Greetings, and welcome to the Alkermes Fourth Quarter 2021 Earnings Call. My name is Ralph, and I will be your operator for today’s call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thanks Ralph. Good morning. Welcome to the Alkermes Plc’s conference call to discuss our financial results and business update for the quarter and year ended December 31, 2021. With me today are Richard Pops, our CEO; Iain Brown, our CFO, and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release and related financial tables and reconciliation of the GAAP to non-GAAP financial measures that we’ll discuss today. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual and quarterly report filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we’ll open the call for Q&A. I now turn the call over to Richard.

That’s great. Thank you, Sandy. Good morning, everyone. 2021 was a critical year in the development and evolution of Alkermes. We had three explicit overarching goals, growing our commercial business, expanding and advancing our development pipeline and driving profitability. We were successful in all three of those domains. I will start first with the commercial business. The year was highlighted by the FDA approval and launch of evolving, our first oral medicine for the treatment of adults with schizophrenia and for the treatment of adults with bipolar 1 disorder. The launch is off to a strong start. And there are reasons why. First is the nature of the medicine itself. LYBALVI is addressing an unmet need in the market. The second is the launch benefits from the commercial infrastructure we built in psychiatry and our presence and success with ARISTADA. With these two medicines, we have an important and growing commercial franchise in psychiatry. For VIVITROL we redefined began executing our new growth strategy focused on the alcohol dependence indication. So these products LYBALVI, ARISTADA and VIVITROL together with VUMERITY represent our four key growth drivers. With respect to the pipeline, we’re guided by a focused research and development strategy that prioritizes programs with the highest potential return on investment. During the year, we initiated Nemvaleukin clinical studies to support potential registration in two tumor types, where patients have limited treatment options and significant unmet need remains. We also initiated first in human study for our HDAC inhibitor ALKS 1140. We nominated and began in the IND enabling activities for ALKS 2680 orexin 2 receptor agonist and achieve preclinical proof of concept for our tumor target IL-12 program. From a financial perspective, we executed the plan with respect to our 2021 objectives and we were on track to achieving our…

Thank you, Rich and hello, everyone. Our 2021 results reflect strong execution against our strategic priorities as we manage the business to the high end of our revenue expectations and exceeded expectations on the bottom line. I’m pleased with these results, which reflect the company’s progress over the last several years in fueling top line growth through Alkermes developed products, coupled with a continued focus on disciplined expense management and operational efficiencies. In the next few minutes, I’ll take you through the details of our 2021 results, then turn to our 2022 financial expectations and underlying assumptions, and then finished with our updated long term profitability targets. So starting with our 2021 financial performance, we generated total revenues of $1.17 billion, representing a year-over-year increase of approximately 13%. This increase was primarily driven by double digit year-over-year growth of both VIVITROL and ARISTADA as well as growth in VUMERITY at royalty and manufacturing revenues. From a bottom line perspective, we recorded GAAP net loss of $48.2 million compared to $110.9 million in the prior year, and non-GAAP net income of $129.1 million for the year, compared to 68.6 million in 2020. Turning to VIVITROL in 2021, we recorded net sales of $343.9 million, up 11% year-over-year driven primarily by an increase in units of approximately 10%. This increase reflects the execution of our strategy to increase awareness and drive adoption of VIVITROL as an important treatment option for alcohol dependence. Year-over-year gross to net adjustments increase to 51.5% from 49.9% in 2020, primarily reflecting an increase in Medicaid utilization. Now in the fourth quarter VIVITROL net sales were $92 million reflecting 4% growth sequentially and 15% growth year-over-year. Gross to net adjustments of 50.2% reflected favorability in Medicaid utilization and a continued lower rate of returns. Inventory levels increased by…

