Executive Summary / Key Takeaways

• Alkermes has successfully transformed into a focused, profitable neuroscience company, leveraging its proprietary commercial portfolio (VIVITROL, ARISTADA, LYBALVI) as an economic engine to fund pipeline growth.
• Despite an expected significant decline in manufacturing and royalty revenues in 2025 due to the expiration of the U.S. INVEGA SUSTENNA royalty and manufacturing transitions, the company is guiding to robust profitability, targeting over $200 million in EBITDA ($310M-$340M adjusted EBITDA).
• The core investment thesis centers on the potential of the ALKS 2680 orexin 2 receptor agonist program, with Phase 2 data readouts in narcolepsy type 1 (early Q3 2025) and type 2 (Fall 2025) representing potentially transformative catalysts.
• Alkermes possesses differentiated proprietary technologies (LinkeRx, NanoCrystal, microsphere) that enable unique product profiles, providing a competitive edge in specific market segments, particularly for long-acting injectables and combination therapies.
• While facing competition from larger players and managing risks like ANDA litigation and evolving government policies (Medicaid, tariffs), the company's focused strategy, strong balance sheet, and pipeline potential position it for future value creation.

A Focused Neuroscience Powerhouse Emerges

Alkermes plc has undergone a deliberate multi-year evolution, shedding legacy assets to sharpen its focus and emerge as a pure-play, integrated neuroscience biopharmaceutical company. This transformation, marked by the separation of its oncology business in late 2023 and the sale of its Athlone manufacturing facility in mid-2024, has streamlined operations and repositioned the company to prioritize its proprietary commercial portfolio and high-potential development pipeline. The strategic intent is clear: leverage the cash-generating power of its marketed products to fuel innovation and drive long-term value creation in the complex field of neuroscience.

The company's core business revolves around its portfolio of proprietary products commercialized in the United States. This includes VIVITROL, a once-monthly injectable for alcohol and opioid dependence; the ARISTADA family (ARISTADA and ARISTADA INITIO), long-acting injectables for schizophrenia; and LYBALVI, a once-daily oral atypical antipsychotic for schizophrenia and bipolar I disorder. These products address significant unmet needs in large patient populations and form the bedrock of Alkermes' current financial performance.

Complementing its proprietary sales, Alkermes historically derived substantial revenue from manufacturing and royalty agreements with partners like Janssen and Biogen (BIIB), related to products utilizing its proprietary technologies or licensed assets. While this revenue stream has been significant, it is undergoing a planned decline as certain royalties expire and manufacturing obligations conclude or transition, reflecting the company's strategic pivot towards its own commercial assets.

Technological Edge in Delivery and Design

A key differentiator for Alkermes lies in its proprietary drug delivery and formulation technologies. The company's polymer-based microsphere injectable extended-release technology, utilized in VIVITROL, enables therapeutic medication levels to be maintained in the body through a single intramuscular injection every four weeks, offering a significant advantage in adherence compared to daily dosing.

The LinkeRx technology, employed in ARISTADA, facilitates the creation of extended-release intramuscular injectable suspensions. ARISTADA INITIO further leverages LinkeRx alongside the NanoCrystal technology, resulting in smaller particles for faster dissolution and more rapid achievement of therapeutic drug levels, enabling same-day initiation of ARISTADA treatment. These technologies provide tangible benefits in terms of reduced dosing frequency and improved pharmacokinetic profiles, addressing critical needs in the management of chronic psychiatric and addictive disorders.

LYBALVI, while an oral therapy, represents a different facet of Alkermes' innovative approach by combining olanzapine, a well-established antipsychotic, with samidorphan, an opioid antagonist, in a single bilayer tablet. This combination is designed to mitigate the significant weight gain and metabolic side effects associated with olanzapine alone, a major barrier to long-term adherence. Management highlights that LYBALVI is becoming the standard of care within olanzapine-based therapy precisely because it addresses this critical tolerability issue, a key competitive advantage in the antipsychotic market.

Beyond its commercialized technologies, Alkermes is actively investing in next-generation approaches, particularly within the exciting field of orexin 2 receptor agonists. The Project Saturn initiative is focused on advancing new orexin molecules (ALKS 4510, ALKS 7290) into the clinic in 2025. These candidates are designed to have distinct pharmacokinetic and pharmaceutical properties compared to ALKS 2680, with the stated goal of exploring potential utility in a spectrum of neurological disorders beyond hypersomnolence, including those related to mood, attention, vigilance, and cognition. While specific quantitative targets for these new molecules are not publicly detailed, the strategic intent is to leverage the company's expertise in neuroscience and molecular design to unlock the broad potential of the orexin pathway.

