10-Q 1 alks-20160331x10q.htm 10-Q alks_Current folio_10Q

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-35299

 

ALKERMES PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

 

Ireland

 

98-1007018

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

Connaught House

1 Burlington Road

Dublin 4, Ireland

(Address of principal executive offices)

 

+ 353-1-772-8000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes   No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):  Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

 

 

Non-accelerated filer

 

Smaller reporting company

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes   No 

 

The number of the registrant’s ordinary shares, $0.01 par value, outstanding as of April 22, 2016 was 151,165,398 shares.

 

 

 

 


 

ALKERMES PLC AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016

 

 

 

 

 

 

Page No.

PART I - FINANCIAL INFORMATION 

 

Item 1.  

Condensed Consolidated Financial Statements (unaudited):

 

 

Condensed Consolidated Balance Sheets — March 31, 2016 and December 31, 2015

 

Condensed Consolidated Statements of Operations and Comprehensive Loss  — For the Three Months Ended March 31, 2016 and 2015

 

Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2016 and 2015

 

Notes to Condensed Consolidated Financial Statements

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

29 

Item 4. 

Controls and Procedures

30 

 

 

 

PART II - OTHER INFORMATION 

 

Item 1. 

Legal Proceedings

30 

Item 1A. 

Risk Factors

32 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

32 

Item 5. 

Other Information

32 

Item 6. 

Exhibits

32 

Signatures 

 

33 

Exhibit Index 

 

34 

2


 

Cautionary Note Concerning Forward-Looking Statements

 

This document contains and incorporates by reference “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, these statements can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “continue,” “believe,” “plan,” “estimate,” “intend” or other similar words. These statements discuss future expectations, and contain projections of results of operations or of financial condition, or state trends and known uncertainties or other forward-looking information. Forward-looking statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) include, without limitation, statements regarding:

 

·

our expectations regarding our financial performance, including revenues, expenses, gross margins, liquidity, capital expenditures and income taxes;

·

our expectations regarding our products, including the development, regulatory (including expectations about regulatory filing, regulatory approval and regulatory timelines), therapeutic and commercial scope and potential of such products and the costs and expenses related thereto;

·

our expectations regarding the initiation, timing and results of clinical trials of our products;

·

our expectations regarding the competitive landscape, and changes therein, related to our products, including our development programs, and our industry generally;

·

our expectations regarding the financial impact of currency exchange rate fluctuations and valuations;

·

our expectations regarding future amortization of intangible assets;

·

our expectations regarding our collaborations, licensing arrangements and other significant agreements with third parties relating to our products, including our development programs;

·

our expectations regarding the impact of adoption of new accounting pronouncements;

·

our expectations regarding nearterm changes in the nature of our market risk exposures or in management’s objectives and strategies with respect to managing such exposures;

·

our ability to comply with restrictive covenants of our indebtedness and our ability to fund our debt service obligations;

·

our expectations regarding future capital requirements and capital expenditures and our ability to finance our operations and capital requirements; and

·

other factors discussed elsewhere in this Form 10-Q.

 

Actual results might differ materially from those expressed or implied by these forwardlooking statements because these forwardlooking statements are subject to risks, assumptions and uncertainties. You are cautioned not to place undue reliance on forwardlooking statements, which speak only as of the date of this Form 10-Q. All subsequent written and oral forwardlooking statements concerning the matters addressed in this Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by applicable law or regulation, we do not undertake any obligation to update publicly or revise any forwardlooking statements, whether as a result of new information, future events or otherwise. In light of these risks, assumptions and uncertainties, the forwardlooking events discussed in this Form 10-Q might not occur. For more information regarding the risks and uncertainties of our business, see “Part I, Item 1A—Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015 (the “Annual Report”) and any subsequent reports filed with the U.S. Securities and Exchange Commission (“SEC”).

 

Unless otherwise indicated, information contained in this Form 10-Q concerning the disorders targeted by our products and the markets in which we operate is based on information from various sources (including, without limitation, industry publications, medical and clinical journals and studies, surveys and forecasts and our internal research), on assumptions that we have made, which we believe are reasonable, based on those data and other similar sources and on our knowledge of the markets for our products. Our internal research has not been verified by any independent source, and we have not independently verified any thirdparty information. These projections, assumptions and estimates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Part I, Item 1A—Risk Factors” of our Annual Report. These and other factors could cause our results to differ materially from those expressed in the estimates included in this Form 10-Q.