Thanks Iain and good morning, everyone. The fourth quarter marked the beginning of a new chapter for Alkermes within the commercial neuro-psychiatry landscape. Over several years, we have built a substantial and sophisticated set of capabilities necessary to commercialize medicines for patients with serious mental illness. And the launch of LYBALVI our second anti-psychotic medication, we are leveraging our established commercial infrastructure, as well as the market insights and relationships that we have built through our presence in the market with ARISTADA. These capabilities and insights are valuable assets and we expect they will provide a strong platform for growth. Overall, I’m encouraged with our performance in 2021, as our team delivered strong commercial execution against the backdrop of dynamic market conditions. VIVITROL surpassed pre-pandemic volumes driven by our strategic focus on the alcohol dependence indication. ARISTADA gained market share and remained the fastest growing long acting, injectable and ALAI market on a month of therapy basis. And we took steps to optimize our commercial field infrastructure to efficiently and effectively launch LYBALVI which we make commercially available in October. So starting there with LYBALVI. LYBALVI addresses a compelling real world need of people suffering from schizophrenia and bipolar 1 disorder offering proven efficacy while being associated with less weight gain versus olanzapine in adults with schizophrenia in the pivotal, Enlightened 2 clinical trial. I’m encouraged by the progress that we have made since launch with net sales in the fourth quarter of $8.2 million driven by strong execution and broad healthcare provider awareness of LYBALVI. Early in the launch, we’re focused on two primary key performance indicators, total prescriptions and prescriber breath. In the fourth quarter, we established a strong trajectory in terms of weekly total prescriptions of the LYBALVI despite the holidays and a surge in COVID-19 cases.…

That’s great. Thank you, Todd. So as you’ve just heard, Alkermes is establishing a distinctive commercial presence in the field of neuro-psychiatry and addiction. LYBALVI is an important new element. Early trends for the launch have been strong and feedback from providers indicates that the value proposition is simple, clear and resonating. This is gratifying and it strengthens our belief that LYBALVI has significant potential to be important medicine in the treatment of schizophrenia and bipolar 1 disorder. The data supporting the weight mitigating properties of LYBALVI compared to olanzapine continue to accumulate in the real world setting and in the clinic. Just last week, we announced positive top line results from the Enlightened Early study a phase 3B study evaluating the effect of LYBALVI compared to olanzapine on body weight in patients with schizophrenia, schizophrenic form disorder or bipolar 1 disorder who were early in their illness. This study met its pre-specified primary endpoint, as patients treated with LYBALVI experience significantly less weight gain than patients treated with olanzapine at week 12. Consistent with the Enlightened 2 pivotal study, and numerical difference in average weight gain between treatment arms was observed early in treatment, and continued to separate through studies pre-specified primary endpoint. The safety profile of LYBALVI was consistent with previous studies and with this label. So we look forward to presenting additional results from Enlightened Early and upcoming scientific meetings. Nemvaleukin is emerging as a differentiated IL-2 variant with accumulating clinical evidence of anti tumor activity, both alone as mono-therapy and in combination with the checkpoint inhibitor. This week at the ASCO GU meeting, we will present additional data for the mono-therapy expansion stage of artistryARTISTRY-1 in patients with renal cell carcinoma. The mono-therapy anti tumor activity has been a key differentiating feature of Nemvaleukin that distinguishes…

Thanks, Richard. All right, Ralph, I think we’re ready to pivot to the Q&A.

Thanks. Sandy. [Operator Instructions] And our first question comes from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your questions.

Alright, thanks for taking the questions. Congratulations on the progress. And thank you for all the color. So maybe just two for me. First in terms of LYBALVI gross to net weight. What do you think that will stabilize at? Is it sort of closer to the 2022 guidance, or maybe closer to the VIVITROL, ARISTADA number? How do you think about balancing access versus script growth in 2022 and beyond? And maybe I’ll stick around to it probably goes a little bit in line with that. Thank you for the updated longer term profitability targets, but it’s going to continue to dig a little. Did you consider putting up revenue targets publicly? Do you think it’s something you could put out in the future just to sort of shore up that you do have growth in the business? Thank you.

