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Item 7. Management’s Discussion and Analysis

2025-02-12 compared with 2024-02-21 · 125 added, 161 removed, 297 unchanged (49% of the section changed)

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Factors that might cause future results to differ materially from those projected in the forward-looking statements also include, but are not limited to, those discussed in “Item 1A—Risk Factors” and elsewhere in this Annual Report.

A detailed discussion of our 2021 financial condition and results of operations, and of 2022 year-over-year changes as compared to 2021, can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 16, 2023.

A detailed discussion of our 2022 financial condition and results of operations, and of 2023 year-over-year changes as compared to 2022, can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 21, 2024.

We have a portfolio of proprietary products that we manufacture, market and sell in the U.S.—VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI.

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We expect VIVITROL, ARISTADA, ARISTADA INITIO, LYBALVI and VUMERITY to generate significant revenues for us in the near- and medium-term as we believe these products are singular or competitively advantaged products in their classes.

In 2023, our net income from continuing operations was $519.2 million, as compared to net loss from continuing operations of $33.2 million in 2022.

The increase in net income from continuing operations was primarily due to increases of $142.4 million in product sales, net, $411.4 million in manufacturing and royalty revenue and $99.6 million in income tax benefit, partially offset by increases of $34.9 million in cost of goods manufactured and sold and $99.0 million in selling, general and administrative expenses.

The increase in manufacturing and royalty revenue primarily relates to the successful outcome of the arbitration proceedings in respect of the long-acting INVEGA products.

In 2024, our net income from continuing operations was $372.1 million, as compared to $519.2 million in 2023.

The decrease in net income from continuing operations was primarily due to two significant one-time events in 2023, which were the receipt in June 2023 of back royalties and interest in respect of 2022 U.S.

sales of the long-acting INVEGA products, following the successful outcome of the arbitration proceedings related to such products, and the partial release of our valuation allowance maintained against certain Irish deferred tax assets.

These events were partially offset by an increase in our product sales, net and a decrease in our operating expenses in 2024.

These items are discussed in further detail within the “Results of Operations” section below.

Business Update

On November 15, 2023, we completed the separation of our oncology business into Mural Oncology plc (“Mural”), a new, independent, publicly-traded company (the “Separation”).

The Separation was effected by means of a distribution of all of the outstanding ordinary shares of Mural to our shareholders (the “Distribution”), in which each of our shareholders received one ordinary share, nominal value $0.01 per share, of Mural for every ten ordinary shares, par value $0.01 per share, of Alkermes held by such shareholder as of the close of business on November 6, 2023, the record date for the Distribution.

The effective time of the Distribution was 12:01 a.m.

Eastern time on November 15, 2023 (the “Separation Date”).

In connection with the Separation, we entered into a separation agreement with Mural that, among other things, sets forth the principal terms of the Separation and the Distribution, and a number of other ancillary agreements.

The Separation and related agreements are more fully described in Note 3, Discontinued Operations , in the “Notes to Consolidated Financial Statements” in this Annual Report.

On December 14, 2023, we announced that we entered into a definitive agreement to sell the Athlone Facility to Novo and plan to enter into subcontracting arrangements to continue certain development and manufacturing activities currently performed at the Athlone Facility for a period of time after the closing of the transaction, which arrangements may continue through the end of 2025.

The transaction is subject to various uncertainties and risk, including, without limitation, satisfaction of the conditions to closing of the transaction on the anticipated timeline, potential negative impacts on our relationships with current suppliers or licensees or diversion of management and employee attention from daily business operations, and risks inherent in the transition to subcontracting arrangements.

The transaction is expected to close in mid-2024, subject to certain closing conditions.

In May 2024, we completed the sale of the Athlone Facility to Novo and entered into subcontracting arrangements to continue certain development and manufacturing activities performed at the Athlone Facility, which may continue through the end of 2025.

In November 2023, we completed the separation of our former oncology business into a new, independent, publicly-traded company (the “Separation”), which is more fully described in Note 3, Discontinued Operations , in the “Notes to Consolidated Financial Statements” in this Annual Report.

Results of Operations

As a result of the Separation, the historical results of our oncology business have been reflected as discontinued operations in our consolidated financial statements through the Separation Date.

As a result of the Separation, the historical results of our former oncology business have been reflected as discontinued operations in our consolidated financial statements through November 15, 2023, the date of the Separation.

Prior period results of operations and balance sheet information have been recast to reflect this presentation.

Product Sales, Net

Our product sales, net, consist of sales of VIVITROL, ARISTADA and ARISTADA INITIO, and LYBALVI, primarily to wholesalers, specialty distributors and pharmacies.

Our product sales, net, consist of sales of VIVITROL, ARISTADA, ARISTADA INITIO, and LYBALVI, primarily to wholesalers, specialty distributors and pharmacies.

The following table presents the adjustments deducted from product sales, gross to arrive at product sales, net, for sales of these products during the years ended December 31, 2024 and 2023:

Year Ended December 31,

(In millions, except for % of Sales)

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Product sales, net

VIVITROL product sales, gross, increased by 13%, which was primarily due to an increase of 5% in the number of VIVITROL units sold and a 6% increase in the selling price of VIVITROL that went into effect in January 2023.

ARISTADA and ARISTADA INITIO product sales, gross, increased by 11%, which was primarily due to an increase of 8% in the number of ARISTADA and ARISTADA INITIO units sold and a 3% increase in the selling price of ARISTADA and ARISTADA INITIO that went into effect in January 2023.