 

3


 

Note Regarding Company and Product References

 

Alkermes plc (as used in this report, together with our subsidiaries, “Alkermes,” the “Company,” “us,” “we” and “our”) is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to research, develop and commercialize, both with partners and on its own, pharmaceutical products that are designed to address unmet medical needs of patients in major therapeutic areas. We have a diversified portfolio of marketed drug products and a clinical pipeline of products that address central nervous system (“CNS”) disorders such as schizophrenia, depression, addiction and multiple sclerosis. Except as otherwise suggested by the context, references to “products” or “our products” in this Form 10-Q include our marketed products, marketed products using our proprietary technologies, our product candidates and product candidates using our proprietary technologies, and references to “licensees” are used interchangeably with references to “collaborative partners” and “partners.”

 

Note Regarding Trademarks

 

We are the owner of various U.S. federal trademark registrations (“®”) and other trademarks (“TM”), including ARISTADA®, LinkeRx®, NanoCrystal®, SECATM and VIVITROL®. The following are trademarks of the respective companies listed: AMPYRA® and FAMPYRA®—Acorda Therapeutics, Inc.; BYDUREON® —Amylin Pharmaceuticals, LLC; INVEGA SUSTENNA®, INVEGA TRINZA®, XEPLION®, and RISPERDAL CONSTA®—Johnson & Johnson (or its affiliate); MEGACE®—E.R. Squibb & Sons, LLC; RITALIN LA® and FOCALIN XR®—Novartis AG; TECFIDERA®—Biogen MA Inc.; TRICOR®—Abbvie Inc.; and ZYPREXA®—Eli Lilly and Company. Other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q are referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

 

 

4


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

 

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

 

 

 

 

 

 

    

March 31, 2016

    

December 31, 2015

 

 

 

(In thousands, except share and per
share amounts)

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

199,976

 

$

181,109

 

Investments — short-term

 

 

425,414

 

 

353,669

 

Receivables, net

 

 

139,814

 

 

155,487

 

Inventory

 

 

44,817

 

 

38,411

 

Prepaid expenses and other current assets

 

 

28,539

 

 

26,286

 

Total current assets

 

 

838,560

 

 

754,962

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

 

256,326

 

 

254,819

 

INTANGIBLE ASSETS—NET

 

 

364,030

 

 

379,186

 

INVESTMENTS—LONG-TERM

 

 

93,990

 

 

264,071

 

GOODWILL

 

 

92,873

 

 

92,873

 

CONTINGENT CONSIDERATION

 

 

57,200

 

 

55,300

 

DEFERRED TAX ASSETS

 

 

63,886

 

 

40,856

 

OTHER ASSETS

 

 

28,022

 

 

13,677

 

TOTAL ASSETS

 

$

1,794,887

 

$

1,855,744

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

157,480

 

$

168,735

 

Long-term debt—short-term

 

 

64,825

 

 

65,737

 

Deferred revenue—short-term

 

 

1,826

 

 

1,735

 

Total current liabilities

 

 

224,131

 

 

236,207

 

LONG-TERM DEBT

 

 

283,664

 

 

284,207

 

OTHER LONG-TERM LIABILITIES

 

 

14,411

 

 

12,610

 

DEFERRED REVENUE—LONG-TERM

 

 

7,442

 

 

7,975

 

DEFERRED TAX LIABILITIES

 

 

161

 

 

470

 

Total liabilities

 

 

529,809

 

 

541,469

 

COMMITMENTS AND CONTINGENCIES (Note 13)

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Preferred shares, par value, $0.01 per share; 50,000,000 shares authorized; zero issued and outstanding at March 31, 2016 and December 31, 2015, respectively

 

 

 —

 

 

 —

 

Ordinary shares, par value, $0.01 per share; 450,000,000 shares authorized; 152,609,491 and 152,128,941 shares issued; 151,082,475 and 150,700,989 shares outstanding at March 31, 2016, and December 31, 2015, respectively

 

 

1,523

 

 

1,518

 

Treasury shares, at cost (1,527,016 and 1,427,952 shares at March 31, 2016 and December 31, 2015, respectively)

 

 

(61,958)

 

 

(58,661)

 

Additional paid-in capital

 

 

2,145,296

 

 

2,114,711

 

Accumulated other comprehensive loss

 

 

(2,861)

 

 

(3,795)

 

Accumulated deficit

 

 

(816,922)

 

 

(739,498)

 

Total shareholders’ equity

 

 

1,265,078

 

 

1,314,275

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,794,887

 

$

1,855,744

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

5


 

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2016

    

2015

 

 

 

(In thousands, except per share amounts)

 

REVENUES:

 

 

 

 

 

 

 

Manufacturing and royalty revenues

 

$

106,159

 