Okay. So why don’t I take a crack of those two? Thanks for the questions Brandon. On the LYBALVI gross to nets, what we said is we would expect that to settle out in the long-term in the mid 40% range. So that would be slightly higher than the 40% range we talked about for fiscal 2022. It’s going to be a little bit dynamic as LYBALVI sort of works its way through the access situations in each of the three different channels that we see. And also the particular indication whether it’s schizophrenia or bipolar has an implication for gross in essence as well, but I think we said at launch, we would expect mid 30s initially going to mid 40s, steady stage. On the long-term profitability targets I’ll just try and make a couple of comments there. Provide a little bit more color. So I think restating the targets really highlights the company’s continued commitment to long-term profitability. I think they are margin targets. So revenue matters and expense management matters. I think right now, we’re really focused on managing, driving the profitability through driving the top line through the proprietary products VIVITROL, ARISTADA, LYBALVI as I mentioned. VUMERITY is going to be an important contributor to that as well. And we’re very much focused on managing cost structure. So we’re not going to provide long-term revenue targets at this point in time. But all to say we’re really focused on managing the income statement to be able to achieve these targets in 24, 25 and 26.

Hey Brandon it’s Rich. I just want to implicit in your question, the first question was a concept I want to make sure we address which is whether or not we’re using gross to net in order to gain additional access in the launch year. And that has not been our strategy. Our strategy has been to drive demand for the product through physicians, desire to use it with their patients, and then evolved into our contracting strategies as that demand grows over time.

Great, thank you to both of you. I appreciate all the color.

Our next question comes from the line of Vamil Divan with Mizuho Securities. Please proceed with your questions.

Great. Thanks for taking my question. So maybe also one around LYBALVI one around over guidance. So like LYBALVI just curious if you could share a little bit more in terms of the initial risk in terms of the initial reception you’re seeing from that product in the market, and also in the fourth quarter number was there. Is there any sort of inventory stocking component that we should sort of keep in mind your guidance for this year certainly is higher than we were expecting, but just trying to get a sense of the underlying demand. And then second, I like how you’re sort of handling the relative situation from a forward looking perspective. But can you just give us a sense because we get this question a lot around timing, and when we might hear more on the royalty? I know you are looking to speak to J&J and kind of open all options. But I don’t know if there’s anything you can share around how long this process might take to play out and when we might hear more from all of you. Thank you.

Good morning Vamil. It’s Rich. I’ll have Todd answer the first one. I’ll pick up the second.

Yes, I’ll start with LYBALVI. So first off is we are really encouraged by the initial launch momentum as I said in the prepared remarks, and Q4 according to ACWIA approximately 3,800 prescriptions, broad healthcare adoption 1,160 providers overall as well and the feedback. So we’re spending a lot of time doing market research with our customers, and also talking to our field organization as well. And our feedback from ATPs, payers and our team on the ground is really consistent throughout the research. What we’re hearing is that the clinical profile, LYBALVI clinical data is being well received. We’re seeing very clearly that the broad indications and utility for different patient types. So that’s the switch market, it’s schizophrenia, it’s bipolar across the board, we’re seeing broad utilization across all four doses which was a key strategic advantage for the product, and physicians are telling us they think that this is a key differentiator. So the value proposition, it’s early, but our belief is the value proposition is resonating right now. And we really have an opportunity to capitalize just on the efficacy of olanzapine with a low incidence of long term weight gain from our clinical programs. So we’re encouraged right now. The feedback from ATP is good. The feedback from patients is good right now and in the driver, again, is that it’s a positive response to olanzapine but the patients are experiencing less, less weight gain. So we’re encouraged by the initial feedback.

That’s right. And then Vamil just to add one thing, specifically around the inventory, I did mention in the earlier comments that we had about $4.5 million of stocking inventory, and that that would burn off in Q1 and that’s why I pointed you towards the $8 million to $10 million of net sales in the first quarter of this year.