LYBALVI product sales, gross, increased by 102%, which was primarily due to an increase of 97% in the number of units sold and increases of 6% and 3% in the selling price of LYBALVI that went into effect in November 2022 and July 2023, respectively.

VIVITROL product sales, gross, increased by 10%, which was primarily due to a 7% increase in the number of units sold and a 3.2% increase in the selling price that went into effect in January 2024.

ARISTADA and ARISTADA INITIO product sales, gross, increased by 5%, which was primarily due to a 3% increase in the number of units sold and a 3.0% increase in the selling price that went into effect in January 2024.

LYBALVI product sales, gross, increased by 52%, which was primarily due to a 45% increase in the number of units sold and increases of 3.8% and 2.0% in the selling price that went into effect in January 2024 and July 2024, respectively.

The decrease in Medicaid rebates as a percentage of sales was primarily due to the increase in sales of LYBALVI, which has lower Medicaid utilization than VIVITROL, ARISTADA and ARISTADA INITIO, and actual Medicaid utilization rates related to VIVITROL being lower than original estimates, due, in part, to $8.7 million in actual credits received in the fourth quarter of 2024 from certain states related to duplicate Medicaid billings.

The following table compares product sales, net earned during the years ended December 31, 2024 and 2023:

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Product sales, net

A number of companies are working to develop products to treat addiction, including alcohol and opioid dependence, that may compete with, and negatively impact, future sales of VIVITROL.

A number of companies currently market and/or are developing products to treat addiction, including alcohol and opioid dependence, that may compete with, and negatively impact, future sales of VIVITROL.

Increased competition may lead to reduced unit sales of VIVITROL and increased pricing pressure.

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and, as such, we do not anticipate any generic versions of these products to enter the market in the near term.

We expect our product sales, net will continue to grow as VIVITROL continues to penetrate the alcohol dependence market in the U.S., as ARISTADA and ARISTADA INITIO continue to gain market share in the U.S., and as we continue to grow sales of LYBALVI in the U.S.

Manufacturing and Royalty Revenues

Manufacturing revenue from RISPERDAL CONSTA and VUMERITY are recognized at the point in time that the product has been fully manufactured.

Manufacturing revenues for other third-party products using our proprietary technologies are mostly recognized over time as products move through the manufacturing process, using an input method based on costs as a measure of progress.

Royalties earned on our licensees’ net sales of products using our proprietary technologies are generally recognized in the period such products are sold by our licensees.

Royalties earned on our licensees’ net sales of products using our proprietary technologies are recognized in the period such products are sold by our licensees.

The following table compares manufacturing and royalty revenues earned in the years ended December 31, 2024 and 2023:

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Manufacturing and royalty revenues

Our agreements with Janssen related to the long-acting INVEGA products provide for tiered royalty payments, which consist of a patent royalty and a know-how royalty, both of which are determined on a country-by-country basis.

The patent royalty, which equals 1.5% of net sales, is payable in each country until the expiration of the last of the patents with valid claims applicable to the product in such country.

The know-how royalty is a tiered royalty of 3.5% on calendar year net sales up to $250 million;

5.5% on calendar year net sales of between $250 million and $500 million;

and 7.5% on calendar year net sales exceeding $500 million.

The know-how royalty rate resets to 3.5% at the beginning of each calendar year and is payable until 15 years from the first commercial sale of a product in each individual country, subject to expiry of the agreement.

In November 2021, we received notice from Janssen of partial termination of our license agreement under which we provided Janssen with rights to, and know-how, training and technical assistance in respect of, our NanoCrystal technology, which was used to develop the long-acting INVEGA products.

The partial termination became effective in February 2022, at which time Janssen ceased paying us royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA.

Accordingly, we ceased recognizing royalty revenue related to sales of these products in February 2022.

In April 2022, we commenced binding arbitration proceedings related to, among other things, Janssen’s partial termination of this license agreement and Janssen’s royalty and other obligations under the agreement.

In May 2023, the Tribunal issued the Final Award, which concluded the arbitration proceedings.

The Final Award provided that we were due back royalties of $195.4 million, inclusive of $8.1 million in late-payment interest, related to 2022 U.S.

net sales of the long-acting INVEGA products, which we received from Janssen in the second quarter of 2023, and are entitled to 2023 and future royalty revenues from Janssen related to net sales of INVEGA SUSTENNA through August 20, 2024, INVEGA TRINZA through the second quarter of 2030 (but no later than May 2030 when the license agreement expires) and INVEGA HAFYERA through May 2030 (when the license agreement expires).

Following issuance of the Final Award, we recognized royalty revenues related to the back royalties for 2022, as described above, and resumed recognizing royalty revenue related to ongoing U.S.

sales of the long-acting INVEGA products.

Royalty revenues related to the long-acting INVEGA products increased by $370.4 million during 2023, as compared to 2022, primarily due to the receipt of the back royalties and late-payment interest described above and a full year of royalty revenue related to worldwide net sales of the long-acting INVEGA products of approximately $290.7 million, as compared to royalty revenue of $115.7 million during 2022.

Janssen’s worldwide net sales of the long-acting INVEGA products were $4,115.0 million during 2023, as compared to $4,140.0 million during 2022.

We expect royalty revenues from net sales of the long-acting INVEGA products to decrease in the near-term, as the royalty revenues related to net sales of INVEGA SUSTENNA are expected to end on August 20, 2024, which could have a significant impact on our INEVGA SUSTENNA royalty revenues during 2024.

