ALKS

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How ALKS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Item 1A—Risk Factors” and elsewhere in this Annual Report.
A detailed discussion of our 2023 financial condition and results of operations, and of 2024 year-over-year changes as compared to 2023, 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, 2024, which was filed with the SEC on February 12, 2025.
Overview We have a portfolio of proprietary products that we manufacture, market and/or sell in the U.S., which in 2025 was comprised of ARISTADA, ARISTADA INITIO, LYBALVI and VIVITROL.
We also earned manufacturing and/or royalty revenues on net sales of products commercialized by our licensees, the most significant of which in 2025 were the long-acting INVEGA products and VUMERITY.
We expect ARISTADA, ARISTADA INITIO, LYBALVI, VIVITROL and VUMERITY, and our new product, LUMRYZ, which we acquired and began to market and sell in the U.S. in February 2026, 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 2025, our net income from continuing operations was $241.7 million, as compared to $372.1 million in 2024.
The decrease in net income from continuing operations of $130.5 million was primarily due to an increase in total expenses of $84.9 million and a decrease of $182.8 million in manufacturing and royalty revenues.
These items were partially offset by an increase in product sales, net of $101.1 million and a decrease in our income tax provision of $21.8 million.
Business Update In October 2025, we entered into the Transaction Agreement with Avadel, which was subsequently amended in November 2025, pursuant to which we agreed to acquire the entire issued and to be issued ordinary share capital of Avadel for consideration of (i) $21.00 per Avadel Share, payable in cash at closing and (ii) a non-transferable CVR entitling holders of Avadel Shares to a potential additional cash payment of $1.50 per Avadel Share, contingent upon achievement of a certain specified milestone.
On February 12, 2026, we successfully completed the Avadel Acquisition, adding both LUMRYZ to our portfolio of proprietary commercial products and a commercial organization with experience in narcolepsy.
During the three months ended December 31, 2025, we incurred costs of approximately $10.0 million in connection with the Avadel Acquisition.
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 concluded by the end of 2025.
Results of Operations Product Sales, Net Our product sales, net, consisted of sales of ARISTADA, ARISTADA INITIO, LYBALVI and VIVITROL, 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, 2025 and 2024: Year Ended December 31, (In millions, except for % of Sales) 2025 % of Sales 2024 % of Sales Product sales, gross $ 2,212.5 100.0 % $ 2,119.5 100.0 % Adjustments to product sales, gross: Medicaid rebates (421.8 ) (19.1 ) % (454.0 ) (21.4 ) % Chargebacks (254.3 ) (11.5 ) % (231.5 ) (10.9 ) % Product discounts (166.2 ) (7.5 ) % (155.1 ) (7.3 ) % Medicare Part D (79.5 ) (3.5 ) % (83.0 ) (3.9 ) % Other (106.1 ) (4.8 ) % (112.4 ) (5.4 ) % Total adjustments (1,027.9 ) (46.4 ) % (1,036.0 ) (48.9 ) % Product sales, net $ 1,184.6 53.6 % $ 1,083.5 51.1 % The increase in product sales, gross was due to a 19% increase in the number of units sold for LYBALVI and a 3% price increase for each of LYBALVI, ARISTADA/ARISTADA INITIO and VIVITROL that went into effect in January 2025, partially offset by decreases of 3% and 2% in the number of units sold for VIVITROL and ARISTADA/ARISTADA INITIO, respectively.
The decrease in Medicaid rebates as a percentage of sales was primarily due to gross-to-net favorability, as actual Medicaid rebates related to VIVITROL and ARISTADA/ARISTADA INITIO were lower than original estimates by approximately $26.7 million and $13.6 million, respectively.
The following table compares product sales, net earned during the years ended December 31, 2025 and 2024: Year Ended December 31, (In millions) 2025 2024 Change VIVITROL $ 467.9 $ 457.3 $ 10.6 ARISTADA and ARISTADA INITIO 370.0 346.2 23.8 LYBALVI 346.7 280.0 66.7 Product sales, net $ 1,184.6 $ 1,083.5 $ 101.1 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.
In addition, the latest to expire of our patents covering VIVITROL will expire in 2029 in the U.S. and we expect generic versions of VIVITROL to enter the market in 2027.