And with respect to J&J Vamil, I can’t really give you any precision around timing. We have begun the engagement with J&J, which is, which is encouraging in that sense; I just want to say that our belief in the strength of our argument is stronger than ever. It was always strong and is undiminished. But it’s interesting if the virtue as Iain mentioned in his remarks, if you take out the J&J royalties, even for the modeling purposes, as you know, it does reveal the underlying strength and the growth in the base business. And that actually is really useful, I think, for investors to take a look at. What’s not complicated if the J&J numbers come back in, recognize that we’re planning for the expiration of those royalties over time anyway 2024 in the U.S., 2026 ex-U.S. So they’re going to go away. And what is left is this growing business with this being effectively managed towards increasing profitability.

So thanks, also for clarifying the inventory. Sorry, I missed in the prepared remarks, juggling a few different things. Thanks so much.

Our next question is from the line of Akash Tiwari with Jeffries. Please proceed with your question.

So it’s hard to fully back this out. But would it be fair to say that your expectations on LYBALVI performance between now and 2025 would have to be higher than that in consensus for you to hit your long-term margin targets? Do you agree with that or not? And then with your new long term guidance, what programs were specifically discontinued and what was the cost savings associated with that both in 2022 and beyond? Thank you.

So I’ll take a crack at that one. With regard to the LYBALVI sales, I think it’s fair to say that the company’s expectations are probably slightly more robust than the streets current level of consensus. So take that for what you will. And then on the R&D side, I’m not going to go into specific programs. I think we went back in and we’ve looked at some of the early stage programs that we were working on and we have either partners to the side, or, as they say, if they didn’t meet the internal stage gates we canceled those. So all that really factored into the guidance that we provided today for the R&D expense number.

And Akash, it’s Rich. I would just say first, good morning. Second of all, the question on the LYBALVI revenue is good one because it, obviously we believe that there’s a great potential for LYBALVI going forward. But the purpose of stating the explicit profitability targets is to say, we’re going to drive the business from the management side to hit them irrespective of that trajectory. It gets very easy if LYBALVI exceeds expectations, but LYBALVIis going to continue to grow. VUMERITY is growing. ARISTADA and VIVITROL are strong products. So we have a robust top line that we can manage to and that’s the point.

Thank you.

The next question is from the line of Cory Kasimov with JPMorgan. Please proceed with your questions.

This is Tiffany on for Corey, congrats on the quarter. I just wanted to ask on how much of an impediment COVID has been with LYBALVI first quarter on the market obviously, looks pretty solid overall, but just wondering, kind of COVID headwinds and how they play into that. And then also how much you’re able to leverage your presence with ARISTADA to overcome some of these obstacles. Thanks.

Yes, I’ll take that one. Our original hypothesis going into the launch is that we have real leverage in the business and that is absolutely playing out right now. We’re hearing that consistently from our field team also through physicians, through our surveys as well too. First and foremost, as physicians don’t believe that ARISTADA and LYBALVI compete. They think that they’re synergistic together and we’re seeing leverage in our business with our field infrastructure. That’s the reason why we didn’t have to have it such a dramatic increase in our SG&A expenses to actually launch the product because we have access and we have relationships with about 60% of our targeted audience. To the earlier comments we made in our prepared remarks, we did see a slowdown and patient diagnosis overall in the market for addiction but also for psychiatry, as well in the fourth quarter. In fact ACWIA reported a little bit of a slowdown and diagnose patients and also patients originating in person as well too. We didn’t quite see any headwinds there with for LYBALVI for the main reason why that physicians are targets are very comfortable with olanzapine and by being comfortable with olanzapine regardless of the modality in person telehealth or in COVID they’re more comfortable prescribing a product like LYBALVI. So that’s an advantage for LYBALVI. They’re also more comfortable with ARISTADA because of our presence in the market for so long. So when we have relationships, that helps us from COVID impact perspective, but we did see some delays and patient initiation in the fourth quarter, as we said. We believe that that’s going to completely evolve and change throughout the year, and we’re well positioned to maximize our infrastructure.

Our next question is coming from the line of Umer Raffat with Evercore ISI. Please proceed with your question.