In addition, each of INVEGA SUSTENNA and INVEGA TRINZA are currently subject to Paragraph IV litigation in response to companies seeking to market generic versions of such products.

Increased competition from new products or generic versions of these products may lead to reduced unit sales of such products and increased pricing pressure.

For a discussion of these legal proceedings, see Note 19, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report, and for information about risks relating to these legal proceedings, see “Item 1A—Risk Factors” in this Annual Report, and specifically the section entitled “We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers.”

We receive a 15% royalty on worldwide net sales of VUMERITY manufactured and packaged by us, subject to increases in such royalty rate for VUMERITY manufactured and/or packaged by Biogen or its designees, in the period that the end-market sales of VUMERITY occur.

We also recognize manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and, to the extent we package such product, then also when packaged batches of VUMERITY are made available to Biogen.

Manufacturing revenue from VUMERITY increased by $10.4 million during 2023, primarily due to an increase in the number of bulk batches made available to Biogen.

Royalty revenue related to VUMERITY increased by $3.4 million during 2023, due to an increase in end-market net sales of VUMERITY, which were $576.3 million during 2023, as compared to $553.4 million during 2022.

We recognize manufacturing revenue for RISPERDAL CONSTA at the point in time when RISPERDAL CONSTA has been fully manufactured, which is deemed to have occurred when the product is approved for shipment by both us and Janssen.

We record royalty revenue, equal to 2.5% of Janssen’s end-market net sales, in the period that the end-market sales of RISPERDAL CONSTA occur.

We expect revenues from RISPERDAL CONSTA to continue to decrease over time as patents covering RISPERDAL CONSTA expire in markets where end-market net sales of RISPERDAL CONSTA occur.

The decrease in royalty revenues related to the long-acting INVEGA products was primarily due to the receipt in June 2023 of back royalties of $195.4 million, inclusive of $8.1 million in late-payment interest, related to 2022 U.S.

sales of the long-acting INVEGA products following the successful outcome of the arbitration proceedings related to such products and the expiration of our royalty on U.S.

net sales of INVEGA SUSTENNA in August 2024.

Pursuant to the Final Award issued in the arbitration proceedings,

we are entitled to royalty revenues from Janssen related to U.S.

net sales of INVEGA TRINZA and INVEGA HAFYERA through certain specified dates in 2030.

We expect royalty revenues from net sales of the long-acting INVEGA products to decrease further in 2025, as the royalty revenues related to U.S.

net sales of INVEGA SUSTENNA comprised a significant portion of the overall royalty revenues for the long-acting INVEGA products.

For additional discussion of our agreements with Janssen related to the long-acting INVEGA products, including the royalty provisions set forth therein and the related arbitration proceedings and outcome, see the section entitled “ Collaborative Arrangements — Janssen ” in “Item 1—Business” in this Annual Report.

In addition, each of INVEGA SUSTENNA and INVEGA TRINZA is currently subject to Paragraph IV litigation in response to companies seeking to market generic versions of such product.

Increased competition from new products or generic versions of any one or more of the long-acting INVEGA products may lead to reduced unit sales of the long-acting INVEGA products, including those not yet genericized, and increased pricing pressure.

For a discussion of legal proceedings related to INVEGA TRINZA, see Note 19, Commitments and Contingent Liabilities in the “Notes to Consolidated Financial Statements” in this Annual Report, and for information about risks relating to these legal proceedings, see “Item 1A—Risk Factors” in this Annual Report, and specifically the section entitled “Uncertainty over IP in the biopharmaceutical industry has been the source of litigation and other legal proceedings, and we or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers.”

The increase in VUMERITY revenue was due to an $8.3 million increase in royalty revenue, partially offset by a $3.6 million decrease in manufacturing revenue.

The increase in royalty revenue was primarily due to an increase in end-market sales of VUMERITY to $628.0 million in 2024, as compared to $576.3 million in 2023.

The decrease in manufacturing revenue was primarily due to a reduction in the selling price.

The manufacturing fee we earn is based on our cost to produce VUMERITY.

As the assets used to manufacture VUMERITY were classified as held for sale and transferred to Novo in connection with the sale of the Athlone Facility, depreciation expense was removed from the manufacturing cost base, which had a negative impact on our manufacturing fee.

For a discussion of our agreements with Biogen related to VUMERITY, including the manufacturing and royalty revenue provisions set forth therein, see the section entitled “ Collaborative Arrangements—Biogen ” in “Item 1—Business” in this Annual Report.

The decrease in revenue from RISPERDAL CONSTA was primarily due to a decrease of $13.0 million in manufacturing revenue, which was primarily due to a decrease in the number of batches made available to Janssen.

The decrease in royalty revenue was due to expirations of the patents covering RISPERDAL CONSTA, which expired in the U.S.

in January 2023 and in the EU in 2021.

We expect revenues from RISPERDAL CONSTA to continue to decrease as patents covering RISPERDAL CONSTA continue to expire in markets where end-market net sales of RISPERDAL CONSTA occur.

We are aware of potential generic and other competition to RISPERDAL CONSTA that may lead to reduced unit sales and increased pricing pressure.

The decrease in revenue from RISPERDAL CONSTA during 2023 was primarily due to decreases of $6.6 million in manufacturing revenue and $6.1 million in royalty revenue.

