ALKERMES PLC The following should be read in conjunction with our consolidated financial statements and related notes beginning on page F1 of this Annual Report. The following discussion contains forwardlooking statements. Actual results may differ significantly from those projected in the forwardlooking statements. See "Cautionary Note Concerning ForwardLooking Statements" on page 3 of this Annual Report. Factors that might cause future results to differ materially from those projected in the forwardlooking statements also include, but are not limited to, those discussed in "Item 1A-Risk Factors" and elsewhere in this Annual Report. A detailed discussion of our 2020 financial condition and results of operations, and of 2021 year-over-year changes as compared to 2020, can be found in "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 , which was filed with theSEC onFebruary 16, 2022 .
Overview
We have a portfolio of proprietary products that we manufacture, market and sell in theU.S. -VIVITROL, ARISTADA, ARISTADA INITIO and most recently, LYBALVI, which we launched commercially inOctober 2021 . We also earn manufacturing and/or royalty revenues on net sales of products commercialized by our licensees, the most significant of which in 2022 were the long-acting INVEGA products and VUMERITY. We expect VIVITROL, ARISTADA, ARISTADA INITIO, LYBALVI and VUMERITY to generate significant revenues for us in the near and mediumterm as we believe these products are singular or competitively advantaged products in their classes.
In 2022, we incurred an operating loss of
InNovember 2022 , we announced our intent, as approved by our board of directors, to separate our neuroscience business and oncology business. We are exploring a separation of the oncology business into an independent, publicly-traded company as part of an ongoing review of strategic alternatives for the oncology business. Following the planned separation, we would focus on driving growth of our proprietary commercial products: LYBALVI, ARISTADA, ARISTADA INITIO and VIVITROL and on advancing the development of pipeline programs focused on neurological disorders. We also expect to retain manufacturing and royalty revenues related to our licensed products and third-party products using our proprietary technologies under license.Oncology Co. would focus on the discovery and development of cancer therapies, including the continued development of nemvaleukin alfa and our portfolio of novel, preclinical, engineered cytokines. The separation, if consummated, is expected to be completed in the second half of 2023 and is subject to customary closing conditions, including final approval by our board of directors and, if sought, receipt of a private letter ruling from theIRS and/or tax opinion from our tax advisors. COVID-19 Update The COVID-19 pandemic has impacted, and may continue to impact, many aspects of society, including the operation of healthcare systems, global travel, supply and labor markets and other business and economic activity worldwide. A number of the marketed products from which we derive revenue, including manufacturing and royalty revenue, are injectable medications administered by healthcare professionals, which have been, and may continue to be, adversely impacted to varying degrees as a result of COVID-19 related closures, restrictions, labor shortages and other disruptions that have transpired, and may continue to transpire, while the pandemic persists. The COVID-19 pandemic has caused, and may continue to cause, varying degrees of disruption to our employees and our business operations. While we have continued to operate our manufacturing facilities and supply our medicines throughout the pandemic, we have at times during the pandemic experienced labor or supply chain disruptions at our manufacturing facilities and may continue to experience such disruptions while the pandemic persists, which could impact our ability to manufacture our products and the third-party products from which we receive revenue in a timely matter or at all. In addition, while we have continued to conduct R&D activities, including our ongoing clinical trials, the COVID-19 pandemic has at times impacted the timelines of certain of our early-stage discovery efforts and clinical trials, and may continue to impact such timelines while the pandemic persists. We work with our internal teams, our clinical investigators, R&D vendors and critical supply chain vendors to continually assess, and mitigate, the potential impact of COVID-19 on our manufacturing operations and R&D activities. The degree to which the COVID-19 pandemic may continue to impact our employees, business, financial condition and results of operations will depend on the ultimate severity and duration of the pandemic and the manner in which it continues to evolve, including the emergence, prevalence and severity of new COVID-19 variants, and future developments in response thereto. Due to these and numerous other uncertainties surrounding the ongoing COVID-19 pandemic, the actual impact of the pandemic on our financial condition and operating results may differ from our current projections. For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, our financial condition or our results of operations, see "Item 1A-Risk Factors" in this Annual Report and specifically the section entitled "Our business, financial condition and results of operations have been, and may continue to be, adversely affected by the ongoing COVID-19 pandemic or other similar outbreaks of contagious diseases." 55
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Table of Contents Results of Operations Product Sales, Net Our product sales, net consist of sales in theU.S. of VIVITROL, ARISTADA, ARISTADA INITIO, and following its commercial launch inOctober 2021 , LYBALVI, 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 VIVITROL, ARISTADA, ARISTADA INITIO and LYBALVI in theU.S. during the years endedDecember 31, 2022 and 2021: Year Ended December
31,
(In millions, except for % of Sales) 2022 % of Sales 2021 % of Sales Product sales, gross
$ 1,548.9 100.0 %$ 1,315.1 100.0 % Adjustments to product sales, gross: Medicaid rebates (344.0 ) (22.2 ) % (331.9 ) (25.2 ) % Chargebacks (157.2 ) (10.2 ) % (129.1 ) (9.8 ) % Product discounts (124.1 ) (8.0 ) % (107.0 ) (8.1 ) % Medicare Part D (68.1 ) (4.4 ) % (59.8 ) (4.5 ) % Other (77.9 ) (5.0 ) % (59.9 ) (4.6 ) % Total adjustments (771.3 ) (49.8 ) % (687.7 ) (52.2 ) % Product sales, net$ 777.6 50.2 %$ 627.4 47.8 % Product sales, net during the years endedDecember 31, 2022 and 2021 were as follows: Year Ended December 31, (In millions) 2022 2021 Change VIVITROL$ 379.5 $ 343.9 $ 35.6 ARISTADA and ARISTADA INITIO 302.1 275.4 26.7 LYBALVI 96.0 8.1 87.9 Product sales, net$ 777.6 $ 627.4 $ 150.2 VIVITROL product sales, gross, increased by 7% in 2022 which was primarily due to an increase of 2% in the number of VIVITROL units sold and a 6% increase in the selling price of VIVITROL that went into effect inApril 2022 . ARISTADA and ARISTADA INITIO product sales, gross, increased by 11% in 2022 which was primarily due to an increase of 8% in the number of ARISTADA and ARISTADA INITIO units sold