##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

|           |  |                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------
|(checkbox) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|(box) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number 0-19267

ALKERMES, INC.

|                                                                            |  |                                                
|--------------------------------------------------------------------------- |  | -----------------------------------------------
|PENNSYLVANIA
(State or other jurisdiction of
incorporation or organization) |  | 23-2472830
(I.R.S. Employer
Identification No.)
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |  |                                                
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|64 Sidney Street, Cambridge, MA
(Address of principal executive offices)    |  | 02139-4136
(Zip Code)                          

Registrants telephone number including area code: (617) 494-0171

Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes (checkbox)   No (box)

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

|                                        |  |                                           |            | 
|--------------------------------------- |  | ----------------------------------------- | ---------- | 
|Class                                   |  | Shares Outstanding as of November 9, 2001
|                                        |  |                                          
|Common Stock, par value $.01            |  |                                           | 63,946,916
|                                       
|                                       
|                                       
|                                       
|Non-Voting Common Stock, par value $.01 |  |                                           | 382,632    | 





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TABLE OF CONTENTS



|                                    |                                                                                               |                                            |  |  |  |  |  | 
|----------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION      
|                                    | Item 1. Consolidated Financial Statements:                                                   
|                                    |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                    |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                    |                                                                                               | STATEMENTS OF CASH FLOWS                  
|                                    |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                    | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                    | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION         
|                                    | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                         
|Exhibit Index                      
|Ex-10.1  1998 Equity Incentive Plan



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##### Table of Contents



ALKERMES, INC. AND SUBSIDIARIES

INDEX

|                               |         |  |                                                            |                                                  |  |          |   | 
|------------------------------ | ------- |  | ---------------------------------------------------------- | ------------------------------------------------ |  | -------- | - | 
|                               |         |  |                                                            |                                                  |  | Page No.
|                               |         |  |                                                            |                                                  |  |         
|PART I  FINANCIAL INFORMATION |         |  |                                                            |                                                 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               | Item 1. |  | Consolidated Financial Statements                          |                                                  |  |          |  
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | Consolidated Balance Sheets                      |  |          | 3 | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | - September 30, 2001 and March 31, 2001          |  |          |   | 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | Consolidated Statements of Operations            |  |          | 4 | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | - Three months ended September 30, 2001 and 2000 |  |          |   | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | - Six months ended September 30, 2001 and 2000   |  |          |   | 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | Consolidated Statements of Cash Flows            |  |          | 5 | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | - Six months ended September 30, 2001 and 2000   |  |          |   | 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | Notes to Consolidated Financial Statements       |  |          | 6 | 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               | Item 2. |  | Managements Discussion and Analysis of                    |                                                  |  | 9        |  
|                              
|                              
|                              
|                              
|                               |         |  |                                                            | Financial Condition and Results of Operations    |  |          |   | 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               | Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk |                                                  |  | 14       |  
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION    |         |  |                                                            |                                                 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|                               | Item 6. |  | Exhibits and Reports on Form 8-K                           |                                                  |  | 15       |  
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|SIGNATURES                     |         |  | 16                                                         |                                                 
|                              
|                              
|                              
|                              
|                               |         | 
|                              
|                              
|                              
|                              
|EXHIBIT INDEX                  |         |  | 17                                                         |                                                 

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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Consolidated Financial Statements:




ALKERMES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)