The decrease in manufacturing revenue was primarily due to a decrease in the number of U.S.

batches made available to Janssen and a 7% decrease in the rest of world average selling price of the product.

The decrease in royalty revenue was primarily due to expirations of the patents covering RISPERDAL CONSTA, which expired in the U.S.

in January 2023 and expired in the EU in 2021.

For a discussion of our agreements with Janssen related to RISPERDAL CONSTA, including the manufacturing provisions set forth therein, see the section entitled “ Collaborative Arrangements—Janssen ” in “Item 1—Business” in this Annual Report.

During the years ended December 31, 2024 and 2023, we recognized $36.6 million and $49.9 million, respectively, in manufacturing and royalty revenue related to FAMPYRA which is included within “Other” in the table above.

As of December 31, 2024, our manufacturing obligations related to FAMPYRA concluded.

Accordingly, we do not expect to recognize any revenues related to FAMPYRA going forward.

Certain of our manufacturing and royalty revenues are earned in countries outside of the U.S.

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Cost of goods manufactured and sold

(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

The increase in cost of goods manufactured and sold during 2023 was primarily due to an increase of $8.0 million in the cost of goods manufactured for VUMERITY and increases of $15.5 million, $13.3 million and $6.2 million, respectively, in the cost of goods sold for VIVITROL, LYBALVI and ARISTADA, partially offset by a decrease of $2.0 million in the cost of goods manufactured for RISPERDAL CONSTA.

The increase related to VUMERITY was primarily due to increased manufacturing activity, as described above.

The increases related to LYBALVI and ARISTADA were primarily due to the increases in sales activity, as described above.

The increase in the cost of goods sold related to VIVITROL was due to an increase in sales activity, as described above, and an increase in costs related to out-of-specification batches.

These increases were partially offset by decreases in cost of goods manufactured for RISPERDAL CONSTA, primarily due to a decrease in U.S.

batches made available to Janssen, as described above, and in the cost of goods manufactured for certain legacy products that we manufacture due to a decrease in sales of such products.

The decrease in cost of goods manufactured and sold was primarily due to lower cost of goods manufactured for certain legacy products due to a decrease in volumes of such products.

This includes RISPERDAL CONSTA as well as products manufactured at the Athlone Facility.

This decrease was partially offset by an increase in the cost of goods sold for certain of our proprietary products due to increases in the number of units sold as discussed above, and an increase in costs related to VIVITROL out-of-specification batches and subsequent investigation costs.

Research and Development Expenses

For each of our research and development (“R&D”) programs, we incur both external and internal expenses.

External R&D expenses include fees for clinical and preclinical activities performed by contract research organizations, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities.

For each of our R&D programs, we incur both external and internal expenses.

External R&D expenses include fees for clinical and preclinical activities performed by CROs, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities.

Internal R&D expenses include employee-related expenses, occupancy costs, depreciation and general overhead.

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Research and development expenses

(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

These amounts are not necessarily predictive of future R&D expenses.

In an effort to allocate our spending most effectively, we continually evaluate our products under development based on the performance of such products in preclinical and/or clinical trials, our expectations regarding the likelihood of their regulatory approval and our view of their future potential commercial viability, among other factors.

The increase in expenses related to ALKS 2680 during 2023 was primarily due to an increase in early-stage development expenses, including chemistry manufacturing and controls expenses and spend on a phase 1b proof-of-concept study, which was initiated in the second quarter of 2023.

The decrease in expenses related to LYBALVI during 2023 was primarily due to decreased spend on certain ongoing long-term safety and tolerability studies as they near completion, partially offset by increased spend on the pediatric study related to the product.

The decrease in other external R&D expenses was primarily due to the termination of the ALKS 1140 clinical development program in the second quarter of 2022.

The increase in expenses related to ALKS 2680 was primarily due to an increase in spend related to the advancement of the development programs for the product, including completion of our phase 1b proof-of-concept studies, initiation of our phase 2 clinical studies, Vibrance-1 and Vibrance-2 and preparatory spend in advance of initiation of our phase 2 study for IH.

The increase in expenses related to LYBALVI was primarily due to increased spend on our pediatric studies related to the product, partially offset by decreased spend following the completion of our long-term safety and tolerability studies.

The decrease in other external R&D expenses was primarily due to identifying cost-effective resourcing options for clinical programming and outsourced data management services and decreases in spend on activities associated with certain of our research programs.

The decrease in employee-related expenses was primarily due to a decrease in salaries and benefits related to a 10% reduction in R&D-related headcount during 2024.

Selling, General and Administrative Expenses

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Selling, general and administrative expense

(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

The increase in selling and marketing expense during 2023 was primarily due to a $72.1 million increase in marketing spend related to the launch of the direct-to-consumer campaign for LYBALVI.

Employee-related expenses also increased by $25.2 million, primarily related to a 5% increase in sales and marketing headcount and an increase in employee travel as our in-person activities increased.

The increase in general and administrative expense during 2023 was primarily due to an increase in salaries and benefits of $7.6 million and an increase in our branded prescription drug fee of $2.1 million, partially offset by a decrease in professional services fees of $2.4 million, primarily due to decreased legal expenses.

The decrease in selling and marketing expense was primarily due to a $34.6 million decrease in marketing expense related primarily to decreased media spend and free goods, a $7.1 million decrease in professional services, primarily due to the decrease in media spend, and a $3.6 million decrease in employee related expenses, primarily due to a 7% decrease in sales and marketing headcount.