Hi guys. Thanks for taking my question. I have two if I may. First, is it fair to assume based on the forward looking guidance, you guys are putting out medium term? You’re setting an EPS floor of at least 250? Am I correct in doing that sort of math? And then secondly, as it relates to specifically on LYBALVI number in that 2025, 2026 timeframe. It’s hard to get to that 30% net income margin unless I assume that LYBALVI would be closer to 500 million to 600 million in that time frame rather than 300 million to 400 million in consensus. So am I correct in that direction of at least $200 million of upside in LYBALVI versus what consensus has? Thank you very much.

I think on your last question on the LYBALVI, I think consensus continues to evolve with regard to that product. We’re obviously in the launch phase. I think 2022 is going to tell us a lot about the future trajectory of the product. As we mentioned that initial gaining access is going to take a 12 to 18 month timeframe. So 2022 is going to reveal a lot. And then with regard to the longer term profitability targets we’re really focused in on the non GAAP net income and EBITDA measured we talked to today and again as we go through 22 and beyond, we’ll be able to focus on those measures. So, we haven’t specifically talked about EPS at this point in time. We’re just focused on managing the top line and managing the cost structure in order to be able to hit EBITDA and our non-GAAP income measures.

Thank you. Our next question is from the line of Paul Matteis with Stifel. Please proceed with your question.

This is Katie, on for Paul. Just a quick question from us. We were wondering if you could clarify where 1140 is in development, and what you’re looking to see in order to enter a phase one. And any inclinations on indication strategy would be helpful as well. Thank you.

Hi Katie, this is Rich. You may not have heard the prepared remarks. So we just gave an update on the 1140. It’s in the clinic right now. So it’s in its first human study and in the single escalating dose, and we’re pausing right now after three dose escalations, because we have a higher than predicted presence of the primary metabolite, which is metabolized at a higher level in humans than animals. So we want to just reestablish those exposure margins in animals before we continue the dose escalation, and we see no safety signals. So we were encouraged to keep going, but we just need to do a little bit more work pre-clinically before we continue the escalation.

The next question is from the line of Marc Goodman with SVB Leerink. Please proceed with your question.

This is [Indiscernible] on for Marc. You mentioned that you currently have similar you to utilization for schizophrenia and bipolar 1, but that the utilization may have an implication for gross to net. So just wondering if you have, if you expect similar utilization going forward or a modification of that? Thanks.

Yes. Absolutely. I’ll take that. It’s a little early right now. Once we get a little bit more time in our belt with utilization claims data, we’ll have a much better line of sight. I would say in general, the way to think about this is that LYBALVI is not being niched in any one patient population. We’re seeing broad utilization across schizophrenia and bipolar as well. Typically, in the bipolar market, you see a little bit higher concentration of reimbursement through commercial. We would assume that that would play through for LYBALVI over time, but at this point right now, it’s a little early.

Thank you. The next question is coming from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your question.

Good morning, everyone. Chris here on to Doug. So I just have a question about VIVITROL. With COVID seem to ease how do you expect us to alter kind of the alcohol versus opioid use disorder mix? And I guess, similarly, for the breakdown of the different ARISTADA products how do you expect the changing COVID landscape to impact that? Thank you.

