were dropping a day after the company said the
Securities and Exchange Commission
is examining its accounting practices in a partnership with another drugmaker.
On Tuesday after the market had closed, Alkermes said the SEC is reviewing a deal with
for the alcoholism treatment Vivitrol. Alkermes developed the drug and Cephalon is marketing it.
"We are working with the SEC to answer their questions to allow them to complete their review as soon as possible," said James Frates, the Alkermes chief financial officer.
By Wednesday afternoon, Alkermes' stock was down 80 cents, or 4.7%, to $16.29 on heavy trading volume. The stock fell as low as $15.79. Cephalon was up 33 cents to $81.35.
The descent of Alkermes' stock was aided by a downgrade from WR Hambrecht analyst Andrew Forman, who said Vivitrol continues to be a
disappointment. Forman, who doesn't own shares, cut his rating to hold from buy.
Alkermes has been using the same accounting method since signing the marketing deal with Cephalon in June 2005, the company said. In conversations with SEC staff members, Alkermes said the agency "has not indicated to the company that its financial reporting for the collaboration is not in accordance with GAAP."
However, Alkermes added that a restatement is possible "if the staff were to reach a different conclusion than the company." Any restatement "would not change the underlying cash flows or the company's rights or obligations under the collaboration."
Alkermes relies on manufacturing revenue, R&D revenue and royalties from partners. The poor performance of Vivitrol means that Risperdal Consta has been the biggest revenue source, representing $112 million of $240 million in sales for the fiscal year ended March 31.
Risperdal Consta, a treatment for schizophrenia, is an injectable version of
Johnson & Johnson's
Risperdal. The original Risperdal is taken once a day as a pill, tablet or liquid. Consta is injected once every two weeks.
Vivitrol provided only $16.8 million for the fiscal year, and partner Cephalon has promised to
expand its marketing campaign.
Alkermes also received $74.5 million in research and development revenue for the fiscal year.
The company earned $9.4 million, or 9 cents a share, for the just-completed fiscal year. For the 2006 fiscal year, it earned $3.8 million, or 4 cents a share, on revenue of $166.6 million. The financial data is unaudited pending final word from the SEC on the Vivitrol accounting.
Alkermes expects revenue for the current fiscal year to be in the range of $240 million to $260 million.