Amortization of Acquired Intangible Assets

Year Ended December 31,

(In millions)

Amortization of acquired intangible assets

Our amortizable intangible assets consist of technology and collaborative arrangements acquired as part of the acquisition of EDT in September 2011, which are being amortized over 12 to 13 years.

We amortize our amortizable intangible assets using the economic use method, which reflects the pattern that the economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract.

Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet at December 31, 2023 is expected to be approximately $2.0 million in the year ending December 31, 2024.

Other Income (Expense), Net

Our amortizable intangible assets primarily consisted of technology and collaborative arrangements acquired as part of the acquisition of Elan Drug Technologies (“EDT”) in September 2011.

These intangible assets were amortized over 12 to 13 years using the economic use method, which reflects the pattern that the economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract, and became fully amortized during 2024.

Other Income, Net

Year Ended December 31,

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Interest expense

Change in the fair value of contingent consideration

Other (expense) income, net

Total other income (expense), net

Interest income consists primarily of interest earned on our available-for-sale investments.

Interest expense consists of interest incurred on our 2026 Term Loans.

The increases in interest income and interest expense were primarily due to increases in interest rates over the past twelve months, due to the rising interest rate environment during the year.

The change in the fair value of contingent consideration was due to the determination during 2022 that it was unlikely we would collect any further contingent consideration proceeds under our agreements with Baudax Bio, Inc.

(“Baudax”) in effect at the time, and accordingly, we reduced the fair value of the contingent consideration to zero, as discussed in Note 6, Fair Value , in the “Notes to Consolidated Financial Statements” in this Annual Report.

Income Tax (Benefit) Provision

Other income (expense), net

Total other income, net

Interest income consists of interest earned on our cash and available-for-sale investments.

The increase in interest income was due to an increase in our cash and investments and increases in interest rates due to the rising interest rate environment.

Interest expense consists of interest incurred on our previously outstanding term loans scheduled to become due in 2026 (the “Former Term Loans”) under our former amended and restated credit agreement (the “Former Credit Agreement”), which we prepaid in full and terminated on December 19, 2024.

The increase in other income (expense), net was primarily due to the gain on the sale of the Athlone Facility of approximately $1.5 million, following the completion of the sale in May 2024.

Income Tax Provision (Benefit)

Year Ended December 31,

(In millions)

Income tax (benefit) provision

(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

Income tax provision (benefit)

The income tax provision in 2024 was primarily due to taxes on income earned in Ireland.

The income tax benefit in 2023 was primarily attributable to the partial release of the valuation allowance maintained against certain Irish deferred tax assets, partially offset by taxes on income earned in the U.S.

The income tax provision in 2022 was primarily due to U.S.

federal and state taxes on income earned in the U.S.

and the tax impact of employee equity activity.

No provision for income tax has been provided on undistributed earnings of our foreign subsidiaries because such earnings are indefinitely reinvested in the foreign operations.

Cumulative unremitted earnings of overseas subsidiaries totaled approximately $797.0 million at December 31, 2023.

Our effective tax rate during the year ended December 31, 2024 was 16.1%, which exceeds the Irish statutory tax rate of 12.5%, primarily due to non-deductible expenses and income that was taxable at rates higher than the Irish statutory tax rate.

The new corporate minimum tax rate of 15.0% did not have a material impact on our business in 2024.

Cumulative unremitted earnings of U.S.

subsidiaries totaled approximately $933.5 million as of December 31, 2024.

In the event of a repatriation of those earnings in the form of dividends or otherwise, we may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreign tax authorities.

We estimate that approximately $72.0 million of income taxes would be payable on the repatriation of the unremitted earnings to Ireland.

As of December 31, 2023, we had $1.3 billion of Irish NOL carryforwards, $14.6 million of U.S.

federal NOL carryforwards, $43.2 million of state NOL carryforwards, $9.7 million of federal R&D credits and $31.0 million of state tax credits which will either expire on various dates through 2043 or can be carried forward indefinitely.

As of December 31, 2024, we had $393.9 million of Irish NOL carryforwards, $14.1 million of U.S.

federal NOL carryforwards, $43.2 million of state NOL carryforwards and $34.0 million of state tax credits which will either expire on various dates through 2039 or can be carried forward indefinitely.

These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and tax.

These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities, and may be subject to limitations based upon changes in the ownership of our ordinary shares.

In December 2022, the EU agreed to implement a corporate minimum tax rate of 15% on companies with combined annual revenue of at least €750.0 million.

The Irish government has transposed the corporate minimum tax rules into Irish legislation with effect as of January 1, 2024.

Included within these loss and credit carryforwards are $14.1 million of U.S.

federal NOL carryforwards and $5.8 million of state NOL

carryforwards, acquired as part of the acquisition of Rodin Therapeutics, Inc.

(“Rodin”) in November 2019, each of which are subject to a $0.5 million annual limitation.

Liquidity and Capital Resources

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We generated $439.1 million and $401.4 million of cash from operating activities during the years ended December 31, 2024 and 2023, respectively.

We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash requirements, such as capital expenditures and principal and interest payments on our long-term debt, for at least the twelve months following the date from which our financial statements were issued.

Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain additional financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financing methods or structures.

In addition, the 2026 Term Loans have an incremental facility capacity in an amount of $175.0 million, plus additional potential amounts provided that we meet certain conditions, including a specified leverage ratio.