$

128,744

 

Product sales, net

 

 

49,374

 

 

31,137

 

Research and development revenue

 

 

1,241

 

 

1,333

 

Total revenues

 

 

156,774

 

 

161,214

 

EXPENSES:

 

 

 

 

 

 

 

Cost of goods manufactured and sold (exclusive of amortization of acquired intangible assets shown below)

 

 

27,711

 

 

39,974

 

Research and development

 

 

101,072

 

 

70,278

 

Selling, general and administrative

 

 

89,719

 

 

63,050

 

Amortization of acquired intangible assets

 

 

15,156

 

 

15,220

 

Total expenses

 

 

233,658

 

 

188,522

 

OPERATING LOSS

 

 

(76,884)

 

 

(27,308)

 

OTHER EXPENSE, NET:

 

 

 

 

 

 

 

Interest income

 

 

1,011

 

 

660

 

Interest expense

 

 

(3,295)

 

 

(3,288)

 

Increase in the fair value of contingent consideration

 

 

1,900

 

 

 —

 

Other income (expense), net

 

 

249

 

 

(211)

 

Total other expense, net

 

 

(135)

 

 

(2,839)

 

LOSS BEFORE INCOME TAXES

 

 

(77,019)

 

 

(30,147)

 

PROVISION FOR INCOME TAXES

 

 

404

 

 

510

 

NET LOSS

 

$

(77,423)

 

$

(30,657)

 

LOSS PER COMMON SHARE:

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.51)

 

$

(0.21)

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

 

 

 

 

 

 

 

Basic and diluted

 

 

150,825

 

 

148,089

 

COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

Net loss

 

$

(77,423)

 

$

(30,657)

 

Holding gains, net of a tax provision of $425 and $209, respectively

 

 

935

 

 

489

 

COMPREHENSIVE LOSS

 

$

(76,488)

 

$

(30,168)

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6


 

ALKERMES PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2016

    

2015

 

 

 

(In thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

 

$

(77,423)

 

$

(30,657)

 

Adjustments to reconcile net loss to cash flows from operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

22,703

 

 

22,487

 

Share-based compensation expense

 

 

24,256

 

 

17,329

 

Deferred income taxes

 

 

(25,437)

 

 

(4,301)

 

Excess tax benefit from share-based compensation

 

 

(4,874)

 

 

(4,744)

 

Increase in the fair value of contingent consideration

 

 

(1,900)

 

 

 —

 

Other non-cash charges

 

 

672

 

 

(145)

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

15,673

 

 

9,572

 

Inventory, prepaid expenses and other assets

 

 

(11,651)

 

 

3,021

 

Accounts payable and accrued expenses

 

 

(680)

 

 

(10,303)

 

Deferred revenue

 

 

(442)

 

 

(328)

 

Other long-term liabilities

 

 

1,889

 

 

146

 

Cash flows (used in) provided by operating activities

 

 

(57,214)

 

 

2,077

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Additions of property, plant and equipment

 

 

(12,009)

 

 

(10,710)

 

Proceeds from the sale of equipment

 

 

7

 

 

41

 

Investment in Reset Therapeutics, Inc.

 

 

(15,000)

 

 

 —

 

Purchases of investments

 

 

(58,528)

 

 

(117,047)

 

Sales and maturities of investments

 

 

158,224

 

 

98,927

 

Cash flows provided by (used in) investing activities

 

 

72,694

 

 

(28,789)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from the issuance of ordinary shares under share-based compensation arrangements

 

 

3,498

 

 

13,598

 

Excess tax benefit from share-based compensation

 

 

4,874

 

 

4,744

 

Employee taxes paid related to net share settlement of equity awards

 

 

(3,297)

 

 

(4,693)

 

Principal payments of long-term debt

 

 

(1,688)

 

 

(1,688)

 

Cash flows provided by financing activities

 

 

3,387

 

 

11,961

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

18,867

 

 

(14,751)

 

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

181,109

 

 

224,064

 

CASH AND CASH EQUIVALENTS—End of period

 

$

199,976

 

$

209,313

 

SUPPLEMENTAL CASH FLOW DISCLOSURE:

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Purchased capital expenditures included in accounts payable and accrued expenses

 

$

3,099

 

$

3,090

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

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Table of Contents

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited)

 

1. THE COMPANY

 

Alkermes plc is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to research, develop and commercialize, both with partners and on its own, pharmaceutical products that are designed to address unmet medical needs of patients in major therapeutic areas. Alkermes has a diversified portfolio of marketed drug products and a clinical pipeline of products that address CNS disorders such as schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes has a research and development (“R&D”) center in Waltham, Massachusetts; an R&D and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements of the Company for the three months ended March 31, 2016 and 2015 are unaudited and have been prepared on a basis substantially consistent with the audited financial statements for the year ended December 31, 2015. The year-end condensed consolidated balance sheet data, which is presented for comparative purposes, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”) (commonly referred to as “GAAP”). In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, that are necessary to state fairly the results of operations for the reported periods.