and a 3% increase in the selling price of ARISTADA and ARISTADA INITIO that went into effect inApril 2022 . The increase in LYBALVI during 2022, as compared to 2021, was due to the product having a full year of sales in 2022 following its commercial launch inOctober 2021 . The decrease in Medicaid rebates as a percentage of sales was primarily due to actual Medicaid utilization rates related to VIVITROL being lower than original estimates as such rates normalize from initial pandemic levels and due to the increased sales of LYBALVI, which had lower Medicaid utilization than VIVITROL and ARISTADA. A number of companies are working to develop products to treat addiction, including alcohol and opioid dependence, that may compete with, and negatively impact, future sales of VIVITROL. Increased competition may lead to reduced unit sales of VIVITROL and increased pricing pressure. The latest to expire of our patents covering VIVITROL will expire in 2029 in theU.S. and expired inEurope in 2021. Under the terms of a settlement and license agreement, we granted Amneal a license under certain patents covering VIVITROL, including the latest to expire patent covering VIVITROL in theU.S. , to market and sell a generic formulation of VIVITROL in theU.S. beginning sometime in 2028 or earlier under certain circumstances. We are currently engaged in Paragraph IV litigation with certain Teva entities in respect of the last to expire patent covering VIVITROL in theU.S. For a discussion of these legal proceedings, see Note 17, 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 "Item 1A-Risk Factors" in this Annual Report and specifically the section entitled "Risks Related to our Intellectual Property-We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers". A number of companies currently market and/or are developing products to treat schizophrenia and/or bipolar I disorder that may compete with and negatively impact future sales of ARISTADA, ARISTADA INITIO and LYBALVI. Increased competition may lead to reduced unit sales of ARISTADA, ARISTADA INITIO and LYBALVI and increased pricing pressure. The latest to expire of our patents covering ARISTADA, ARISTADA INITIO and LYBALVI in theU.S. will expire in 2039, 2039 and 2032, respectively; and, as such, we do not anticipate any generic versions of these products to enter the market in the near term. We expect our product sales, net will continue to grow as VIVITROL continues to penetrate the alcohol dependence and opioid dependence markets in theU.S. , as ARISTADA and ARISTADA INITIO continue to gain market share in theU.S. , and as we continue the commercial launch of LYBALVI. 56
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Manufacturing and Royalty Revenues
Manufacturing revenue from RISPERDAL CONSTA and VUMERITY are recognized at the point in time that the product has been fully manufactured. Manufacturing revenues for third-party products using our proprietary technologies are mostly recognized over time as products move through the manufacturing process, using an input method based on costs as a measure of progress. Royalties earned on our licensees' net sales of third-party products using our proprietary technologies are generally recognized in the period such products are sold by our licensees. The following table compares manufacturing and royalty revenues earned in the years endedDecember 31, 2022 and 2021: Year Ended December 31, (In millions) 2022 2021
Change
Manufacturing and royalty revenues: Long-acting INVEGA products$ 115.7 $ 303.1 $ (187.4 ) VUMERITY 115.5 87.4 28.1 RISPERDAL CONSTA 49.9 50.9 (1.0 ) Other 50.9 100.4
(49.5 )
Manufacturing and royalty revenues
Our agreements with Janssen related to the long-acting INVEGA products provide for tiered royalty payments, which consist of a patent royalty and a know-how royalty, both of which are determined on a country-by-country basis. The patent royalty, which equals 1.5% of net sales, is payable in each country until the expiration of the last of the patents with valid claims applicable to the product in such country. The know-how royalty is a tiered royalty of 3.5% on calendar year net sales up to$250 million ; 5.5% on calendar year net sales of between$250 million and$500 million ; and 7.5% on calendar year net sales exceeding$500 million . The know-how royalty rate resets to 3.5% at the beginning of each calendar year and is payable until 15 years from the first commercial sale of a product in each individual country, subject to expiry of the agreement. For more information about the license agreement with Janssen in respect of the long-acting INVEGA products, see "Collaborative Arrangements-Janssen" in "Item 1-Business" in this Annual Report. InNovember 2021 , we received notice of partial termination of our license agreement with Janssen under which we provided Janssen with rights to, and know-how, training and technical assistance in respect of, our small particle pharmaceutical compound technology, known as NanoCrystal technology, which was used to develop INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA, and INVEGA HAFYERA/BYANNLI. The partial termination became effective inFebruary 2022 , at which time Janssen ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in theU.S. InApril 2022 , we commenced binding arbitration proceedings related to, among other things, Janssen's partial termination of this license agreement and Janssen's royalty and other obligations under the agreement. OnDecember 21, 2022 , we received the Interim Award for these proceedings from the Tribunal, in which the Tribunal agreed with our position that, while Janssen may terminate the agreement, it may not continue to sell Products (as defined in the agreement) developed during the term of the agreement without paying royalties pursuant to the term of the agreement. This award is not yet final. We will engage with Janssen and the Tribunal in additional proceedings prior to the Tribunal's issuance of a final award. Accordingly, we have not recognized royalty revenue related toU.S. sales of long-acting INVEGA products sinceFebruary 2022 . For additional information regarding the arbitration proceedings with Janssen, see Note 17, Commitments and Contingent Liabilities in the "Notes to Consolidated Financial Statements" in this Annual Report. For information about risks relating to the notice of partial termination and our collaborative arrangements more broadly, see "Item 1A-Risk Factors" in this Annual Report and specifically the section entitled "We rely heavily on our licensees in the commercialization and continued development of products from which we receive revenue and, if our licensees are not effective, or if disputes arise in respect of our contractual arrangements, our revenues could be materially adversely affected." The decrease in royalty revenues from the long-acting INVEGA products was primarily due to Janssen's partial termination of our license agreement related to such products. When the partial termination of the license agreement became effective inFebruary 2022 , Janssen ceased paying royalties related to sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA in theU.S. and we stopped recognizing royalty revenue related to net sales of these products. During 2022, Janssen's rest of world net sales were$1,426.0 million , as compared to$1,472.0 million during 2021. We expect royalty revenues from net sales of XEPLION, TREVICTA and BYANNLI to decrease over time. The amount, timing and duration of royalty revenues from sales of INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAFYERA depend upon the outcome of our dispute with Janssen related to the impact of its partial termination of our license agreement on its obligations to continue to pay us know-how royalties in accordance with the terms of the agreement. 57
