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Alkermes Turns to Profit, Ups View

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Alkermes plc (ALKS - Free Report) reported earnings of 14 cents per share in the third quarter of fiscal 2013 (ended December 31, 2012). The Zacks Consensus Estimate was 12 cents per share.

Alkermes suffered a loss of 13 cents per share in the year-ago quarter. The company swung to a profit in the reported quarter on the back of higher revenues and lower operating expenses.

Total revenue for the third quarter of fiscal 2013 jumped 8.2% year-over-year to $135.9 million year-over-year. The increase in total revenues during the reported quarter was primarily due to growth in the company’s key products. Revenues surpassed the Zacks Consensus Estimate of $126 million.

Quarterly Results

In the reported quarter, Alkermes recorded $52.5 million (up 10.3% year-over-year) of manufacturing and royalty revenues from its long-acting atypical antipsychotic franchise comprising Risperdal Consta and Invega Sustenna/Xeplion. These drugs are marketed by Johnson & Johnson (JNJ - Free Report) . Worldwide end-market sales of these drugs at the end of the third quarter of fiscal 2013 were approximately $586 million, reflecting an increase of 13% compared to the year-ago period.

Alkermes recorded manufacturing and royalty revenues of $18.4 million (up 73.6% year-over-year) in the reported quarter from Ampyra/Fampyra. In the US, unaudited end-market sales of Ampyra for the third quarter of fiscal 2013 were approximately $73 million (up 28%), whereas outside the US, end-market sales of Fampyra (ex-US trade name of Ampyra) for the quarter were approximately $10.5 million (up 1%).

Alkermes earned royalty of $5.3 million on revenues of type II diabetes treatment Bydureon, which is marketed by Bristol-Myers Squibb (BMY - Free Report) . Royalty revenues for Bydureon were based on end-market net sales of approximately $65 million.

Vivitrol, a legacy Alkermes product, performed well in the third quarter of fiscal 2013. Sales of the product climbed approximately 50% year over year to $15.9 million.

During the quarter, Alkermes also earned revenues from Tricor 145 ($6.8 million) and Ritalan LA/Focalin XR franchise ($9.8 million). Research and development (R&D) revenue from collaborations came in at $1.7 million in the third quarter of fiscal 2013 as opposed to $2.3 million a year ago.

Reported total expenses were $110.6 million in the third quarter of fiscal 2013, down from the year-ago quarter of $130.6 million. The reduction in total expenses was primarily due to the timing of clinical trial expenses and certain merger-related expenses which were incurred in the year-ago quarter.

Fiscal 2013 Projection Upped

Alkermes increased its outlook for fiscal 2013. Alkermes now expects adjusted earnings per share in the range of 99 cents to $1.13 (previous: 88 cents to $1.02). The Zacks Consensus Estimate is currently 64 cents.

The company also upped its revenue guidance for fiscal 2013 to the range of $520 million to $545 million (previous guidance: $510-$540 million). The higher guidance is due to increased net sales expectation of Vivitrol, which is now expected to generate around $55–$60 million of net product sales (previous: $45 million to $55 million) in fiscal 2013.

We believe Alkermes’ new revenue guidance is achievable. The Zacks Consensus Estimate of $525 million is towards the lower end of the company’s new revenue guidance range.

Alkermes lowered its R&D guidance for fiscal 2013 in the range of $140 million to $150 million from the previous range of $150 million to $160 million. The company however maintained its selling, general and administrative expenses guidance at $120 million to $130 million.

Alkermes currently carries a Zacks Rank #2 (Buy). Elan also carries a comparable rank. Meanwhile, Targacept Inc. looks more attractive in the pharma sector carrying a Zacks Rank #1 (Strong Buy).

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