Alkermes PLC

The stable rating outlook reflects our expectation that Alkermes' transitional period is near completion, and that continued steady growth of its existing and newly launched products will finally begin to offset elevated SG&A and research and development (R&D) expenses. This would improve EBITDA and leverage to 4x-5x during the first half of 2020. We could lower the rating if it becomes evident there will be little improvement in Alkermes' operating performance in 2020 and its leverage ratio remains above 5x, accompanied by persistent cash flow deficits. We would likely lower the rating if continued cash flow deficits decrease the cash balance near the amount of debt. A sizable debt-financed transaction that reduces Alkermes' cash balance could also prompt reconsideration of

...Adjusted leverage spiked in 2019, but we expect it to come down in the first half of 2020. Operating performance over the past several quarters was heavily impaired following patent expirations on royalty products (Ampyra), a rejected new drug application for its ALKS 5461, and significantly increased selling, general, and administrative (SG&A) costs related to the commercialization of Aristada. We expect this to result in adjusted leverage above 5x at year-end 2019. New product launches and continued growth in Aristada and Vivitrol, in addition to a recently announced $150 million restructuring program, should contribute to leverage falling below 5x in early 2020. Alkermes has continued therapeutic concentration and dependence on two products. The company is primarily focused on diseases of the central nervous system and depends on the growth of its two main products, Vivitrol and Aristada, since Ampyra now faces generic competition. This risk is somewhat mitigated by patent expirations...

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