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In addition, each of INVEGA SUSTENNA and INVEGA TRINZA are currently subject to Paragraph IV litigation in response to companies seeking to market generic versions of such products. Increased competition from new products or generic versions of these products may lead to reduced unit sales of such products and increased pricing pressure. For a discussion of these legal proceedings, see Note 17, Commitments and Contingent Liabilities in the "Notes to Consolidated Financial Statements" in this Annual Report, and for information about risks relating to these legal proceedings, see "Item 1A-Risk Factors" in this Annual Report, and specifically the section entitled "We or our licensees may face claims against IP rights covering our products and competition from generic drug manufacturers." We recognize manufacturing revenue for RISPERDAL CONSTA at the point in time when RISPERDAL CONSTA has been fully manufactured, which is deemed to have occurred when the product is approved for shipment by both us and Janssen. We record royalty revenue, equal to 2.5% of Janssen's end-market net sales, in the period that the end-market sales of RISPERDAL CONSTA occur. The decrease in revenue from RISPERDAL CONSTA was primarily due to a decrease of$3.2 million in royalty revenue, partially offset by a$2.2 million increase in manufacturing revenue. This decrease in royalty revenue was due to a decrease in end-market sales of RISPERDAL CONSTA, which was$485.0 million during 2022, as compared to$592.0 million during 2021. The increase in manufacturing revenue was primarily due to an increase in the number of units approved for shipment to Janssen. We expect revenues from RISPERDAL CONSTA to decrease over time. The latest to expire patent covering RISPERDAL CONSTA expired in 2021 in the EU and expired inJanuary 2023 in theU.S. , and we are aware of potential generic competition for RISPERDAL CONSTA that may lead to reduced unit sales and increased pricing pressure. We receive a 15% royalty on worldwide net sales of VUMERITY for product manufactured and packaged by us, subject to increases for VUMERITY manufactured and/or packaged by Biogen or its designees, in the period that the end-market sales of VUMERITY occur. We also recognize manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and, to the extent we package such product, then also when packaged batches of VUMERITY are made available to Biogen. The increase in revenue from VUMERITY was due to increases of$6.7 million and$21.4 million in manufacturing revenue and royalty revenue, respectively. The increase in manufacturing revenue was due to an increase in the number of packaged batches that were manufactured for Biogen, partially offset by a manufacturing issue related to VUMERITY, which, for a period during 2022, negatively impacted the number of commercial batches we were able to manufacture. The increase in royalty revenue was due to an increase in net sales of VUMERITY, which were$553.4 million during 2022, as compared to$410.0 million during 2021. The decrease in other manufacturing and royalty revenue was primarily due to the decision from an arbitration panel inOctober 2022 , which found that we must return to Acorda$16.5 million (inclusive of prejudgment interest and administrative fees) previously paid by Acorda under a license agreement between the Company and Acorda. InNovember 2022 , the panel found that we must pay to Acorda an additional$1.8 million (inclusive of prejudgment interest). These amounts represent a portion of the royalty revenue paid to us by Acorda sinceJuly 2020 related to AMPYRA. We paid the$16.5 million inOctober 2022 and paid the additional$1.8 million inDecember 2022 . In addition, during the three months endedJune 30, 2022 , we had recorded$3.2 million of royalty revenue related to AMPYRA as we believed that we had met the necessary revenue recognition criteria under the Financial Accounting Standards Board Accounting Standards Codification 606, Revenue from Contracts with Customers ("Topic 606"). However, as a result of the arbitration ruling, we reversed the$3.2 million as the panel found that we were no longer entitled to be paid those royalties. During the three months endedSeptember 30, 2022 , we recorded both the approximately$18.3 million in repayments and the$3.2 million reversal as reversals of royalty revenue within "Manufacturing and royalty revenue" in the accompanying consolidated statements of operations and comprehensive loss. As a result of the arbitration ruling, we no longer have a contractual obligation to manufacture and supply AMPYRA or a contractual right to receive future manufacturing or royalty revenue related to AMPYRA. InJanuary 2023 , Acorda filed a petition with theU.S. District Court for the Southern District of New York asking the court to confirm in part and modify in part the final arbitral award rendered by the arbitration panel inOctober 2022 and, as part of the requested modification, seeking an additional approximately$66.0 million in damages. We intend to contest this petition and believe it is without merit. Certain of our manufacturing and royalty revenues are earned in countries outside of theU.S. and are denominated in currencies in which the product is sold. See "Item 7A-Quantitative and Qualitative Disclosures about Market Risk" in this Annual Report for information on currency exchange rate risk related to our revenues and "Item 1A-Risk Factors" in this Annual Report, and specifically the section entitled "Currency exchange rates may affect revenues and expenses" for risks related to currency exchange rates. 58
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Costs and Expenses
Cost of Goods Manufactured and Sold
Year Ended December 31,
(In millions) 2022 2021 Change
Cost of goods manufactured and sold
The increase in cost of goods manufactured and sold was primarily due to increases of$6.4 million and$4.8 million , respectively, in the cost of goods manufactured for VUMERITY and RISPERDAL CONSTA and increases of$5.6 million and$10.2 million , respectively, in the cost of goods sold for VIVITROL and LYBALVI. The increases related to VUMERITY and RISPERDAL CONSTA were primarily due to increased manufacturing activity, as discussed above. The increase related to LYBALVI was primarily due to the increase in sales activity, as discussed above. The increase related to VIVITROL was primarily due to an increase in costs incurred for out-of-specification batches, as well as an increase in sales activity, as discussed above.