In December 2024, we prepaid our previously outstanding long-term debt without penalty in the amount of $289.5 million and, during the course of 2024, repurchased approximately $200.0 million of our ordinary shares.

We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash requirements, including capital expenditures, for at least the twelve months following the date from which our financial statements were issued.

Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financing methods or structures.

Our investment objectives are, first, to preserve liquidity and conserve capital and, second, to generate investment income.

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Our available-for-sale investments consist primarily of short and long-term U.S.

government and agency debt securities, corporate debt securities and debt securities issued and backed by non-U.S.

government and agency debt securities and corporate debt securities.

Our held-to-maturity investments consist of investments that are held as collateral under certain letters of credit related to certain of our lease agreements.

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We have the intent and ability to hold these investments until recovery, which may be at maturity, and it is more-likely-than-not that we would not be required to sell these securities before recovery of their amortized cost.

We have no off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources in the next twelve months.

In connection with our acquisition of Rodin Therapeutics, Inc.

(“Rodin”) in November 2019, we may become obligated to make up to $825.0 million in future milestone payments to the former shareholders of Rodin, $200.0 million of which would be triggered upon achievement of certain specified clinical milestones, $300.0 million of which would be triggered by the achievement of certain regulatory milestones and $325.0 million of which would be triggered upon the attainment of certain sales thresholds.

In connection with our acquisition of Rodin, we may become obligated to make up to $825.0 million in future milestone payments to the former shareholders of Rodin, $200.0 million of which would be triggered upon achievement of certain specified clinical milestones, $300.0 million of which would be triggered by the achievement of certain regulatory milestones and $325.0 million of which would be triggered upon the attainment of certain sales thresholds.

At December 31, 2024, we had not recorded a liability related to these milestone payments as none of the future events that would trigger a milestone payment were considered probable of occurring.

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Cash flows provided by operating activities

Cash flows provided by (used in) investing activities

Cash flows (used in) provided by investing activities

Cash flows used in financing activities

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Operating Activities

Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.

Cash flows provided by operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.

Operating cash flow is derived by adjusting our net income (loss) for non-cash operating items such as depreciation, amortization and share-based compensation and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.

Cash flows provided by operating activities during 2023 were $401.4 million and primarily consisted of net income of $355.8 million, adjusted for non-cash items, including share-based compensation of $100.9 million and depreciation and amortization of $74.9 million, partially offset by changes in working capital of $36.7 million and deferred income taxes of $99.9 million.

Cash flows provided by operating activities during 2024 primarily consisted of net income of $367.1 million, adjusted for non-cash items, including share-based compensation of $96.6 million and depreciation and amortization of $28.5 million and deferred income taxes of $40.5 million.

Cash flows provided by operating activities during 2023 primarily consisted of net income of $355.8 million, adjusted for non-cash items, including share-based compensation of $100.9 million and depreciation and amortization of $74.9 million, partially offset by changes in working capital of $36.7 million and deferred income taxes of $99.9 million.

During 2023, net income included receipt of $195.4 million from Janssen, inclusive of $8.1 million in late-payment interest, related to 2022 U.S.

net sales of the long-acting INVEGA products following the successful outcome of the arbitration proceedings in respect of such products.

Cash flows provided by operating activities during 2022 were $21.0 million and primarily consisted of net loss of $158.3 million, adjusted for non-cash items including share-based compensation of $94.3 million, depreciation and amortization of $77.9 million, change in the fair value of contingent consideration of $21.8 million and changes in working capital of $12.8 million, partially offset by deferred income taxes of $32.8 million.

Investing Activities

Cash flows provided by investing activities during 2023 were primarily due to $101.1 million in net sales of investments, offset by the purchase of $48.0 million of property, plant and equipment.

Cash flows used in investing activities during 2022 were primarily due to $28.0 million in net purchases of investments and the purchase of $38.3 million of property, plant and equipment.

We expect to spend approximately $35.0 million during the year ending December 31, 2024 for capital expenditures.

Cash flows used in investing activities during 2024 primarily consisted of $176.2 million in net purchases of investments and the purchase of $33.5 million of property, plant and equipment.

These outflows were offset by proceeds from the sale of the Athlone Facility and related business of $97.9 million.

Cash flows provided by investing activities during 2023 primarily consisted of $101.1 million in net sales of investments and offset by the purchase of $48.0 million of property, plant and equipment.

We expect to spend approximately $45.0 million to $50.0 million during the year ending December 31, 2025 for capital expenditures.

We continue to evaluate our manufacturing capacity based on expectations of demand for the products that we manufacture and will continue to record such amounts within construction in progress until such time as the underlying assets are placed into service, or we determine we have sufficient existing capacity and the assets are no longer required, at which time we would recognize an impairment charge.

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Financing Activities

Cash flows used in financing activities during 2023 primarily related to $275.0 million in cash distributed to Mural in connection with the Separation and $28.5 million of employee taxes paid related to the net share settlement of equity awards, partially offset by $16.8 million of cash that we received upon exercises of employee stock options.

Cash flows used in financing activities during 2022 primarily related to $18.2 million of employee taxes paid related to the net share settlement of equity awards and $3.0 million of principal payments on our 2026 Term Loans, partially offset by $19.6 million of cash that we received upon exercises of employee stock options.

At December 31, 2023, our borrowings consisted of $291.8 million outstanding under the 2026 Term Loans.

The 2026 Term Loans bear interest at SOFR plus a credit spread adjustment applicable to the interest period and an applicable margin of 2.5% with a floor of 0.5%.

