisition: The use of bank debt to finance the acquisition could increase financial leverage and interest expenses, potentially impacting the company’s financial stability.

Regulatory and clinical trial risks: The development of new drugs, including alixorexton and other orexin 2 receptor agonists, involves regulatory hurdles and the risk of unfavorable clinical trial outcomes, which could delay or prevent market entry.

Increased SG&A expenses: The rise in SG&A expenses, driven by promotional activities and the expansion of the psychiatry field organization, could strain financial resources if revenue growth does not offset these costs.

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Guidance & Outlook

Proposed acquisition of Avadel Pharmaceuticals: The acquisition is expected to diversify Alkermes' commercial portfolio and strengthen profitability. It will accelerate entry into the sleep medicine market and provide a foundation for the potential launch of alixorexton, an orexin 2 receptor agonist in development for narcolepsy and idiopathic hypersomnia. The transaction is expected to close in Q1 2026.

Development of orexin 2 receptor agonists: Alkermes is advancing its portfolio of orexin 2 receptor agonists, including alixorexton, ALKS 4510, and ALKS 7290. Alixorexton has shown promising Phase II results for narcolepsy type 1 and is expected to enter Phase III trials in Q1 2026. Additional candidates are progressing through early-stage clinical trials.

2025 Financial Guidance: Alkermes raised its 2025 full-year guidance, expecting total revenues of $1.43 billion to $1.49 billion, GAAP net income of $230 million to $250 million, EBITDA of $270 million to $290 million, and adjusted EBITDA of $365 million to $385 million.

Proprietary Product Portfolio: For 2025, VIVITROL net sales are expected to range from $460 million to $470 million, ARISTADA net sales from $360 million to $370 million, and LYBALVI net sales from $340 million to $350 million.

R&D Investments: Increased R&D expenses are anticipated due to investments in the Vibrance Phase II studies of alixorexton and early-stage development of ALKS 4510 and ALKS 7290.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you talk about LYBALVI's performance and gross-to-net expectations?

A:LYBALVI showed strong performance in Q3, driven by an expanded psychiatry footprint and increased call volume. Year-over-year TRx growth was about 25%, and new patient starts increased by 16%. Gross-to-net was slightly lower in Q3 due to deductible resets and lower co-pay utilization. Management expects typical seasonal patterns to show a slight expansion of gross-to-net in Q4 but will provide full-year guidance in February.

Q:What are the expectations for NT2 alixorexton data and the next steps with the FDA?

A:The NT2 study data is expected in November. These data, combined with Vibrance-1 and NT1 data, will form the package for an end-of-Phase II meeting with the FDA. The Phase III program is expected to launch early next year.

Q:What are the expectations for VIVITROL heading into Q4?

A:VIVITROL saw strong AD demand in Q3, with AD sales driving the majority of the brand's performance. Management expects continued AD growth in Q4, noting that VIVITROL is a mature product.

Q:What are the expectations for the NT2 study's MWT benefit and safety data?

A:Management did not comment on blinded safety data but expects the NT2 study to show safety, tolerability, and efficacy across various doses. The goal is to inform Phase III dose selection and design. They anticipate variability in the patient population and aim to gather evidence of efficacy across multiple parameters.

Q:What details will be provided in the NT2 top-line release, and how will safety concerns be addressed?

A:The top-line release will include structured data, but detailed data will be shared at medical meetings. Management has made decisions about Phase III dosing based on Vibrance-1 data but will keep details proprietary for now. They noted a low incidence of new-onset adverse events in the Vibrance-1 study.

Q:Will the Vibrance-2 data include time-course data, and is there a biological rationale for efficacy deterioration?

A:The top-line Vibrance-2 data may not include detailed time-course data. Management does not expect significant evidence of tachyphylaxis or efficacy degradation between 4 and 8 weeks. They aim to see dose response across efficacy measures but will confirm after reviewing the data.

Q:What is the importance of ESS in the NT2 study, and what are the expectations for ocular monitoring in Phase III?

A:Both MWT and ESS are primary endpoints in the NT2 study, capturing different aspects of sleepiness. Management hopes to see efficacy across multiple parameters. For Phase III, they are uncertain about the need for ocular monitoring but noted that Vibrance-1 showed mild visual adverse events.

Q:What are the plans for additional orexins in the clinic, and what about alixorexton outside the U.S.?

A:Management is exploring orexins in psychiatry, neurology, and rare neurodevelopmental settings. They are developing alixorexton in Europe and Asia, aiming to bring it to patients globally at comparable prices to the U.S.

Q:How are NT2 and IH populations being captured in trials, and what are the differences in diagnosis?

A:Management is enrolling NT2 and IH patients without discrimination between diagnoses. They noted regional differences in diagnosis and expect the studies to provide insights into variability and response across these populations.

Q:What are the timelines for next-gen orexins and low-salt oxybate data?

A:Management aims to complete SAD/MAD studies for next-gen orexins and move into patient-focused studies. They are interested in the low-salt oxybate program and will provide updates post-acquisition.

Q:What is the impact of ACA subsidies on the commercial business?

A:Management believes ACA subsidies are politically important and expects them to continue. They emphasized the importance of Medicaid for patients with serious mental illness and addiction.

Q:What drove LYBALVI's growth, and how are physicians responding?

A:LYBALVI's growth was driven by its efficacy profile, broad label, and increased commercial investment. Physicians are gaining experience with the product, leading to expanded prescribing.

Q:What are the Phase III scenarios for alixorexton?

A:Management expects two Phase III studies, one for NT1 and one for NT2, to support labeling for narcolepsy.

Q:What are the visual AE findings from Vibrance-1, and is there a dose response?

A:Most visual AEs were mild and transient, with one moderate and one severe case. There was a dose response, with more AEs at the 8-mg dose. No new visual AEs were observed in the extension period for patients previously exposed to alixorexton.

Q:What is the gross-to-net expectation for ARISTADA and VIVITROL?

A:ARISTADA's gross-to-net is expected to follow historical patterns at approximately 53%. VIVITROL's Medicaid volume is stable, and no additional gross-to-net favorability is expected.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance for LYBALVI's gross-to-net expectations for the next year, stating they would provide a full-year guide in February. They also did not disclose detailed Phase III dosing plans for alixorexton, citing proprietary reasons. Additionally, they did not provide specifics on the PK profile of next-gen orexins or the exact timing of translational studies.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Alkermes plc (ALKS) Q3 2025 Earnings Call Transcript

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The earnings call reveals strong financial performance with revenue growth attributed to high demand, a solid cash position, and strategic advancements in product development. While management avoided certain specifics, the overall sentiment is positive due to the promising pipeline developments, expanded sales force, and strategic initiatives. The market cap suggests a moderate reaction, leading to an anticipated stock price increase of 2% to 8% over the next two weeks.

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The earnings call revealed mixed signals: a slight revenue beat and strong cash position, but EPS missed expectations. The Q&A highlighted management's evasiveness on safety data and efficacy thresholds, raising concerns. Although share repurchase authorization remains, the lack of strong positive catalysts and cautious market conditions suggest a neutral stock price movement. The company's market cap indicates moderate volatility, so a 2% swing is plausible.

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