Research and Development Expenses
For each of our R&D programs, we incur both external and internal expenses. External R&D expenses include fees for clinical and non-clinical activities performed by CROs, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities. Internal R&D expenses include employee-related expenses, occupancy costs, depreciation and general overhead. We track external R&D expenses for each of our development programs; however, internal R&D expenses are not tracked by individual program as they can benefit multiple programs or our technologies in general. The following table sets forth our external R&D expenses for the years endedDecember 31, 2022 and 2021 relating to our then-current development programs and our internal R&D expenses, listed by the nature of such expenses: Year Ended December 31, (In millions) 2022 2021 Change External R&D expenses: Development programs: nemvaleukin$ 77.8 $ 80.1 $ (2.3 ) LYBALVI 23.1 26.0 (2.9 ) ALKS 1140 3.5 29.3 (25.8 ) Other external R&D expenses 76.1 65.7 10.4 Total external R&D expenses 180.5 201.1 (20.6 ) Internal R&D expenses: Employee-related 159.0 148.6 10.4 Occupancy 17.8 19.5 (1.7 ) Depreciation 12.0 12.2 (0.2 ) Other 24.5 25.1 (0.6 ) Total internal R&D expenses 213.3 205.4 7.9
Research and development expenses
These amounts are not necessarily predictive of future R&D expenses. In an effort to allocate our spending most effectively, we continually evaluate our products under development based on the performance of such products in preclinical and/or clinical trials, our expectations regarding the likelihood of their regulatory approval and our view of their future potential commercial viability, among other factors. The decrease in expenses related to nemvaleukin was primarily due to decreased spend on the ARTISTRY-1 study, partially offset by increased spend on the ARTISTRY-7 study. For additional detail on the ARTISTRY development program for nemvaleukin, see "Item 1-Business" in this Annual Report and specifically the section entitled "Key Development Program - nemvaleukin alfa". The decrease in expenses related to LYBALVI was primarily due to decreased R&D activities for the product in light of its commercial launch inOctober 2021 , partially offset by continued spend on ongoing clinical studies. The decrease in expenses related to ALKS 1140 was primarily due to the termination of the ALKS 1140 clinical development program in the second quarter of 2022, as the initial data did not support further clinical development, and a$25.0 million development milestone in the third quarter of 2021 related to the submission of a clinical trial authorization for ALKS 1140. The increase in other external R&D expenses was primarily due to an increase of$10.2 million related to our early-stage development programs. The increase in employee-related expense was primarily related to an increase of$5.5 million in labor and benefits, primarily due to increases in recruitment costs and temporary labor and an increase of$3.2 million in R&D-related share-based compensation, primarily due to an increase in the fair value of the awards granted in 2022. 59
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Selling, General and Administrative Expenses
Year Ended December 31,
(In millions) 2022 2021 Change
Selling and marketing expense $ 392.2 $ 365.9 $ 26.3
General and administrative expense 213.5
195.1 18.4
Selling, general and administrative expense
The increase in selling and marketing expense was primarily due to a
The increase in general and administrative expense was primarily due to a$9.9 million increase in professional service fees, primarily due to increased spend on legal fees and fees related to the proposed separation of the Company's oncology business. We also had a$3.5 million increase in our branded prescription drug fee due to an increase in sales of our commercialized products and a$1.9 million increase in travel and expense, primarily due to resuming in-person meetings as travel restrictions loosened.