Navigating a Competitive Landscape

Alkermes operates within highly competitive markets dominated by larger pharmaceutical companies with extensive resources and established product portfolios. Key competitors in the antipsychotic space include Johnson & Johnson (JNJ), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), and AbbVie (ABBV), among others. These rivals market products that compete directly with ARISTADA and LYBALVI. In the addiction market, VIVITROL faces competition from other medications and behavioral therapies, with potential future competition from generic entrants.

While larger competitors benefit from greater scale, broader product portfolios, and extensive global reach, Alkermes positions itself through its focused neuroscience expertise, differentiated technologies, and targeted commercial strategy. Its proprietary technologies provide a competitive moat, enabling products with unique dosing profiles (ARISTADA) or improved tolerability (LYBALVI). Management emphasizes that LYBALVI's broad indication (schizophrenia and bipolar I disorder) and its ability to address olanzapine-related weight gain are key advantages against competitors, including newer entrants or potential olanzapine LAIs. The company's expanded psychiatry sales force, fully deployed in Q1 2025, is intended to maintain a competitive share of voice and drive uptake against these larger rivals.

In the emerging orexin agonist space, Alkermes views itself as a leader, particularly with ALKS 2680. While other companies are also developing orexin agonists, Alkermes highlights that ALKS 2680 is the only candidate proceeding into Phase 2 studies in both narcolepsy type 1 and type 2 based on positive patient data across NT1, NT2, and idiopathic hypersomnia (IH). The company believes its approach of evaluating a wide range of doses in Phase 2 will be crucial for establishing the optimal therapeutic profile and competitive positioning. The complexity of developing orally bioavailable, brain-penetrant, selective orexin 2 receptor agonists with appropriate pharmacokinetic properties is a significant barrier to entry, favoring companies with deep expertise in this area.

Customer dynamics, particularly within the U.S. healthcare system, also shape the competitive environment. Access and reimbursement are critical for product uptake. Alkermes has focused on disciplined contracting to enhance LYBALVI's access profile in the commercial payer channel, expecting this to drive future volume growth. The company also monitors potential changes in government policies, such as Medicaid funding and tariffs, which could impact its business, although its U.S.-based manufacturing for proprietary products provides some insulation against certain trade policy risks.

Financial Performance and Outlook

Alkermes' financial performance in the first quarter of 2025 reflects the ongoing transition and strategic focus. Total revenues for Q1 2025 were $306.5 million, a decrease from $350.4 million in Q1 2024. This decline was primarily driven by a significant $54.8 million decrease in manufacturing and royalty revenues, largely due to the expiration of the U.S. INVEGA SUSTENNA royalty in August 2024 and the conclusion of FAMPYRA manufacturing obligations.

Proprietary product sales, however, showed solid growth, increasing by 5% year-over-year to $244.5 million in Q1 2025. This growth was fueled by a 21% increase in LYBALVI unit sales and a 3% price increase across the portfolio, partially offset by modest declines in VIVITROL and ARISTADA/INITIO unit sales. LYBALVI sales grew 23% year-over-year to $70.0 million, while VIVITROL grew 3% to $101.0 million. ARISTADA/INITIO sales decreased 7% to $73.5 million.

Operating expenses saw a decrease in Q1 2025 compared to the prior year, totaling $292.7 million versus $307.1 million. This was primarily due to lower cost of goods sold (reflecting efficiencies and lower unit sales of certain products) and decreased selling, general, and administrative expenses (driven by reduced media spend and professional fees, partially offset by increased sales force investment). Research and development expenses increased modestly to $71.8 million as investments in the ALKS 2680 program ramped up.

The company reported GAAP net income from continuing operations of $22.5 million, or $0.13 per diluted share, in Q1 2025, compared to $38.9 million, or $0.23 per diluted share, in Q1 2024. The decrease in net income was primarily attributable to the significant reduction in high-margin royalty revenue, partially offset by operational efficiencies and growth in proprietary sales.

Alkermes maintains a strong financial position. As of March 31, 2025, the company held $916.2 million in cash and total investments.