Under the terms of a settlement and license agreement entered into in July 2019 with Amneal, we granted Amneal a non-exclusive license under certain patents covering VIVITROL, including the remaining patent covering VIVITROL in the U.S., to market and sell a generic formulation of VIVITROL in the U.S. beginning on the earlier of the First Entry Date, sometime in 2028 or earlier under certain circumstances, and in September 2025, entered into an authorized generic product supply agreement (the “AG Agreement”) with Amneal, pursuant to which we granted Amneal certain rights to distribute and sell in the U.S. an authorized generic version of VIVITROL for a one-year term beginning on the date of a Third Party ANDA Product Launch (as defined in the AG Agreement), subject to certain conditions set forth in the AG Agreement.
The latest to expire of our patents covering ARISTADA and ARISTADA INITIO in the U.S. will expire in 2039; and, as such, we do not anticipate any generic versions of these products to enter the market in the near term.
The latest to expire of our patents covering LYBALVI in the U.S. will expire in 2041.
We are currently engaged in Paragraph IV litigation with certain entities in respect of certain of the Company’s patents related to LYBALVI with expiration dates between 2032 and 2041.
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 regarding the risks relating to these legal proceedings, see “Risks Related to our Intellectual Property—Uncertainty over IP in the biopharmaceutical industry has been the source of litigation and other legal proceedings, and we and our licensees have previously and may in the future face claims against IP rights covering our products and competition from generic drug manufacturers”.
Manufacturing and Royalty Revenues Substantially all of our manufacturing revenue was recognized at the point in time that the product has been fully manufactured.
Royalties earned on our licensees’ net sales of products using our proprietary technologies and our licensed product were recognized in the period such products were sold by our licensees.
The following table compares manufacturing and royalty revenues earned in the years ended December 31, 2025 and 2024: Year Ended December 31, (In millions) 2025 2024 Change Manufacturing and royalty revenues: Long-acting INVEGA products $ 109.6 $ 236.5 $ (126.9 ) VUMERITY 130.5 134.0 (3.5 ) RISPERDAL CONSTA 19.6 23.5 (3.9 ) Other 31.6 80.1 (48.5 ) Manufacturing and royalty revenues $ 291.3 $ 474.1 $ (182.8 ) The decrease in royalty revenues related to the long-acting INVEGA products was primarily due to the expiration of our royalty on net sales of INVEGA SUSTENNA in the U.S. in August 2024.
Although we expect royalty revenues related to U.S. net sales of INVEGA TRINZA and INVEGA HAFYERA through certain specified dates in 2030, total royalty revenues from net sales of the long-acting INVEGA products have been, and we expect will continue to be lower as the royalty revenues related to U.S. net sales of INVEGA SUSTENNA comprised a significant portion of the overall royalty revenues from the long-acting INVEGA products.
In addition, INVEGA SUSTENNA is currently subject to Paragraph IV litigation in response to companies seeking to market generic versions of such product.
Though we no longer receive royalties from INVEGA SUSTENNA in the U.S., 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 all of the long-acting INVEGA products, including those not yet genericized, and increased pricing pressure.
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 completed arbitration proceedings and outcome, see the section entitled “ Collaborative Arrangements — Janssen ” in “Item 1—Business” in this Annual Report.
The decrease in VUMERITY revenue was due to a $22.8 million decrease in manufacturing revenue, primarily due to a reduction in the number of batches manufactured for sale to Biogen, partially offset by a $19.2 million increase in royalty revenue, due to an increase in end-market sales of the product.
The decrease in revenue related to RISPERDAL CONSTA was primarily due to a $3.6 million decrease in manufacturing revenue, primarily due to a decrease in the number of batches made available to Janssen for sale in the U.S., which has a higher selling price than product sold outside of the U.S.
We are aware of generic and other competition to RISPERDAL CONSTA that may lead to reduced unit sales and increased pricing pressure.
The decrease in Other manufacturing and royalty revenue was primarily due to a $36.6 million decrease in revenue from FAMPYRA, as our manufacturing obligations for FAMPYRA concluded on December 31, 2024, and a $10.5 million decrease in manufacturing revenue from certain of our other legacy products.