Amortization of Acquired Intangible Assets
Year Ended December 31,
(In millions) 2022 2021 Change
Amortization of acquired intangible assets
Our amortizable intangible assets consist of technology and collaborative arrangements acquired as part of the acquisition of EDT inSeptember 2011 , which are being amortized over 12 to 13 years. We amortize our amortizable intangible assets using the economic use method, which reflects the pattern that the economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract. Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet atDecember 31, 2022 is expected to be approximately$35.0 million and$1.0 million in the years endingDecember 31, 2023 and 2024, respectively. Other Expense, Net Year Ended December 31, (In millions) 2022 2021 Change Interest income$ 7.6 $ 2.4 $ 5.2 Interest expense (13.0 ) (11.2 ) (1.8 ) Change in the fair value of contingent consideration (21.8 ) (1.4 ) (20.4 ) Other income, net 2.2 0.2 2.0 Total other expense, net$ (25.0 ) $ (10.0 ) $ (15.0 ) The increase in total other expense, net was primarily due to the change in the fair value of contingent consideration and an increase in interest expense, partially offset by increases in interest income and other income, net. The change in the fair value of the contingent consideration was due to the determination that it was unlikely that we would collect any further contingent consideration proceeds from Baudax Bio, Inc. ("Baudax"), and accordingly, we reduced the fair value of the contingent consideration to zero, as discussed in Note 5, Fair Value, in the "Notes to Consolidated Financial Statements" in this Annual Report. Interest expense consists primarily of interest incurred on our 2026 Term Loans. Interest income consists primarily of interest earned on our available-for-sale investments. The increases in interest income and interest expense were primarily due to increases in interest rates. The increase in interest expense was partially offset by a decrease in certain financing costs related to the Term Loan Refinancing completed inMarch 2021 . The Term Loan Refinancing is discussed in Note 11, Long-Term Debt in the "Notes to Consolidated Financial Statements" in this Annual Report. The increase in other income, net was primarily due to proceeds received in connection with the Company's investment inFountain Healthcare Partners II, L.P. ofIreland ("Fountain") inMarch 2022 , partially offset by the write down of certain construction in progress due to the determination that certain construction in progress related to our agreement with Baudax had no future value, as discussed in Note 7, Property, Plant and Equipment, in the "Notes to Consolidated Financial Statements" in this Annual Report. The Fountain investment is discussed in Note 4, Investments, in the "Notes to Consolidated Financial Statements" in this Annual Report. 60
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Income Tax (Benefit) Provision
Year Ended December 31,
(In millions) 2022 2021 Change
Income tax (benefit) provision
The income tax benefit in 2022 was primarily due to an enhanced foreign derived intangible income deduction that resulted from a change to Section 174 of the Tax Cuts and Jobs Act in relation to capitalization and amortization of R&D expenses. The income tax provision in 2021 was primarily due toU.S. federal and state taxes on income earned in theU.S. and the tax impact of employee equity activity. No provision for income tax has been provided on undistributed earnings of our foreign subsidiaries because such earnings are indefinitely reinvested in the foreign operations. Cumulative unremitted earnings of overseas subsidiaries totaled approximately$812.8 million atDecember 31, 2022 . In the event of a repatriation of those earnings in the form of dividends or otherwise, we may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreign tax authorities. We estimate that approximately$55.0 million of income taxes would be payable on the repatriation of the unremitted earnings toIreland . As ofDecember 31, 2022 , we had$1.7 billion of Irish NOL carryforwards,$15.1 million ofU.S. federal NOL carryforwards,$43.2 million of state NOL carryforwards,$5.7 million of federal R&D credits and$29.0 million of state tax credits which will either expire on various dates through 2042 or can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and tax. These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities and may be subject to limitations based upon changes in the ownership of our ordinary shares. As discussed in "Item 1A-Risk Factors" in this Annual Report and specifically the section entitled "Changes in tax rules and regulations, or interpretations thereof, may adversely affect our financial condition", effective in 2022, the Tax Cuts and Jobs Act of 2017 requires us to capitalize, and subsequently amortize R&D expenses over five years for research activities conducted in theU.S. and over fifteen years for research activities conducted outside of theU.S. In 2022, this resulted in a material increase to ourU.S. income tax liability and net deferred tax assets and a material decrease to our cash flows provided from operations. We expect an impact from this legislative change throughout the amortization period. InDecember 2022 , the EU agreed to implement a corporate minimum tax rate of 15% on companies with combined annual revenue of at least €750.0 million. The Irish government will be required to transpose these rules into Irish legislation. The new rules are expected to come into effect onJanuary 1, 2024 . The Company is currently monitoring these developments and assessing the potential impact.
Liquidity and Capital Resources
Our financial condition is summarized as follows:
December 31, 2022 December 31, 2021
(In millions) U.S. Ireland Total U.S. Ireland Total
Cash and cash equivalents $ 208.4 $ 84.1 $ 292.5 $ 88.6 $ 248.9 $ 337.5
Investments-short-term 207.6 108.4 316.0 144.5 54.3 198.8
Investments-long-term 70.3 61.3 131.6 163.0 66.4 229.4
Total cash and investments $ 486.3 $ 253.8 $ 740.1 $ 396.1 $ 369.6 $ 765.7
Outstanding borrowings-short
and long-term $ 293.3 $ - $ 293.3 $ 295.8 $ - $ 295.8 At
Gross
Amortized Unrealized Allowance for Estimated
(In millions) Cost Gains Losses Credit Losses Fair Value
Investments-short-term
available-for-sale $ 320.6 $ - $ (4.6 ) $ - $ 316.0
Investments-long-term
available-for-sale 134.6 - (4.8 ) - 129.8
Investments-long-term
held-to-maturity 1.8 - - - 1.8
Total $ 457.0 $ - $ (9.4 ) $ - $ 447.6
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Table of Contents Sources and Uses of Cash We generated$21.0 million and$101.7 million of cash from operating activities during the years endedDecember 31, 2022 and 2021, respectively. We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash requirements, such as capital expenditures and principal and interest payments on our longterm debt, for at least the twelve months following the date from which our financial statements were issued. Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain additional financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financing methods or structures. In addition, the 2026 Term Loans have an incremental facility capacity in an amount of$175.0 million , plus additional potential amounts provided that we meet certain conditions, including a specified leverage ratio. Our investment objectives are, first, to preserve liquidity and conserve capital and, second, to generate investment income. We mitigate credit risk in our cash reserves by maintaining a well-diversified portfolio that limits the amount of investment exposure as to institution, maturity and investment type. However, the value of these securities may be adversely affected by the instability of the global financial markets, which could, in turn, adversely impact our financial position and our overall liquidity. Our available-for-sale investments consist primarily of short and long-termU.S. government and agency debt securities, corporate debt securities and debt securities issued and backed by non-U.S. governments. Our held-to-maturity investments consist of investments that are held as collateral under certain letters of credit related to certain of our lease agreements. We classify availableforsale investments in an unrealized loss position that do not mature within 12 months as longterm investments. We have the