 

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Alkermes, which are contained in the Company’s Annual Report that has been filed with the SEC. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Alkermes plc and its wholly owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies, within the “Notes to Consolidated Financial Statements” accompanying its Annual Report. Intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates and judgments and methodologies, including those related to revenue recognition and related allowances, its collaborative relationships, clinical trial expenses, the valuation of inventory, impairment and amortization of intangibles and long-lived assets, share-based compensation, income taxes including the valuation allowance for deferred tax assets, valuation of contingent consideration, valuation of investments and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

 

Segment Information

 

The Company operates as one business segment, which is the business of developing, manufacturing and commercializing medicines. The Company’s chief decision maker, the Chairman of the Board and Chief Executive Officer, reviews the Company’s operating results on an aggregate basis and manages the Company’s operations as a single operating unit.

 

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Table of Contents

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

Income Taxes

 

The Company’s income tax provision in the three months ended March 31, 2016 and 2015 relates primarily to U.S. federal and state taxes on income. The Company records a deferred tax asset or liability based on the difference between the financial statement and tax basis of its assets and liabilities, as measured by enacted jurisdictional tax rates assumed to be in effect when these differences reverse. At March 31, 2016, the Company maintained a valuation allowance against certain of its U.S. and foreign deferred tax assets. The Company evaluates, at each reporting period, the need for a valuation allowance on its deferred tax assets on a jurisdiction by jurisdiction basis.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. In March 2016, the FASB issued additional guidance providing clarification as to principal versus agent considerations. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This guidance becomes effective for the Company in its year ending December 31, 2018, and the Company could early adopt the standard for its year ending December 31, 2017. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

 

In June 2014, the FASB issued guidance that clarifies the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. Existing GAAP does not contain explicit guidance on how to account for these share-based payments. The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities have the option of prospectively applying the guidance to awards granted or modified after the effective date or retrospectively applying the guidance to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements. The Company adopted this guidance on January 1, 2016, and this guidance did not have an impact on its consolidated financial statements.

 

In January 2015, the FASB issued guidance that simplifies income statement presentation by eliminating the concept of extraordinary items. The Company adopted this guidance on January 1, 2016, and this guidance did not have an impact on its consolidated financial statements.

 

In January 2016, the FASB issued guidance that enhances the reporting model for financial instruments through addressing certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The amendments in this update include: requiring equity securities to be measured at fair value with changes in fair value recognized through the income statement; simplifying the impairment assessment of equity instruments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the

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Table of Contents

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This guidance becomes effective for the Company in its year ending December 31, 2018, and the Company is currently assessing the impact that this standard will have on its consolidated financial statements.

 

In February 2016, the FASB issued guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and this guidance is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. This guidance becomes effective for the Company in its year ending December 31, 2019, and the Company is currently assessing the impact that this standard will have on its consolidated financial statements.

 

In March 2016, the FASB issued guidance as part of its simplification initiative to eliminate the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the use of the equity method as a result of an increase in the level of ownership interest or degree of influence. This guidance becomes effective for the Company in its year ending December 31, 2017, and the Company does not currently expect this guidance to have an impact on its consolidated financial statements.

 

In March 2016, the FASB issued guidance as part of its simplification initiative that involves several aspects of the accounting for share-based payment transactions. The amendments in this update established that: all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement; excess tax benefits be classified as an operating activity in the statement of cash flows; the entity make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, which is current GAAP, or account for forfeitures as they occur; the threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions; and cash paid by an employer when directly withholding shares for tax-withholding purposes be classified as a financing activity in the statement of cash flows. This guidance becomes effective for the Company in its year ending December 31, 2017, and the Company is currently assessing the impact that this standard will have on its consolidated financial statements.