Yes. I’ll start with that with first thinking about VIVITROL. First is we’re really encouraged that in 2021, we actually reestablished growth for VIVITROL. We actually exceeded our pre-pandemic volumes which is just a really strong indication of the strength of the team and the value proposition of VIVITROL. The way we’re thinking about VIVITROL now in the future is the dual indication. VIVITROL is well regarded in the AD market and AD market overall, is driving growth for the entire category. So if we take a step back, and we look at TRX is in terms of months of therapy, if you look at Q4 the market grew approximately 12%. VIVITROL continues to outpace that market. VIVITROL grew approximately 19% in terms of months of therapy. We did see some headwinds as I said earlier within the OD market. The OD market is relatively flat. VIVITROL has a slight decline within the OD market. We think that that will resolve itself over time, as pandemic related restrictions ease, as patients get access to treatment, mainly in the controlled setting category overall. Long term, we see the strongest market growth potential for the category being an alcohol dependence and VIVITROL as I said earlier, is very well received. Additionally when we talk to our customers, through all of our market research approximately 80% of surveyed HCPs believe that the prevalence of AD is increasing over the past year, and about 70% of those HCPs believe that the medication is an important part of the journey. So we think VIVITROL is very well positioned for sustained growth overtime being mainly driven from the alcohol dependence indication. As I said earlier, thinking a little bit about ARISTADA. ARISTADA continues to outpace the broader long acting market as well. The market has seen a slowdown, we saw a slowdown in 2020, we saw slowdown in 2021. Market continues to grow, but just not at the pace that we saw pre-pandemic ARISTADA growing three times faster than the market. We see that in terms of TRX MOTs we also see that with new patient starts, which we define as NBRXs ARISTADA continues to outpace the market. And it’s really being driven by the value propositions. Physicians are telling us that awareness levels are increasing. They believe in 1064, which is our two dose option and also our initial regimen as well too. So we believe that that ARISTADA will continue to grow in our assumptions are there ARISTADA will continue to outpace the market.

Awesome, thanks for the detail.

Thank you. The next question is from the line of Jason Gerberry with Bank of America. Please proceed with your question.

Hi, guys. Good morning. Thanks for taking my questions. First one for me on nemvaleukin. Just as we think about IV shorter infusion formats versus sub-q, what do you think is more important to driving a high value partnership? I would assume IV just given its physician administered and most of these combinations are IV anyway. So I’m just curious your views on that? And then ultimately, also, how important do you think the [Indiscernible] melanoma phase 3is later this year. It seems like investors are focused on that as potentially a catalyst for driving more enthusiasm from large pharma partners in IL-2 as a mechanism. And then just to summarize on the long term profitability, it sounds like if you see revenue scale upwards and beat consensus in a meaningful way you can maintain the current operating spend, maybe even grow it but alternatively, if revenues are falling short, in that 24, 25 timeframe, you have the flexibility to flex down your operating spend levels to make the target. So there’s a bit of fluidity in it. But it sounds like those would be the scenarios. Is that the right way to think about it? Thanks.

Good morning Jason. I think just I’ll quickly answer the last part, which is yes, that I think that’s the right way to think but Iain can give more color on that. But that’s exactly right. We have, it’s nice going into this with a billion dollar top line with this growing revenue line with new products involved and so it gives you a lot of flexibility as you model out, ideally we will continue to grow that revenue line but we have a lot of flexibility in the whole P&L. Nemvaleukin is interesting. On the route of administration, there’s biology, and there’s commercial to in play here, because the sub-q biology with the data we’ve shown so far, has a differential profile from the IV which may be good, bad or indifferent. Interferon gamma levels are different. And K levels are different via the sub-q route. And so we’re seeing responses sub-q, we want to see the test the durability of it versus the IV responses. So we think that’s a really important route. But depending on the physician, you talk to sub-q or less frequent IV are both important. What we’re testing in the clinic on the IV side is maybe once every three weeks cycle or twice every three weeks cycle IV, which we think is really commercially attractive. And the modeling exercise that I referred to, we’re modeling IV to IV is probably much more predictable, reliable than modeling IV to sub-q. So we’ll determine both empirically. But I think resolution of both the route and the schedule are really important foundations for expanding the program via collaboration. I do think the whole field is waiting with some anticipation to see the phase 3 is. We’ve always said we think the correlation between the outcomes of Nemvaleukin and [Indiscernible] is limited at best. But with that said, I think from an investor perspective, people do want to see whether that casts a shadow or a halo around the IL-2 space.

Thank you. At this time, we’ve reached the end of our question and answer session and I’ll hand the floor right to management for closing remarks.

Great, thanks, everyone, for joining us on the call today and we will be here at the company if you need anything else. Thanks so much.

Thank you. This will conclude today’s conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.