It generated $98.8 million in cash flow from operating activities in Q1 2025, a substantial increase from $21.1 million in the prior-year period, primarily driven by favorable changes in working capital. The company prepaid all outstanding debt in late 2024, ending the year debt-free.

This robust liquidity and cash generation capability provides significant flexibility to fund its pipeline, invest in commercial growth, and potentially return capital to shareholders through its remaining $200 million share repurchase authorization.

For the full year 2025, Alkermes reiterated its financial guidance, signaling confidence in its ability to execute despite the expected revenue headwinds from manufacturing and royalties. The company expects total revenues in the range of $1.34 billion to $1.43 billion, with proprietary product sales projected between $1.09 billion and $1.15 billion. This implies continued growth in proprietary sales, offsetting a significant portion of the anticipated ~$215 million decline in manufacturing and royalty revenue compared to 2024.

Operating expenses are expected to increase modestly, with R&D guided to $305 million to $335 million (reflecting increased investment in the orexin pipeline) and SG&A guided to $655 million to $685 million (reflecting sales force expansion and promotional activities). Despite these investments and the revenue transition, Alkermes expects to deliver GAAP net income between $175 million and $205 million, EBITDA between $215 million and $245 million, and adjusted EBITDA between $310 million and $340 million. This profitability guidance underscores the underlying strength and efficiency of the core business.

Specific product guidance for 2025 includes VIVITROL net sales of $440 million to $460 million (mid-single-digit demand growth), ARISTADA net sales of $335 million to $355 million (fairly consistent underlying demand), and LYBALVI net sales of $320 million to $340 million (approximately 25% year-over-year demand growth). LYBALVI's gross-to-net adjustments are expected to remain in the low-to-mid 30% range for the rest of the year.

Pipeline Catalysts and Key Risks

The most significant near-term value driver for Alkermes is the ALKS 2680 orexin program. The Phase 2 Vibrance-1 study in NT1 is fully enrolled, with top-line data expected early in the third quarter of 2025. The Phase 2 Vibrance-2 study in NT2 is enrolling well, with enrollment completion expected mid-year 2025 and data in the fall. The Phase 2 Vibrance-3 study in IH was recently initiated, with data anticipated in mid-2026. These data readouts, particularly for NT1 and NT2, are critical milestones that will further characterize the efficacy, safety, and tolerability of ALKS 2680 across a range of doses and inform the design of pivotal Phase 3 studies, for which preparations are already underway. Positive data demonstrating a differentiated profile could significantly enhance the company's valuation and competitive position in the hypersomnolence market.

Beyond ALKS 2680, the advancement of ALKS 4510 and ALKS 7290 into first-in-human studies in 2025 under the Project Saturn initiative represents the next wave of potential catalysts, exploring the broader applicability of orexin agonists in other neurological and psychiatric disorders.

However, Alkermes faces several key risks. The success of the orexin pipeline is not guaranteed, and clinical trials are subject to inherent uncertainties. Competitive pressures in its commercial markets could intensify, impacting sales growth and pricing. The loss of significant manufacturing and royalty revenues in 2025, while anticipated, will require the proprietary portfolio to deliver strong growth to maintain profitability levels. Legal proceedings, including ANDA litigation related to partnered products (INVEGA TRINZA, VUMERITY) and product liability claims (VIVITROL), could result in unfavorable outcomes. Furthermore, changes in the healthcare policy landscape, particularly regarding Medicaid reimbursement and potential tariffs, could adversely affect revenues and profitability. The company is actively monitoring these risks and implementing strategies to mitigate their impact, such as advocating for patient access and maintaining a diversified supply chain.

Conclusion

Alkermes has successfully navigated a complex transformation, emerging as a focused neuroscience company with a profitable commercial business and a promising pipeline. The company's strategic emphasis on proprietary product growth, supported by differentiated technologies and an expanded sales force, provides the financial engine to fund its ambitious research and development initiatives. While facing the challenge of replacing declining manufacturing and royalty revenues, Alkermes' 2025 guidance signals confidence in its ability to maintain robust profitability and cash generation. The core of the investment thesis lies in the potential of the ALKS 2680 orexin program, with pivotal Phase 2 data expected in 2025 poised to be transformative catalysts. As Alkermes advances its pipeline and leverages its technological expertise in a competitive landscape, its ability to execute on its clinical milestones and continue driving proprietary sales growth will be critical determinants of future value creation for shareholders.