 

3. DIVESTITURE

 

On March 7, 2015, the Company entered into a definitive agreement to sell the Gainesville, GA facility, the related manufacturing and royalty revenue associated with certain products manufactured at the facility, and the rights to IV/IM and parenteral forms of Meloxicam (the “Gainesville Transaction”) to Recro Pharma, Inc. (“Recro”) and Recro Pharma LLC (together with Recro, the “Purchasers”). The sale was completed on April 10, 2015 and, under the terms of the agreement, Recro paid the Company $54.0 million in cash and issued to the Company warrants to purchase an aggregate of 350,000 shares of Recro common stock at a per share exercise price of $19.46, which was two times the closing price of Recro’s common stock on the day prior to closing. The Company is also eligible to receive low double-digit royalties on net sales of IV/IM and parenteral forms of Meloxicam and up to $120.0 million in milestone payments upon the achievement of certain regulatory and sales milestones related to IV/IM and parenteral forms of Meloxicam.

 

The gain on the Gainesville Transaction was determined as follows:

 

 

 

 

 

 

 

April 10, 2015

 

 

 

(In thousands)

 

Sales Proceeds:

 

 

 

 

Cash

 

$

54,010

 

Fair value of warrants

 

 

2,123

 

Fair value of contingent consideration

 

 

57,600

 

Total consideration received

 

$

113,733

 

Less net assets sold

 

 

(101,373)

 

Less transaction costs

 

 

(2,724)

 

Gain on the Gainesville Transaction

 

$

9,636

 

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ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

During the three months ended March 31, 2015, the Gainesville, GA facility and associated intellectual property (“IP”) generated income before income taxes of $4.2 million. The Company recorded the gain on the Gainesville Transaction in the three months ended June 30, 2015. The Company determined that the sale of assets in connection with the Gainesville Transaction did not constitute a strategic shift and that it did not and will not have a major effect on its operations and financial results. Accordingly, the operations from the Gainesville Transaction are not reported in discontinued operations.

 

The Company determined the value of the Gainesville Transaction’s contingent consideration using the following valuation approaches:

 

·

The fair value of the two regulatory milestones was estimated based on applying the likelihood of achieving the regulatory milestone and applying a discount rate from the expected time the milestone occurs to the balance sheet date. The Company expects the regulatory milestone events to occur within the next one and two years, respectively, and used a discount rate of 4.3% and 5.3%, respectively, for each of these events.

 

·

To estimate the fair value of future royalties on net sales of IV/IM and parenteral forms of Meloxicam, the Company assessed the likelihood of IV/IM and parenteral forms of Meloxicam being approved for sale and estimated the expected future sales given approval and IP protection. The Company then discounted these expected payments using a discount rate of 17.0%, which the Company believes captures a market participant’s view of the risk associated with the expected payments.

 

·

The sales milestones were determined through the use of a real options approach, where net sales are simulated in a risk-neutral world. To employ this methodology, the Company used a risk-adjusted expected growth rate based on its assessments of expected growth in net sales of the approved IV/IM and parenteral forms of Meloxicam, adjusted by an appropriate factor capturing their respective correlation with the market. A resulting expected (probability-weighted) milestone payment was then discounted at a cost of debt plus an alpha, which ranged from 12.1% to 13.7%.

 

During the three months ended March 31, 2016, the Company determined that the value of the Gainesville Transaction’s contingent consideration increased by $1.9 million to $57.2 million due primarily to a shorter time to payment on the milestones and royalties included in the contingent consideration. This increase was recorded as “Increase in the fair value of contingent consideration” in the accompanying condensed consolidated statements of operations and comprehensive loss.

 

The warrants the Company received to purchase 350,000 shares of Recro common stock have a fair value of $1.0 million at March 31, 2016 and are being recorded within “Other assets” in the accompanying condensed consolidated balance sheets. The Company used a Black-Scholes model with the following assumptions to determine the fair value of these warrants at March 31, 2016:

 

 

 

 

 

 

Closing stock price at March 31, 2016

 

$

5.97

 

Warrant strike price

 

$

19.46

 

Expected term (years)

 

 

6.02

 

Risk-free rate

 

 

1.38

%

Volatility

 

 

77.4

%

 

A decrease in the fair value of the warrants of $0.8 million during the three months ended March 31, 2016 was recorded within “Other expense, net” in the accompanying condensed consolidated statements of operations and comprehensive loss.

