Benzinga | Dec 10, 2020 07:06AM EST

Alkermes Announces Strategic Value Enhancement Plan And Continued Board Refreshment; New Committee Will Evaluate Strategic Options Related To Non-Core Assets

DUBLIN, Dec. 10, 2020 /PRNewswire/ -- Alkermes plc (NASDAQ:ALKS) today announced a Value Enhancement Plan, or the Plan, designed to drive growth, improve operational and financial performance and enhance shareholder value, as the company continues to advance its mission of developing new medicines designed to have a real-world impact in the treatment of serious mental illness, addiction and cancer. The Plan includes a commitment to multi-year profitability targets, a review and optimization of the company's cost structure, potential monetization of non-core assets, and continued governance enhancements, including the addition of two new independent directors with substantial financial and operational expertise to the company's board of directors (the "Board").

The Value Enhancement Plan is the result of an intensive process initiated over the last several months and is intended to position the company to efficiently execute on its business strategy, support the continued growth of its commercial products, including the potential approval and launch of ALKS 3831, and further the advancement of its pipeline of development programs. The Plan builds upon the company's implementation of a restructuring and addition of two new independent directors to the Board in the fall of 2019 and the company's board refreshment efforts announced in July 2020. These initiatives also follow constructive dialogue with the company's shareholders, including funds advised by Elliott Advisors (UK) Limited ("Elliott"), and entry into an associated cooperation agreement between Alkermes and affiliates of Elliott.

"Alkermes' Board and management are committed to engaging with shareholders and understanding their perspective and have been working on initiatives to drive greater operational efficiency, with a focus on shareholder value creation. These new initiatives also support our strong growth trajectory, which has come more clearly into focus over the past few months, with the positive advisory committee meeting and constructive regulatory interactions for ALKS 3831 for schizophrenia and bipolar I disorder, and with new clinical data emerging in our ALKS 4230 immuno-oncology program," said Richard Pops, Chairman and Chief Executive Officer of Alkermes. "We believe these actions, alongside our focus on commercial execution, the potential approval and commercial launch of ALKS 3831, and the continued development of our pipeline candidates, position the company well for long-term value creation."

A spokesperson for Elliott said, "Elliott is highly supportive of the initiatives announced today and commends the Board and management of Alkermes on taking these steps. From our dialogue with management we are confident that the Company is committed to creating shareholder value. Further, both David Daglio and Brian McKeon will add significant value to Alkermes' Board and the newly formed board committee. Alkermes is significantly undervalued given its attractive assets and growth potential, and we are confident that these new initiatives will yield meaningful share price upside. We thank Richard and the rest of the team for their constructive dialogue and look forward to an ongoing engagement with the Company."

Profitability Targets & Cost Structure Optimization Efforts

As part of the Value Enhancement Plan, the company today announced its commitment to achieving:

* FY 2023 non-GAAP net income equal to 25% of the company's total revenues and EBITDA margin1 of 20% of total revenues

* FY 2024 non-GAAP net income equal to 30% of the company's total revenues and EBITDA margin of 25% of total revenues

The company plans to achieve these margins through disciplined management of the company's cost structure combined with revenue growth, and is committed to meeting these targets in a range of scenarios. To underline Alkermes' commitment to strong profitability, the compensation committee of the Board will consider these targets in its design of this year's long-term incentive plan for senior management.

Alkermes has already undertaken several important initiatives to support these targets, including a reorganization of the company's commercial infrastructure, which was implemented in November 2020. As part of the reorganization, several functional areas within the company's commercial organization were consolidated to improve efficiencies and approximately 80 full-time positions were reallocated to support the anticipated launch of ALKS 3831, reducing the need for previously planned new hires. Additionally, the company has commenced an extensive review of its operations and structure both internally and with external advisors to identify potential areas for improved efficiencies. This review is ongoing, and the company plans to provide an update on the findings and planned initiatives resulting from the review following its conclusion, expected in the first quarter of 2021.

Evaluation of Strategic Opportunities

A newly set-up committee of the board will evaluate a broad range of potential strategic options related to Alkermes' non-core assets, including monetization and divestiture opportunities.

In addition, the company underscored its prior commitment to exploring a strategic collaboration for ALKS 4230, the company's immuno-oncology pipeline candidate, as an important element of the company's focus on realizing the full potential of ALKS 4230 across a broad spectrum of possible treatment combinations, tumor types and lines of therapy. Alkermes believes that accumulating objective response data and subcutaneous administration data from its ARTISTRY development program for ALKS 4230 will serve as the basis for potential collaboration discussions.