intent and ability to hold these investments until recovery, which may be at maturity, and it is morelikelythannot that we would not be required to sell these securities before recovery of their amortized cost. We have no off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources in the next twelve months. As discussed above, we made a$25.0 million development milestone payment to the former shareholders ofRodin Therapeutics, Inc. ("Rodin") during the year endedDecember 31, 2021 . We are obligated to make up to$825.0 million in future payments,$225.0 million of which would be triggered upon achievement of certain specified clinical milestones,$300.0 million of which would be triggered by the achievement of certain regulatory milestones and$325.0 million of which would be triggered upon the attainment of certain sales thresholds. AtDecember 31, 2022 , we had not recorded a liability related to these milestone payments as none of the future events that would trigger a milestone payment were considered probable of occurring. Information about our cash flows, by category, is presented in the accompanying consolidated statements of cash flows. The following table summarizes our cash flows for the years endedDecember 31, 2022 and 2021: Year EndedDecember 31 , (In millions) 2022
2021
Cash and cash equivalents, beginning of period
21.0 101.7
Cash flows used in investing activities (64.4 ) (66.2 ) Cash flows (used in) provided by financing activities (1.6 )
29.0
Cash and cash equivalents, end of period$ 292.5 $ 337.5 Operating Activities Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. We expect cash provided from operating activities will continue to be our primary source of funds to finance operating needs and capital expenditures for the foreseeable future. Operating cash flow is derived by adjusting our net loss for non-cash operating items such as depreciation, amortization and share-based compensation as well as changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations. The decrease in cash flows provided by operating activities was primarily due to an increase in our net loss of$110.1 million and an increase in cash used for our lease liabilities of$15.3 million related to an early payment of our lease of approximately 231,000 square feet of office and laboratory space located at900 Winter Street inWaltham, Massachusetts . Please refer to Note 9, Leases, in the "Notes to Consolidated Financial Statements" in this Annual Report for additional information related to such early payment. These were partially offset by an increase in the cash provided by working capital, primarily due to an increase in cash provided by receivables of$63.3 million and from accounts payable and accrued expenses of$4.0 million . 62
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Investing Activities
The decrease in cash flows used in investing activities was primarily due to a$17.4 million decrease in net purchase of investments and a$6.7 million decrease in payments received in connection with the contingent consideration resulting from the Gainesville Transaction, partially offset by a$10.2 million increase in capital expenditures. We expect to spend approximately$35.0 million to$40.0 million during the year endingDecember 31, 2023 for capital expenditures. We continue to evaluate our manufacturing capacity based on expectations of demand for the products that we manufacture and will continue to record such amounts within construction in progress until such time as the underlying assets are placed into service, or we determine we have sufficient existing capacity and the assets are no longer required, at which time we would recognize an impairment charge. We continue to periodically evaluate whether facts and circumstances indicate that the carrying value of these longlived assets to be held and used may not be recoverable.
Financing Activities
The change in cash flows from financing activities was primarily due to$23.6 million in proceeds from the Term Loan Refinancing, which we received in 2021, and a$7.3 million decrease in the amount of cash that we received upon the exercise of employee stock options, net of employee taxes.
Debt
AtDecember 31, 2022 , our borrowings consisted of$294.8 million outstanding under the 2026 Term Loans. The 2026 Term Loans bear interest at LIBOR plus 2.5%, with a LIBOR floor of 0.5%. Principal payments of$0.8 million are to be made quarterly through 2025, with a final payment of$285.8 million due inMarch 2026 . Please refer to Note 11, LongTerm Debt, in the "Notes to Consolidated Financial Statements" in this Annual Report for a discussion of our outstanding term loans.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments based on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review these accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the "Notes to Consolidated Financial Statements" in this Annual Report. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the audit and risk committee of our board of directors.
Revenue from Contracts with Customers
When entering into arrangements with customers, we identify whether our
performance obligations under each arrangement represent a distinct good or
service or a series of distinct goods or services. If a contract contains more
than one performance obligation, we allocate the total transaction price to each
performance obligation in an amount based on the estimated relative standalone
selling prices of the promised goods or services underlying each performance
obligation. The fair value of performance obligations under each arrangement may
be derived using an estimate of selling price if we do not sell the goods or
services separately.
We recognize revenue when or as we satisfy a performance obligation by
transferring an asset or providing a service to a customer. Management judgment
is required in determining the consideration to be earned under an arrangement
and the period over which we are expected to complete our performance
obligations under an arrangement. Steering committee services that are not
inconsequential or perfunctory and that are determined to be performance
obligations are combined with other research services or performance obligations
required under an arrangement, if any, in determining the level of effort
required in an arrangement and the period over which we expect to complete our
aggregate performance obligations.
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Product Sales, Net
Our product sales, net consist of sales in theU.S. of VIVITROL, ARISTADA, ARISTADA INITIO and, following its commercial launch inOctober 2021 , LYBALVI, primarily to wholesalers, specialty distributors and pharmacies. Product sales, net are recognized when the customer obtains control of the product, which is when the product has been received by the customer. Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, healthcare providers or payers. Our process for estimating reserves established for these variable consideration components does not differ materially from historical practices. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment. The following are our significant categories of sales discounts and allowances:
• Medicaid Rebates-we record accruals for rebates to
Medicaid Drug Rebate Program as a reduction of sales when the product is
shipped into the distribution channel using the expected value. We rebate
individual
program based on a rebate per unit calculation, which is based on our
average manufacturer prices. We estimate expected unit sales to
individuals covered by Medicaid and rebates per unit under the Medicaid
program and adjust our rebate accrual based on actual unit sales and
rebates per unit and changes in trends in Medicaid utilization. To date,actual Medicaid rebates have not differed materially from our estimates;
• Chargebacks-discounts that occur when contracted indirect customers
purchase directly from wholesalers and specialty distributors. Contracted
customers generally purchase a product at its contracted price. The
wholesaler or specialty distributor, in turn, then generally charges back
to us the difference between the wholesale acquisition cost and the
contracted price paid to the wholesaler or specialty distributor by the
customer. The allowance for chargebacks is made using the expected value
and is based on actual and expected utilization of these programs.