 

 

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

4. INVESTMENTS

 

Investments consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Amortized

 

Gross Unrealized

Estimated

 

 

 

Cost

 

Gains

 

Losses(1)

 

Fair Value

 

 

 

(In thousands)

 

March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

$

226,243

 

$

213

 

$

(25)

 

$

226,431

 

Corporate debt securities

 

 

163,918

 

 

150

 

 

(75)

 

 

163,993

 

International government agency debt securities

 

 

35,013

 

 

13

 

 

(36)

 

 

34,990

 

Total short-term investments

 

 

425,174

 

 

376

 

 

(136)

 

 

425,414

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

 

63,945

 

 

 —

 

 

(40)

 

 

63,905

 

Corporate debt securities

 

 

26,778

 

 

 —

 

 

(75)

 

 

26,703

 

 

 

 

90,723

 

 

 —

 

 

(115)

 

 

90,608

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed term deposit account

 

 

1,667

 

 

 —

 

 

 —

 

 

1,667

 

Certificates of deposit

 

 

1,715

 

 

 —

 

 

 —

 

 

1,715

 

 

 

 

3,382

 

 

 —

 

 

 —

 

 

3,382

 

Total long-term investments

 

 

94,105

 

 

 —

 

 

(115)

 

 

93,990

 

Total investments

 

$

519,279

 

$

376

 

$

(251)

 

$

519,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

175,098

 

$

20

 

$

(179)

 

$

174,939

 

U.S. government and agency debt securities

 

 

141,789

 

 

51

 

 

(104)

 

 

141,736

 

International government agency debt securities

 

 

37,070

 

 

 —

 

 

(76)

 

 

36,994

 

Total short-term investments

 

 

353,957

 

 

71

 

 

(359)

 

 

353,669

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency debt securities

 

 

211,216

 

 

 —

 

 

(764)

 

 

210,452

 

Corporate debt securities

 

 

38,381

 

 

 —

 

 

(111)

 

 

38,270

 

International government agency debt securities

 

 

12,039

 

 

 —

 

 

(71)

 

 

11,968

 

 

 

 

261,636

 

 

 —

 

 

(946)

 

 

260,690

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed term deposit account

 

 

1,666

 

 

 —

 

 

 —

 

 

1,666

 

Certificates of deposit

 

 

1,715

 

 

 —

 

 

 —

 

 

1,715

 

 

 

 

3,381

 

 

 —

 

 

 —

 

 

3,381

 

Total long-term investments

 

 

265,017

 

 

 —

 

 

(946)

 

 

264,071

 

Total investments

 

$

618,974

 

$

71

 

$

(1,305)

 

$

617,740

 

 

(1)

 

Losses represent marketable securities that were in loss positions for less than one year.

 

The proceeds from the sales and maturities of marketable securities, which were primarily reinvested and resulted in realized gains and losses, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(In thousands)

    

2016

    

2015

 

Proceeds from the sales and maturities of marketable securities

 

$

158,224

 

$

98,927

 

Realized gains

 

$

63

 

$

11

 

Realized losses

 

$

28

 

$

 —

 

 

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ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

The Company’s available-for-sale and held-to-maturity securities at March 31, 2016 had contractual maturities in the following periods:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

Held-to-maturity

 

 

    

Amortized

    

Estimated

    

Amortized

    

Estimated

 

(In thousands)

 

Cost

 

Fair Value

 

Cost

 

Fair Value

 

Within 1 year

 

$

255,325

 

$

255,260

 

$

1,715

 

$

1,715

 

After 1 year through 5 years

 

 

260,572

 

 

260,762

 

 

1,667

 

 

1,667

 

Total

 

$

515,897

 

$

516,022

 

$

3,382

 

$

3,382

 

 

At March 31, 2016, the Company believed that the unrealized losses on its available-for-sale investments were temporary. The investments with unrealized losses consisted primarily of U.S. government and agency debt securities and corporate debt securities. In making the determination that the decline in fair value of these securities was temporary, the Company considered various factors, including, but not limited to: the length of time each security was in an unrealized loss position; the extent to which fair value was less than cost; financial condition and near-term prospects of the issuers; and the Company’s intent not to sell these securities and the assessment that it is more likely than not that the Company would not be required to sell these securities before the recovery of their amortized cost basis.

 

In February 2016, the Company entered into a collaboration and license option agreement with Reset Therapeutics, Inc. (“Reset”). The Company made an upfront, non-refundable payment of $10.0 million in partial consideration of the grant to the Company of the rights and licenses included in such agreement, which was included in R&D expense in the three months ended March 31, 2016, and simultaneously made a $15.0 million investment in exchange for shares of Reset’s Series B Preferred Stock. The Company is accounting for its investment in Reset under the equity method based on its percentage of ownership, its seat on the board of directors and its belief that it can exert significant influence over the operating and financial policies of Reset. The Company’s $15.0 million investment at March 31, 2016 is included in “Other assets” in the accompanying condensed consolidated balance sheets.