Principal payments of $0.8 million are to be made quarterly through 2025, with a final payment of $285.8 million due in March 2026.

Please refer to Note 12, Long-Term Debt , in the “Notes to Consolidated Financial Statements” in this Annual Report for a discussion of our outstanding term loans.

Cash flows used in financing activities during 2024 primarily related to the prepayment of our previously outstanding long-term debt in the full amount of $289.5 million, payment for the repurchase of our ordinary shares and related expenses in the amount of $200.3 million, and $29.6 million of employee taxes paid related to net share settlements of equity awards, partially offset by $27.6 million of cash that we received upon exercises of employee stock options.

Cash flows used in financing activities during 2023 primarily related to $275.0 million in cash distributed to Mural Oncology plc in connection with the Separation and $28.5 million of employee taxes paid related to net share settlements of equity awards, partially offset by $16.8 million of cash that we received upon exercises of employee stock options.

In December 2024, we prepaid in full all Former Term Loans under the Former Credit Agreement for a total of $289.5 million.

The Company did not incur any early termination penalties in connection with the termination of the Former Credit Agreement (other than customary breakage costs).

All liens on the collateral securing the obligations under the Former Credit Agreement were released in connection with the termination.

Such prepayment was accounted for as a debt extinguishment.

See Note 12, Long-Term Debt , in the “Notes to Consolidated Financial Statements” in this Annual Report for additional discussion related to our Former Term Loans.

Discontinued Operations

Net loss from discontinued operations consists of the results of our oncology business and is reported as a separate component of income.

For additional information, please refer to Note 3, Discontinued Operations , in the “Notes to Consolidated Financial Statements” in this Annual Report.

Net loss from discontinued operations consists of the results of our former oncology business and is reported as a separate component of income.

For additional information, see Note 3, Discontinued Operations , in the “Notes to Consolidated Financial Statements” in this Annual Report.

Critical Accounting Estimates

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Revenue from Contracts with Customers

When entering into arrangements with customers, we identify whether our performance obligations under each arrangement represent a distinct good or service or a series of distinct goods or services.

If a contract contains more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

The fair value of performance obligations under each arrangement may be derived using an estimate of selling price if we do not sell the goods or services separately.

We recognize revenue when or as we satisfy a performance obligation by transferring an asset or providing a service to a customer.

Management judgment is required in determining the consideration to be earned under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement.

Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which we expect to complete our aggregate performance obligations.

We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

We recognize revenue following the five-step model prescribed under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, (“Topic 606”):

(i) identify contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) we satisfy the performance obligations.

Product Sales, Net

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We estimate expected unit sales to individuals covered by Medicaid and rebates per unit under the Medicaid program and adjust our rebate accrual based on actual unit sales and rebates per unit and changes in trends in Medicaid utilization.

To date, actual Medicaid rebates have not differed materially from our estimates;

In 2024, actual Medicaid utilization rates related to VIVITROL were lower than original estimates, due, in part, to $8.7 million in actual credits received in the fourth quarter of 2024 from certain states related to duplicate Medicaid billings.

Medicaid rebates for our other products have not differed materially from our estimates;

• Chargebacks —discounts that occur when contracted indirect customers purchase directly from wholesalers and specialty distributors.

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(In millions)

Medicaid Rebates

Product Discounts

Contractual Adjustments (1)

Discounts (2)

Product Returns

Medicare Part D

Balance, December 31, 2022

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Balance, December 31, 2024

(1) “Contractual Adjustments” include “Medicaid Rebates” and “Medicare Part D” accruals

(2) “Discounts” include “Chargebacks” and “Product Discounts”

Manufacturing Revenue

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We recognize royalty revenues related to the sale by our licensees of products that incorporate our technology.

All of our royalties qualify for the sales-and-usage exemption under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , (“Topic 606”) as (i) such royalties are based strictly on the sales-and-usage by the licensee;

All of our royalties qualify for the sales-and-usage exemption under Topic 606 as (i) such royalties are based strictly on the sales-and-usage by

the licensee;

and (ii) a license of IP is the sole or predominant item to which such royalties relate.

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Discontinued operations

We determined that the separation of our oncology business, which was completed on November 15, 2023, represented a disposal plan that met the criteria for classification of the oncology business as a discontinued operation in accordance with ASC 205-20, Discontinued Operations .

We determined that the separation of our former oncology business, which was completed on November 15, 2023, represented a disposal plan that met the criteria for classification of the oncology business as a discontinued operation in accordance with ASC 205-20, Discontinued Operations .

Accordingly, the accompanying consolidated financial statements for all periods have been updated to present the assets and liabilities associated with the oncology business separately as discontinued operations on the consolidated balance sheet and the results of such discontinued operations reported as a separate component of income in the consolidated statements of operations and comprehensive income (loss).

For additional information related to discontinued operations, refer to Note 3, Discontinued Operations , in our “Notes to Consolidated Financial Statements” in this Annual Report.

For additional information related to discontinued operations, see Note 3, Discontinued Operations , in our “Notes to Consolidated Financial Statements” in this Annual Report.

Impairment of Long-Lived Assets

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Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

The announcement of the planned sale of the Athlone Facility constituted an impairment-triggering event.

Accordingly, we performed a review of our long-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other and determined that the carrying value of our long-lived assets did not exceed the estimated fair value of such long-lived assets.