Costs and Expenses Cost of Goods Manufactured and Sold Year Ended December 31, (In millions) 2025 2024 Change Cost of goods manufactured and sold $ 196.5 $ 245.3 $ (48.8 ) The decrease in the cost of goods manufactured and sold was primarily related to a $43.7 million decrease in the cost of goods manufactured for certain legacy products following the sale of the Athlone Facility in May 2024.
We also had decreases in the cost of goods sold for certain of our proprietary products, primarily due to decreases in costs related to out-of-specification batches and investigation costs.
These decreases were partially offset by an increase in the cost of goods sold for LYBALVI due to an increase in the number of units sold, as discussed above.
The following table sets forth our external R&D expenses for the years ended December 31, 2025 and 2024 relating to our then-current development programs and our internal R&D expenses, listed by the nature of such expenses: Year Ended December 31, (In millions) 2025 2024 Change External R&D expenses: Development programs: Alixorexton $ 95.8 $ 46.0 $ 49.8 LYBALVI 18.8 18.7 0.1 Other external R&D expenses 52.7 36.6 16.1 Total external R&D expenses 167.3 101.3 66.0 Internal R&D expenses: Employee-related 126.0 114.5 11.5 Occupancy 13.0 11.2 1.8 Depreciation 5.6 5.7 (0.1 ) Other 12.1 12.6 (0.5 ) Total internal R&D expenses 156.7 144.0 12.7 Research and development expenses $ 324.0 $ 245.3 $ 78.7 These amounts are not necessarily predictive of future R&D expenses.
The increase in expenses related to alixorexton was primarily due to increased spend related to the advancement of the development program for the product, including initiation of our Vibrance-3 phase 2 clinical study, costs related to the completion of our Vibrance-1 and Vibrance-2 phase 2 studies, startup costs related to planning for our phase 3 clinical program and costs related to our long-term extension study for the product.
The increase in other external R&D expenses was primarily due to activities associated with our preclinical development programs.
We expect R&D expense to increase in 2026, as we plan to initiate the phase 3 program for alixorexton and as ALKS 4510 and ALKS 7290, two internal early-stage development candidates which entered the clinic in 2025, advance.

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Item 1A—Risk Factors” in this Annual Report.
Our trademarks, including VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI, are important to us and are generally covered by trademark applications or registrations with the U.S.
Patent and Trademark Office (the “USPTO”) and the patent or trademark offices of other countries.
Our licensed products and products using our proprietary technologies also use trademarks that are owned by our licensees, such as the trademarks for INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, INVEGA HAFYERA/BYANNLI and RISPERDAL CONSTA, which are registered trademarks of Johnson & Johnson or its affiliated companies and VUMERITY, which is a registered trademark of Biogen (and used by us under license).
Trademark protection varies in accordance with local law and continues in some countries as long as the trademark is used and in other countries as long as the trademark is registered.
Trademark registrations generally are for fixed but renewable terms.
Regulatory Regulation of Pharmaceutical Products United States Our current and contemplated activities, and the products and processes that result from such activities, are subject to substantial government regulation.
Before new pharmaceutical products may be sold in the U.S., preclinical studies and clinical trials of the products must be conducted and the results submitted to the FDA for approval.
Clinical trial programs must determine an appropriate dose and regimen, establish substantial evidence of effectiveness and define the conditions for safe use.
This is a high-risk process that requires stepwise clinical studies in which the product must successfully meet pre-specified endpoints.
Preclinical Testing : Before beginning testing of any compounds with potential therapeutic value in human subjects in the U.S., stringent government requirements for preclinical data must be satisfied.
Preclinical testing includes both in vitro, or in an artificial environment outside of a living organism, and in vivo, or within a living organism, laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation.
Investigational New Drug Application : All available data from animal pharmacology and toxicology studies are included in an Investigational New Drug application (“IND”) submitted to the FDA and are reviewed by the FDA prior to commencement of first-in-human clinical trials.
The preclinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical studies in human subjects.
In certain cases where human clinical data from ex-U.S. studies are available prior to submitting the IND, these data would also be included in the IND for review by the FDA prior to commencing clinical trials in the U.S.
In addition, information pertaining to the composition, manufacturer, stability, and controls used for manufacturing the drug substance and the drug product are included in the IND to support identification, quality, purity, and strength of the investigational drug product.