 

In May 2014, the Company entered into an agreement whereby it is committed to provide up to €7.4 million to a partnership, Fountain Healthcare Partners II, L.P. of Ireland (“Fountain”), which was created to carry on the business of investing exclusively in companies and businesses engaged in the healthcare, pharmaceutical and life sciences sectors. The Company’s commitment represents approximately 7% of the partnership’s total funding, and the Company is accounting for its investment in Fountain under the equity method.  At March 31, 2016, the Company had made payments of, and its investment is equal to, $1.5 million (€1.3 million), which is included within “Other assets” in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2016, the Company recorded a reduction in its investment in Fountain of less than $0.1 million which represented the Company’s proportional share of Fountain’s net loss for the period.

 

5. FAIR VALUE MEASUREMENTS

 

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

 

 

    

 

 

    

 

 

 

(In thousands)

 

2016

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,667

 

$

1,667

 

$

 —

 

$

 —

 

U.S. government and agency debt securities

 

 

290,336

 

 

162,061

 

 

128,275

 

 

 —

 

Corporate debt securities

 

 

190,696

 

 

 —

 

 

190,696

 

 

 —

 

International government agency debt securities

 

 

34,990

 

 

 —

 

 

34,990

 

 

 —

 

Contingent consideration

 

 

57,200

 

 

 —

 

 

 —

 

 

57,200

 

Common stock warrants

 

 

951

 

 

 —

 

 

 —

 

 

951

 

Total

 

$

575,840

 

$

163,728

 

$

353,961

 

$

58,151

 

 

 

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ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 

    

 

 

    

 

 

    

 

 

 

 

 

2015

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,666

 

$

1,666

 

$

 —

 

$

 —

 

U.S. government and agency debt securities

 

 

352,188

 

 

214,456

 

 

137,732

 

 

 —

 

Corporate debt securities

 

 

213,209

 

 

 —

 

 

213,209

 

 

 —

 

International government agency debt securities

 

 

48,962

 

 

 —

 

 

48,962

 

 

 —

 

Contingent consideration

 

 

55,300

 

 

 —

 

 

 —

 

 

55,300

 

Common stock warrants

 

 

1,821

 

 

 —

 

 

 —

 

 

1,821

 

Total

 

$

673,146

 

$

216,122

 

$

399,903

 

$

57,121

 

 

The Company transfers its financial assets and liabilities, measured at fair value on a recurring basis, between the fair value hierarchies at the end of each reporting period. There were no transfers of any securities between the fair value hierarchies during the three months ended March 31, 2016.

 

The Company’s investments in U.S. government and agency debt securities, international government agency debt securities and corporate debt securities classified as Level 2 within the fair value hierarchy were initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing market-observable data. The market-observable data included reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validated the prices developed using the market-observable data by obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.

 

The following table is a rollforward of the fair value of the Company’s assets whose fair values were determined using Level 3 inputs at March 31, 2016:

 

 

 

 

 

 

(In thousands)

    

Fair Value

 

Balance, January 1, 2016

 

$

57,121

 

Increase in fair value of contingent consideration

 

 

1,900

 

Decrease in fair value of warrants

 

 

(870)

 

Balance, March 31, 2016

 

$

58,151

 

 

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximated fair value due to their short-term nature. The fair value of the remaining financial instruments not currently recognized at fair value on the Company’s condensed consolidated balance sheets consisted of the $300.0 million, seven-year term loan bearing interest at LIBOR plus 2.75% with a LIBOR floor of 0.75% (“Term Loan B-1”) and the $75.0 million, four-year term loan bearing interest at LIBOR plus 2.75%, with no LIBOR floor (“Term Loan B-2” and together with Term Loan B-1, the “Term Loan Facility”). The estimated fair value of these term loans, which was based on quoted market price indications (Level 2 in the fair value hierarchy) and which may not be representative of actual values that could have been or will be realized in the future, was as follows at March 31, 2016:

 

 

 

 

 

 

 

 

 

    

Carrying

    

Estimated

 

(In thousands)

 

Value

 

Fair Value

 

Term Loan B-1

 

$

286,664

 

$

283,710

 

Term Loan B-2

 

$

61,825

 

$

61,566

 

 

 

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ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

6. INVENTORY

 

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Inventory consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

(In thousands)

 

2016

 

2015

 

Raw materials

 

$

14,271

 

$

16,445

 

Work in process

 

 

17,204

 

 

12,423

 

Finished goods(1)

 

 

13,342

 

 

9,543

 

Total inventory

 

$

44,817

 

$

38,411

 

 

(1)

 

At March 31, 2016 and December 31, 2015, the Company had $3.2 million and $3.0 million, respectively, of finished goods inventory located at its third-party warehouse and shipping service provider.