Chargebacks could exceed historical experience and our estimates of future
participation in these programs. To date, actual chargebacks have not
differed materially from our estimates;
• Product Discounts-cash consideration, including sales incentives, given by
us under agreements with a number of wholesaler, distributor, pharmacy,
and treatment provider customers that provide them with a discount on the
purchase price of products. The reserve is made using the expected value
and to date, actual product discounts have not differed materially from
our estimates;
• Product Returns-we record an estimate for product returns at the time our
customers take control of our product. We estimate this liability using
the expected returns of product sold based on our historical return levelsand specifically identified anticipated returns due to known business
conditions and product expiry dates. Return amounts are recorded as a
reduction of sales. Once product is returned, it is destroyed; and
• Medicare Part D-we record accruals for Medicare Part D liabilities under
the Medicare Coverage Gap Discount Program ("CGDP") as a reduction of
sales. Under the CGDP, patients reaching the annual coverage gap threshold
are eligible for reimbursement coverage for out-of-pocket costs for
covered prescription drugs. Under an agreement with the Centers for
Medicare and Medicaid Services , manufacturers are responsible for
reimbursement of prescription plan sponsors for the portion of
out-of-pocket expenses not covered under their Medicare plans.
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A rollforward of our provisions for sales and allowances is as follows:
Medicaid Product Product Medicare
(In millions) Rebates Chargebacks Discounts Returns Part D Other Total
Balance, December 31, 2020 $ 182.0 $ 4.3 $ 14.4 $ 23.7 $ 12.9 $ 10.0 $ 247.3 Provision: Current year 344.3 129.1 107.0 11.4 59.8 49.5 701.1 Prior year (12.4 ) - - (1.0 ) - - (13.4 ) Total 331.9 129.1 107.0 10.4 59.8 49.5 687.7 Actual: Current year (173.5 ) (124.4 ) (85.1 ) (9.7 ) (47.6 ) (39.3 ) (479.6 ) Prior year (145.0 ) (3.4 ) (17.8 ) - (10.8 ) (10.6 ) (187.6 ) Total (318.5 ) (127.8 ) (102.9
) (9.7 ) (58.4 ) (49.9 ) (667.2 )
Balance,
$ 24.4 $ 14.3 $ 9.6 $ 267.8 Provision: Current year 366.1 157.2 124.1 15.9 68.1 58.8 790.2 Prior year (22.1 ) - - 3.2 - - (18.9 ) Total 344.0 157.2 124.1 19.1 68.1 58.8 771.3 Actual: Current year (186.5 ) (149.9 ) (103.0 ) (13.8 ) (51.1 ) (48.8 ) (553.1 ) Prior year (144.6 ) (4.1 ) (22.3 ) - (12.9 ) (11.6 ) (195.5 ) Total (331.1 ) (154.0 ) (125.3
) (13.8 ) (64.0 ) (60.4 ) (748.6 )
Balance,
$ 29.7 $ 18.4 $ 8.0 $ 290.5 Manufacturing Revenue We recognize manufacturing revenues from the sale of products we manufacture for resale by our licensees. Manufacturing revenues for our partnered products, with the exception of those from Janssen related to RISPERDAL CONSTA and from Biogen related to VUMERITY, are recognized over time as products move through the manufacturing process, using a standard cost-based model as a measure of progress, which represents a faithful depiction of the transfer of control of the goods. We recognize manufacturing revenue from these products over time as we determined, in each instance, that we would have a right to payment for performance completed to date if our customer were to terminate the manufacturing agreement for reasons other than our non-performance and the products have no alternative use. We invoice our licensees upon shipment with payment terms between 30 to 90 days. We are the exclusive manufacturer of RISPERDAL CONSTA for commercial sale under our manufacturing and supply agreement with Janssen. We determined that it is appropriate to record revenue under this agreement at the point in time when control of the product passes to Janssen, which is determined to be when the product has been fully manufactured, since Janssen does not control the product during the manufacturing process and, in the event Janssen terminates the manufacturing and supply agreement, it is uncertain whether, and at what amount, we would be reimbursed for performance completed to date for product not yet fully manufactured. The manufacturing process is considered fully complete once the finished goods have been approved for shipment by both us and Janssen. We recognize manufacturing revenue related to VUMERITY at cost plus 15%, upon making available bulk batches of VUMERITY to Biogen and, to the extent we package such product, then also when packaged batches of VUMERITY are made available to Biogen. Control of the product passes to Biogen when VUMERITY, in either bulk or finished form, is made available to Biogen. The sales price for certain of our manufacturing revenues is based on the end-market sales price earned by our licensees. As end-market sales generally occur after we have recorded manufacturing revenue, we estimate the sales price for such products based on information supplied to us by our licensees, our historical transaction experience and other third-party data. Differences between actual manufacturing revenues and estimated manufacturing revenues are reconciled and adjusted for in the period in which they become known, which is generally within the same quarter. The differences between our actual and estimated manufacturing revenues have not been material to date.
Royalty Revenue
We recognize royalty revenues related to the sale by our licensees of products
that incorporate our technology. Substantially all of our royalties qualify for
the sales-and-usage exemption under Topic 606 as (i) such royalties are based
strictly on the sales-and-usage by the licensee; and (ii) a license of IP is the
sole or predominant item to which such royalties relate. Based on this
exemption, such royalties are earned in the period the products are sold by our
licensee and we have a present right to payment.
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Certain of our royalty revenues are recognized based on information supplied to us by our licensees and require estimates to be made. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, which is generally within the same quarter. The differences between our actual and estimated royalty revenues have not been material to date.
