Alkermes plc announced approval by its Board of Directors (the Board) to explore separating its commercial-stage neuroscience business and development-stage oncology business. The company, together with the Board and external financial and legal advisors, plans to explore a separation of the oncology business into an independent, publicly-traded company (Oncology Co.) as part of an ongoing review of strategic alternatives for the oncology business.
Alkermes believes separation of the oncology business into Oncology Co. would:
- Drive a sharp strategic focus for each business;
- Establish separate and distinct management teams with relevant therapeutic expertise based on each business' unique strategic priorities and opportunities;
- Simplify capital allocation decision-making and increase flexibility to pursue growth and investment strategies more directly aligned with each business' respective goals; and
- Enable the capital markets to better assess each business' value, performance and potential, and attract a long-term shareholder base suited to each business.
"Alkermes will continue to build on our heritage of innovation and excellence in neuroscience. With a strong topline driven by the growth of our proprietary products, a specialized commercial infrastructure in neuropsychiatry and addiction, and proven drug development capabilities, the standalone neuroscience business represents a compelling opportunity to capture operating leverage, drive growth and profitability, and advance new potential medicines for neurological disorders," said Richard Pops, Chief Executive Officer of Alkermes. "With nemvaleukin now in two potential registrational studies, the oncology business has a compelling standalone investment thesis anchored by the potential medical and economic value of this potential first-in-class cancer therapy. We believe separating the oncology business at this time will best support and position nemvaleukin for success, create value for shareholders, and enable efficient advancement of our preclinical pipeline of engineered cytokines."
Expected Business Profiles:
Alkermes: Profitable, Pure-Play Commercial-Stage Neuroscience Company
Alkermes will retain its focus on significant unmet needs within neuroscience and on driving growth of its proprietary commercial products: LYBALVI®, ARISTADA®/ARISTADA INITIO® and VIVITROL®. The company will also focus on advancing the development of pipeline programs focused on neurological disorders, including ALKS 2680, an orexin 2 receptor agonist for the treatment of narcolepsy. Alkermes expects to retain manufacturing and royalty revenues related to its licensed products and third-party products using the company's proprietary technologies under license. Alkermes would expect to benefit from enhanced profitability and continued balance sheet strength following a separation of the oncology business. Richard Pops will continue as Chief Executive Officer and Chairman of Alkermes.
Oncology Co.: Pure-Play Development-Stage Oncology Company
The oncology business would continue to focus on the discovery and development of cancer therapies, including the continued development of nemvaleukin alfa (nemvaleukin), a novel, investigational, engineered interleukin-2 (IL-2) variant immunotherapy. Nemvaleukin is currently in potential registration enabling studies in two difficult-to-treat tumor types: platinum-resistant ovarian cancer and mucosal melanoma. By selectively targeting the IL-2 pathway, nemvaleukin has broad potential clinical utility in a variety of tumor types and offers the potential for significant value creation as the development program advances. The assets subject to a separation are also expected to include a portfolio of novel, preclinical, engineered cytokines, including tumor-targeted split interleukin-12 (IL-12) and interleukin-18 (IL-18).
"The potential separation of the oncology business from Alkermes' neuroscience business would offer a platform to enhance the performance of both businesses and unlock shareholder value. With the early traction of the LYBALVI launch and progress in the nemvaleukin development program, the value propositions for each of the neuroscience and oncology businesses have come more clearly into focus. As we look ahead, the Board unanimously agrees that the unique needs of each business would be best served by simplified resource and capital allocation decision making, tailored operating structures, and distinct leadership teams, each with a clearly defined strategic focus," said Nancy Wysenski, Lead Independent Director of Alkermes' Board.
Process & Strategic Rationale
In 2020, the Board, working closely with management and external financial and legal advisors, commenced an evaluation of a broad range of potential strategic options for the company's non-core assets, including an evaluation of strategic partnerships and other opportunities for its oncology business. With the advancement of nemvaleukin into potential registration enabling studies and recent developments in the healthcare industry generally, the Board and leadership believe that separating the oncology business at this time is in the best interests of patients, shareholders and other key stakeholders.
Financial Implications
In preparation for a potential separation, Alkermes will continue to carefully manage the cost structure of each business. The company would expect to incur transactional and separation expenses as part of a process to separate and transition the two businesses. Alkermes expects to provide additional financial details at a later date.
Transition and Timing
Additional details regarding a separation, including the name of the contemplated Oncology Co., its executive management team and its board of directors, as well as financial details for the two contemplated companies, would be provided at a later date. The separation, if consummated, is expected to be completed in the second half of 2023. Alkermes anticipates Oncology Co. would be located within the company's existing Waltham, Mass. campus. The facilities and research and manufacturing operations in Wilmington, Ohio and Athlone, Ireland will remain with Alkermes.
Separation of the two businesses would be subject to customary closing conditions and final approval by Alkermes' Board of Directors. There can be no assurance regarding the ultimate timing or structure of a contemplated separation or that the separation will ultimately occur.
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