We evaluate goodwill for impairment for our reporting units annually, as of October 31, and whenever events or changes in circumstances indicate the carrying value of the reporting units may not be recoverable.

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Alternatively, we may elect to not first assess qualitative factors and instead immediately perform the quantitative impairment test.

When some, but not all, of a reporting unit is to be disposed of, the accounting for that reporting unit’s goodwill will depend on whether the disposal group constitutes a business.

If the disposal group constitutes a business, we attribute a portion of the reporting unit’s goodwill to the disposal group based on the relative fair values of:

(i) the disposal group;

and (ii) the portion of the reporting unit that will be retained.

On October 31, 2023, in connection with the Separation, we performed a quantitative impairment test and, while we determined that, based on the weight of all available evidence, the fair value of the reporting unit more-likely-than-not exceeded its carrying value, it was also determined that as a portion of the IP that transferred to Mural was owned by the reporting unit to which our goodwill was assigned, a portion of our goodwill was allocated to Mural.

Please refer to Note 9, Goodwill and Intangible Assets in our “Notes to Consolidated Financial Statements” in this Annual Report for additional information.

In connection with the planned sale of the Athlone Facility, we have reviewed FASB ASC 805, Business Combinations and, based on the definitions therein, have determined that the Athlone Facility constitutes a business and, accordingly, a portion of our goodwill was allocated to the Athlone Facility and is classified as “Assets held for sale” within the accompanying consolidated balance sheets as of December 31, 2023 and 2022.

Please refer to Note 9, Goodwill and Intangible Assets in our “Notes to Consolidated Financial Statements” in this Annual Report for additional information.

On October 31, 2024, we elected to perform a qualitative impairment test and determined that, based on the weight of all available evidence, the fair value of the reporting unit more-likely-than-not exceeded its carrying value.

Valuation of Deferred Tax Assets

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Recent Accounting Pronouncements

Please refer to Note 2, Summary of Significant Accounting Policies , “New Accounting Pronouncements” in our “Notes to Consolidated Financial Statements” in this Annual Report for discussion, if any, of new accounting standards.

See Note 2, Summary of Significant Accounting Policies , “New Accounting Pronouncements” in our “Notes to Consolidated Financial Statements” in this Annual Report for discussion, if any, of new accounting standards.

Quantitative and Qualitat ive Disclosures about Market Risk

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We do not believe that we have a material exposure to interest rate risk as our investment policies specify credit quality standards for our investments and limit the amount of credit exposure from any single issue, issuer or type of investment.

Although we have seen a significant increase in the number of our investment securities in unrealized loss positions, we do not believe our exposure to liquidity and credit risk to be significant as approximately 36% and 61% of our investments at December 31, 2023 are in corporate debt securities with a minimum rating of A2 (Moody’s)/A (Standard and Poor’s) and debt securities issued by the U.S.

We do not believe our exposure to liquidity and credit risk to be significant as approximately 41% and 59% of our investments at December 31, 2024 are in corporate debt securities with a minimum rating of A2 (Moody’s)/A (Standard and Poor’s) and debt securities issued by the U.S.

government or its agencies, respectively.

We have the intent and ability to hold these securities until recovery, which may be at maturity.

At December 31, 2023, our borrowings consisted of $291.8 million outstanding under the 2026 Term Loans.

The 2026 Term Loans mature on March 12, 2026.

In June 2023, we amended the 2026 Terms Loans to transition the interest rate available for borrowings thereunder from a LIBOR-based interest rate to an interest rate based on SOFR and to make other conforming and mechanical changes.

The 2026 Term Loans bear interest at the one-, three- or six-month SOFR rate of our choosing plus a credit spread adjustment applicable to the interest period and an applicable margin of 2.50% with a floor of 0.5%.

We are currently using the one-month SOFR rate, which was 5.47% at December 31, 2023.

A 10% increase in the one-month SOFR rate would have increased the amount of interest we owed by approximately $2.3 million.

At December 31, 2022, a 10% increase in the one-month LIBOR rate, which was the rate in use at the time, would have increased the amount of interest we owed by approximately $1.3 million.

Currency Exchange Rate Risk

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is partially offset by the opposite impact of changes in the exchange ratio of the USD and the euro on operating expenses and payables incurred at our Irish operations that are settled in euro.

For the year ended December 31, 2023, an average 10% weakening in the USD relative to the euro would have resulted in an increase to our expenses denominated in euro of approximately $7.7 million, as compared to an increase in our expenses of approximately $7.5 million in the year ended December 31, 2022.

For the year ended December 31, 2024, an average 10% weakening in the USD relative to the euro would have resulted in an increase to our expenses denominated in euro of approximately $3.9 million, as compared to an increase in our expenses of approximately $7.7 million for the year ended December 31, 2023.

Financial Statemen ts and Supplementary Data

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Total operating expenses

Operating income (loss) from continuing operations

Net income (loss) from continuing operations

Net loss from discontinued operations

Net income (loss)

Operating income from continuing operations

Net income from continuing operations

Net (loss) income from discontinued operations

Earnings (loss) per share—basic:

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From discontinued operations

From net income (loss)

From net income

Earnings (loss) per share—diluted:

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From discontinued operations

From net income (loss)

From net income

(In thousands, except per share data)

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Net loss from discontinued operations

Net (loss) income

(Loss) earnings per share—basic:

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From discontinued operations

From net loss

From net (loss) income

(Loss) earnings per share—diluted:

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From discontinued operations

From net loss

From net (loss) income

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis