Alkermes ( ALKS Quick Quote ALKS - Free Report) received a final award in its arbitration proceedings with Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) , on May 31, 2023. Shares of the company were up almost 3.2% on the news.
The arbitration was related to two license agreements between the companies. In February 2022, Alkermes partially terminated its license agreement with Janssen in the United States.
The final award confirms the tribunal's findings from the first and second interim awards that were issued on Dec 21, 2022, and Apr 19, 2023, respectively. It states that while Janssen has the right to terminate the license agreements, it cannot continue to sell products developed during the term of the agreements without paying royalties to Alkermes.
The award also specifies the distinct royalty terms for each product covered by the agreements, including the termination dates. The royalties for INVEGA SUSTENNA will end on Aug 20, 2024, while the same for INVEGA TRINZA and INVEGA HAFYERA will extend until the second quarter of 2030 and May 2030, respectively. Additionally, royalties for CABENUVA in the United States will be payable until Dec 31, 2036.
The aforementioned award confirms that Alkermes is entitled to back royalties and interest for the 2022 U.S. net sales of the long-acting INVEGA products and CABENUVA. These back royalties are expected to reach approximately $194 million (inclusive of interest) through Mar 15, 2023. The payment will be recorded as ‘Royalty and Manufacturing Revenues’ in the second quarter of the year.
Shares of Alkermes have risen 16.3% year to date against the
industry’s 7.3% decline.
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This positive outcome has prompted the company to raise its financial expectations for 2023. The company anticipates an increase of approximately $425 million in its financial outlook. This includes the back royalties from Janssen for 2022 and the expected royalty revenues from global net sales of INVEGA and CABENUVA in 2023.
Alkermes' updated guidance for 2023 is based on the final award. The company now expects total revenues in the band of $1,550-$1,680 million compared with the previous guided range of $1,130-$1,250 million.
INVEGA royalties are expected in the band of $265-$280 million compared with the previous projection of $40-$45 million. Royalties and interest are expected to be around $195 million. The company expects GAAP net income in the range of $225-$265 million, indicating a significant improvement from the previous anticipated loss of $160-$200 million.
The updated guidance includes Alkermes' combined neuroscience and oncology business for the entire year, with the planned separation of the oncology business in the second half of 2023.
Zacks Rank and Stocks to Consider
Currently, Alkermes carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the biotech sector are
Akero Therapeutics ( AKRO Quick Quote AKRO - Free Report) and ADMA Biologics, Inc. ( ADMA Quick Quote ADMA - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Loss per share estimate for Akero Therapeutics has narrowed from $3.46 to $2.78 for 2023 in the past 90 days. Shares of Akero Therapeutics have nosedived 2.9% year to date.
AKRO’s earnings beat estimates in three of the trailing four quarters and missed the mark in one, delivering an average surprise of 7.96%.
Loss per share estimate for ADMA Biologics has narrowed from 19 cents to 9 cents for 2023 in the past 90 days. In the year so far, shares of ADMA Biologics have risen 4.7%.
ADMA’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.13%.