Clinical Trials : Clinical trials involve the administration of an investigational drug to healthy human volunteers or to patients under the supervision of a qualified investigator pursuant to an FDA-reviewed protocol.
Human clinical trials are typically conducted in three sequential phases, although the phases may overlap with one another and, depending upon the nature of the clinical program, a specific phase or phases may be skipped altogether.
Clinical trials must be conducted under protocols that detail the objectives of the study, the parameters to be used to monitor safety, and the efficacy criteria, if any, to be evaluated.
Each protocol must be submitted to the FDA as part of the applicable IND. • Phase 1 clinical trials—test for safety, tolerability, absorption, bio-distribution, metabolism, excretion and clinical pharmacology and, if possible, to gain early evidence regarding efficacy. • Phase 2 clinical trials—involve a relatively small sample of the intended patient population and seek to assess the efficacy of the drug for targeted indications, to determine dose-response and the optimal dose range and to gather additional information relating to the safety profile. • Phase 3 clinical trials—consist of expanded, large-scale studies of patients with the target disease or disorder to obtain definitive statistical evidence of the efficacy and safety of the proposed product and dosing regimen.
In the U.S., the results of the preclinical and clinical testing of a product are then submitted to the FDA in the form of a New Drug Application (“NDA”) or a Biologics License Application (“BLA”), depending on the nature of the product.
The NDA or BLA also include information pertaining to the chemistry, manufacturing and controls (“CMC”) of the product as well as the proposed product packaging and labeling.
The submission of an application is not a guarantee that the FDA will find the application complete and accept it for filing.
The FDA may refuse to file the application if it is not considered sufficiently complete to permit a review and will inform the applicant of the reason for the refusal.
The applicant may then resubmit the application and include supplemental information.
Once an NDA or BLA is accepted for filing, the FDA has 10 months, under its standard review process, within which to review the application (for some applications, the review process is longer than 10 months).
For drugs that, if approved, would represent a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions when compared to standard applications, the FDA may assign “priority review” designation and review the application within six months of filing.
The FDA has additional review pathways to expedite development and review of new drugs that are intended to treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs, including: “Fast Track,” “Breakthrough Therapy,” and “Accelerated Approval.” However, none of these expedited pathways ensure that a product will receive FDA approval in a timely manner or at all.
As part of its review, the FDA may refer the application to an advisory committee for independent advice on questions related to the development of the drug, recommendation as to whether the application should be approved or other guidance that the FDA may seek.
The FDA is not bound by the recommendation of an advisory committee; however, historically, it has often followed such recommendations.
The FDA may determine that a Risk Evaluation and Mitigation Strategy (“REMS”) is necessary to ensure that the benefits of a new product outweigh its risks.
If required, a REMS may include various elements, such as publication of a medication guide, a patient package insert, a communication plan to educate healthcare providers of the drug’s risks, limitations on who may prescribe or dispense the drug, or other measures that the FDA deems necessary to support the safe use of the drug.
In reviewing an NDA or BLA, the FDA may grant marketing approval, or issue a complete response letter to communicate to the applicant the reasons the application cannot be approved in its then-current form and provide input on the additional information that the FDA requires and/or changes that must be made before an application can be approved.
Even if such additional information is submitted to the FDA or such changes made, the FDA may ultimately decide that the NDA or BLA still does not satisfy the FDA’s criteria for approval.
The receipt of regulatory approval often takes a number of years, involves the expenditure of substantial resources and depends on a number of factors, including the severity of the disease in question, the availability of alternative treatments, efficacy and potential safety signals observed in preclinical tests or clinical trials, and the risks and benefits demonstrated in clinical trials.
It is impossible to predict with any certainty whether and when the FDA will grant marketing approval for a given product.
Even if a product is approved, the approval may be subject to limitations based on the FDA’s interpretation of the data.
For example, the FDA may require, as a condition of approval, restricted distribution and use, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials or restrictions on direct-to-consumer advertising, any of which could negatively impact the commercial success of a drug.
The FDA may also require a sponsor to conduct additional post-marketing studies as a condition of approval to provide data on safety and effectiveness.
In addition, prior to commercialization, products that may be deemed controlled substances are subject to review and scheduling by the DEA.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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