 

 

 

7. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

(In thousands)

 

2016

 

2015

 

Land

 

$

5,913

 

$

5,913

 

Building and improvements

 

 

138,789

 

 

136,797

 

Furniture, fixture and equipment

 

 

222,958

 

 

218,718

 

Leasehold improvements

 

 

16,632

 

 

16,597

 

Construction in progress

 

 

54,267

 

 

51,542

 

Subtotal

 

 

438,559

 

 

429,567

 

Less: accumulated depreciation

 

 

(182,233)

 

 

(174,748)

 

Total property, plant and equipment, net

 

$

256,326

 

$

254,819

 

 

 

8. GOODWILL AND INTANGIBLE ASSETS

 

Goodwill and intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2016

 

(In thousands)

    

Weighted
Amortizable
Life (Years)

    

Gross
Carrying
Amount

    

Accumulated
Amortization

    

Net Carrying
Amount

 

Goodwill

 

 

 

$

92,873

 

$

 —

 

$

92,873

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration agreements

 

12

 

$

465,590

 

$

(180,675)

 

$

284,915

 

NanoCrystal technology

 

13

 

 

74,600

 

 

(19,808)

 

 

54,792

 

OCR technologies

 

12

 

 

42,560

 

 

(18,237)

 

 

24,323

 

Total

 

 

 

$

582,750

 

$

(218,720)

 

$

364,030

 

 

Based on the Company’s most recent analysis, amortization of intangible assets included within its condensed consolidated balance sheet at March 31, 2016 is expected to be approximately $60.0 million, $60.0 million, $60.0 million, $55.0 million and $50.0 million in the years ending December 31, 2016 through 2020, respectively. Although the Company believes such available information and assumptions are reasonable, given the inherent risks and uncertainties underlying its expectations regarding such future revenues, there is the potential for the Company’s actual results to vary significantly from such expectations. If revenues are projected to change, the related amortization of the intangible assets will change in proportion to the change in revenues.

 

On January 21, 2016, following the Company’s press release regarding its ALKS 5461 development program, the Company’s stock price declined by 44% from the previous day’s closing price, which the Company considered to be an impairment triggering event. To determine if its goodwill was impaired, the Company assessed qualitative factors to determine whether it was necessary to perform the two-step impairment test. Based on the weight of all available

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

evidence, the Company determined that the fair value of its reporting unit more-likely-than-not exceeded its carrying value.

 

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following: 

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

(In thousands)

 

2016

 

2015

 

Accounts payable

 

$

33,010

 

$

37,401

 

Accrued compensation

 

 

24,046

 

 

40,371

 

Accrued sales discounts, allowances and reserves

 

 

31,652

 

 

28,449

 

Accrued taxes

 

 

20,627

 

 

1,195

 

Accrued other

 

 

48,145

 

 

61,319

 

Total accounts payable and accrued expenses

 

$

157,480

 

$

168,735

 

 

10. LONG-TERM DEBT

 

Long-term debt consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

(In thousands)

 

2016

 

2015

 

Term Loan B-1, due September 25, 2019

 

$

286,664

 

$

287,207

 

Term Loan B-2, due September 25, 2016

 

 

61,825

 

 

62,737

 

Total

 

 

348,489

 

 

349,944

 

Less: current portion

 

 

(64,825)

 

 

(65,737)

 

Long-term debt

 

$

283,664

 

$

284,207

 

 

11. SHARE-BASED COMPENSATION

 

Share-based compensation expense consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(In thousands)

 

2016

 

2015

 

Cost of goods manufactured and sold

 

$

2,279

 

$

2,017

 

Research and development

 

 

6,430

 

 

4,457

 

Selling, general and administrative

 

 

15,547

 

 

10,855

 

Total share-based compensation expense

 

$

24,256

 

$

17,329

 

 

At March 31, 2016 and December 31, 2015, $1.1 million of share-based compensation cost was capitalized and recorded as “Inventory” in the accompanying condensed consolidated balance sheets.

 

12. LOSS PER SHARE

 

Basic loss per ordinary share is calculated based upon net loss available to holders of ordinary shares divided by the weighted average number of shares outstanding. For the three months ended March 31, 2016 and 2015, as the Company was in a net loss position, the diluted loss per share does not assume conversion or exercise of stock options and awards as they would have an anti-dilutive effect on loss per share.

 

The following potential ordinary equivalent shares have not been included in the net loss per ordinary share

16


 

Table of Contents

ALKERMES PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS — (Unaudited) (Continued)

 

calculation because the effect would have been anti-dilutive:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(In thousands)

 

2016