Research and Development Revenue and License Revenue
Research and development revenue consists of funding that compensates us for formulation, preclinical and clinical testing under research and development arrangements with our partners. We generally bill our partners under such arrangements using a full-time equivalent or hourly rate, plus direct external costs, if any. Revenue is recognized as the obligations under the arrangements are performed. We recognize revenue from the grant of distinct, right-to-use licenses of IP when control of the license is transferred to our licensee, which is the point in time that the licensee is able to direct the use of and obtain substantially all of the benefits from the license.
Amortization and Impairment of LongLived Assets
Longlived assets, other than goodwill which is separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When evaluating longlived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable longlived asset, the new cost basis will be depreciated over the remaining useful life of that asset. When reviewing longlived assets for impairment, we group longlived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. Our amortizable intangible assets consist of IP and are being amortized as revenue is generated from products utilizing the IP, which we refer to as the economic benefit amortization model. This amortization methodology involves calculating a ratio of actual current period sales to total anticipated sales for the life of the product and applying this ratio to the carrying amount of the intangible asset. In order to determine the pattern in which the economic benefits of our intangible assets are consumed, we estimated the future revenues to be earned by products utilizing the capitalized IP from the date of acquisition to the end of their respective useful lives. The factors used to estimate such future revenues included: (i) our and our licensees' projected future sales of the existing commercial products based on these intangible assets; (ii) our projected future sales of new products based on these intangible assets which we anticipate will be launched commercially; (iii) the patent lives of the technologies underlying such existing and new products; and (iv) our expectations regarding the entry of generic and/or other competing products into the markets for such existing and new products. These factors involve known and unknown risks and uncertainties, many of which are beyond our control and could cause the actual economic benefits of these intangible assets to be materially different from our estimates. Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet atDecember 31, 2022 , is expected to be approximately$35.0 million and$1.0 million in the years endingDecember 31, 2023 and 2024, respectively. Although we believe such available information and assumptions are reasonable, given the inherent risks and uncertainties underlying our expectations regarding such future revenues, there is the potential for our actual results to vary significantly from such expectations. If revenues are projected to change, the related amortization of the intangible asset will change in proportion to the change in revenue. If there are any indications that the assumptions underlying our most recent analysis would be different than those utilized within our current estimates, our analysis would be updated and may result in a significant change in the anticipated lifetime revenue of the products associated with our amortizable intangible assets. For example, the occurrence of an adverse event could substantially increase the amount of amortization expense associated with our acquired intangible assets as compared to previous periods or our current expectations, which may result in a significant negative impact on our future results of operations. 66
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We evaluate goodwill for impairment for our reporting units annually, as ofOctober 31 , and whenever events or changes in circumstances indicate the carrying value of the reporting units may not be recoverable. A reporting unit is an operating segment, as defined by GAAP, or a component of an operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and is reviewed by management. Two or more components of an operating segment may be aggregated and deemed a single reporting unit for goodwill impairment testing purposes if the components have similar economic characteristics. As ofDecember 31, 2022 , we have one operating segment and two reporting units. Our goodwill, which solely relates to the Business Combination, has been assigned to one reporting unit which consists of the former EDT business. We have the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If we elect this option and determine, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required; otherwise, no further testing is required. Among other relevant events and circumstances that affect the fair value of reporting units, we consider individual factors, such as microeconomic conditions, changes in the industry and the markets in which we operate as well as historical and expected future financial performance. Alternatively, we may elect to not first assess qualitative factors and instead immediately perform the quantitative impairment test. OnOctober 31, 2022 , we elected to perform a qualitative impairment test and determined that based on the weight of all available evidence, the fair value of the reporting unit more-likely-than-not exceeded its carrying value.
Contingent Consideration
We record contingent consideration that we are entitled to receive related to the sale of a business at fair value on the acquisition date. We estimate the fair value of contingent consideration through valuation models that incorporate probability-adjusted assumptions related to the achievement of milestones and the corresponding likelihood of receiving related payments. We revalue our contingent consideration each reporting period, with changes in the fair value of contingent consideration recognized within the consolidated statements of operations and comprehensive loss. Changes in the fair value of contingent consideration can result from changes to one or multiple assumptions, including adjustments to the discount rates, changes in the amount and timing of cash flows, changes in the assumed achievement and timing of any development and sales-based milestones, changes in the assumed probability associated with regulatory approval and changes in the probability of collection or default on portions of the contingent consideration due to us. These fair value measurements are based on significant inputs, including inputs not observable in the market. Significant judgment was employed in determining the appropriateness of these assumptions at the acquisition date and for each subsequent period. Accordingly, changes in assumptions described above could have a material impact on the increase or decrease in the fair value of contingent consideration recorded in any given period.
Valuation of Deferred Tax Assets
We evaluate the need for deferred tax asset valuation allowances based on a morelikelythannot standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. We consider the following possible sources of taxable income when assessing the realization of deferred tax assets:
• future reversals of existing taxable temporary differences;
• future taxable income exclusive of reversing temporary differences and
carryforwards;
• taxable income in prior carryback years; and
• taxplanning strategies.
The assessment regarding whether a valuation allowance is required or should be
adjusted also considers all available positive and negative evidence factors
including, but not limited to:
• nature, frequency and severity of recent losses;
• duration of statutory carryforward periods;
• historical experience with tax attributes expiring unused; and
• near and mediumterm financial outlook.
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We utilize a rolling three years of actual and current year anticipated results as the primary measures of cumulative losses in recent years.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and future profitability. Our accounting for deferred tax consequences represents our best estimate of those future events. Changes in our current estimates, due to unanticipated events or otherwise, could have a material effect on our financial condition and results of operations. For information related to risks surrounding our deferred tax assets, see "Item 1A-Risk Factors" in this Annual Report and specifically the section entitled "Our deferred tax assets may not be realized."
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies, "New Accounting Pronouncements" in our "Notes to Consolidated Financial Statements" in this Annual Report for a discussion of new accounting standards.
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