Research Update: Alkermes PLC Outlook Revised To Negative On Sustained Cash Outflows; New Debt Rated

Ireland-based biopharmaceutical company Alkermes PLC is refinancing its existing term loan due 2023 ($279 million outstanding) with a new $350 million senior secured term loan maturing in 2025. Operating performance fell short of our original expectation in 2019, impaired by high R&D and SG&A expenses, resulting high adjusted leverage and a free cash flow deficit. We are now expecting adjusted leverage to remain above 5.0x and negative free cash flows to continue through the end of 2020. We are affirming our 'BB-' issuer credit rating on Alkermes, but are revising the outlook to negative. At the same time, we are assigning our 'BB' issue-level rating on the proposed $350 million term loan B. The recovery rating is '2' reflecting our

... PLC is refinancing its existing term loan due 2023 ($279 million outstanding) with a new $350 million senior secured term loan maturing in 2025. - Operating performance fell short of our original expectation in 2019, impaired by high R&D and SG&A expenses, resulting high adjusted leverage and a free cash flow deficit. - We are now expecting adjusted leverage to remain above 5.0x and negative free cash flows to continue through the end of 2020. - We are affirming our '##-' issuer credit rating on Alkermes, but are revising the outlook to negative. At the same time, we are assigning our '##' issue-level rating on the proposed $350 million term loan B. The recovery rating is '2' reflecting our expectation for substantial recovery (70%-90%; rounded estimate: 70%) in the event of payment default. - The negative outlook reflects the risk that free cash outflows persist into 2021 as Alkermes continues to invest in its pipeline....

Research Update