|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |              |   |             |   | 
|------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------------------------------------ | - | ------------- | ----------- | ------------ | - | ----------- | - | 
|                               |                                                                                                                                                                         |  |                                                |                                      |   | September 30, |             | March 31,   
|                               |                                                                                                                                                                         |  |                                                |                                      |   | 2001          |             | 2001        
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  |                                                | ASSETS                               |   |               |             |              |   |             |   | 
|                              
|                              
|                              
|                              
|Current Assets:                |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                              
|                              
|                              
|                              
|                               | Cash and cash equivalents                                                                                                                                               |  | $                                              | 14,048,162                           |   |               | $           | 5,923,282    |  
|                              
|                              
|                              
|                              
|                               | Short-term investments                                                                                                                                                  |  |                                                | 271,626,086                          |   |               |             | 249,004,850  |  
|                              
|                              
|                              
|                              
|                               | Receivables from collaborative arrangements                                                                                                                             |  |                                                | 20,424,634                           |   |               |             | 10,951,763   |  
|                              
|                              
|                              
|                              
|                               | Prepaid expenses and other current assets                                                                                                                               |  |                                                | 4,992,110                            |   |               |             | 5,726,610    |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | Total current assets                           |                                      |   | 311,090,992   |             |              |   | 271,606,505 |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Property, Plant and Equipment: |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                              
|                              
|                              
|                              
|                               | Land                                                                                                                                                                    |  |                                                | 235,000                              |   |               |             | 235,000      |  
|                              
|                              
|                              
|                              
|                               | Building                                                                                                                                                                |  |                                                | 5,021,101                            |   |               |             | 4,888,469    |  
|                              
|                              
|                              
|                              
|                               | Furniture, fixtures and equipment                                                                                                                                       |  |                                                | 47,098,220                           |   |               |             | 43,432,360   |  
|                              
|                              
|                              
|                              
|                               | Leasehold improvements                                                                                                                                                  |  |                                                | 14,689,820                           |   |               |             | 14,401,828   |  
|                              
|                              
|                              
|                              
|                               | Construction in progress                                                                                                                                                |  |                                                | 4,350,733                            |   |               |             | 562,331      |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | 71,394,874                                     |                                      |   |               | 63,519,988  |             
|                              
|                              
|                              
|                              
|                               |                                                                                                                                                                         |  | Less accumulated depreciation and amortization |                                      |   | (31,441,485   | )           |              |   | (27,200,590 | )
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | 39,953,389                                     |                                      |   |               | 36,319,398  |             
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Investments                    |                                                                                                                                                                         |  | 9,697,218                                      |                                      |   |               | 73,416,252  |             
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Other Assets                   |                                                                                                                                                                         |  | 8,535,830                                      |                                      |   |               | 9,955,060   |             
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | Total Assets                                   |                                      | $ | 369,277,429   |             |              | $ | 391,297,215 |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  |                                                | LIABILITIES AND SHAREHOLDERS EQUITY |   |               |             |              |   |             |   | 
|                              
|                              
|                              
|                              
|Current Liabilities:           |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                              
|                              
|                              
|                              
|                               | Accounts payable and accrued expenses                                                                                                                                   |  | $                                              | 10,366,182                           |   |               | $           | 9,414,327    |  
|                              
|                              
|                              
|                              
|                               | Accrued interest                                                                                                                                                        |  |                                                | 2,537,288                            |   |               |             | 2,158,087    |  
|                              
|                              
|                              
|                              
|                               | Deferred revenue                                                                                                                                                        |  |                                                | 7,627,455                            |   |               |             | 8,523,326    |  
|                              
|                              
|                              
|                              
|                               | Long-term obligations  current portion                                                                                                                                 |  |                                                | 10,341,626                           |   |               |             | 10,966,626   |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | Total current liabilities                      |                                      |   | 30,872,551    |             |              |   | 31,062,366  |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Long-Term Obligations          |                                                                                                                                                                         |  | 9,750,000                                      |                                      |   |               | 11,825,000  |             
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Convertible Subordinated Notes |                                                                                                                                                                         |  | 200,000,000                                    |                                      |   |               | 200,000,000 |             
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|Shareholders Equity:          |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                              
|                              
|                              
|                              
|                               | Capital
stock, par value $.01 per share:authorized, 4,550,000 shares; none issued                                                                                       |  |                                                |                                      |   |               |             |              |  
|                              
|                              
|                              
|                              
|                               | Common
stock, par value $.01 per share: authorized, 160,000,000 shares; issued, 63,447,767 and
63,124,248 shares at September 30, 2001 and March 31, 2001, respectively |  |                                                | 634,478                              |   |               |             | 631,243      |  
|                              
|                              
|                              
|                              
|                               | Non-voting
common stock, par value $.01 per share:authorized, 450,000 shares; issued, 382,632 at September 30, 2001 and
March 31, 2001                                  |  |                                                | 3,826                                |   |               |             | 3,826        |  
|                              
|                              
|                              
|                              
|                               | Additional paid-in capital                                                                                                                                              |  |                                                | 429,697,547                          |   |               |             | 427,129,226  |  
|                              
|                              
|                              
|                              
|                               | Deferred compensation                                                                                                                                                   |  |                                                | (522,009                             | ) |               |             | (1,024,303   | )
|                              
|                              
|                              
|                              
|                               | Accumulated other comprehensive income                                                                                                                                  |  |                                                | 2,306,435                            |   |               |             | 4,179,938    |  
|                              
|                              
|                              
|                              
|                               | Accumulated deficit                                                                                                                                                     |  |                                                | (303,465,399                         | ) |               |             | (282,510,081 | )
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | Total shareholders equity                     |                                      |   | 128,654,878   |             |              |   | 148,409,849 |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             
|                               |                                                                                                                                                                         |  | Total Liabilities and Shareholders Equity     |                                      | $ | 369,277,429   |             |              | $ | 391,297,215 |  
|                               |                                                                                                                                                                         |  |                                                |                                      |   |               |             |             

See notes to consolidated financial
statements.


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##### Table of Contents






ALKERMES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |            |            | 
|---------------------------------------------------- | ------------------------------------------------------------------------------ | -------------- | ----------- | ------------- | ---------- | ------------- | ----------- | ------------- | ---------- | ------------- | ----------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                                     |                                                                                |                |             | Three Months  |            | Three Months  |             | Six Months    |            | Six Months   
|                                                     |                                                                                |                |             | Ended         |            | Ended         |             | Ended         |            | Ended        
|                                                     |                                                                                |                |             | September 30, |            | September 30, |             | September 30, |            | September 30,
|                                                     |                                                                                |                |             | 2001          |            | 2000          |             | 2001          |            | 2000         
|                                                     |                                                                                |                |             |               |            |               |             |               |            |              
|Revenues:                                            |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Research and development revenue under
collaborative arrangements              |                | $           | 14,505,003    |            |               | $           | 7,514,325     |            |               | $           | 30,031,678 |            |   | $          | 36,481,270 |           
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Expenses:                                            |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Research and development                                                       |                |             | 22,592,697    |            |               |             | 16,497,690    |            |               |             | 43,302,728 |            |   |            | 30,937,583 |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | General and administrative                                                     |                |             | 6,410,854     |            |               |             | 4,944,515     |            |               |             | 11,785,132 |            |   |            | 9,761,472  |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Noncash compensation (income) expense - attributed
to research and development |                |             |              |            |               |             | (2,290,187    | )          |               |             |           |            |   |            | 859,147    |           
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|                                                     |                                                                                | Total expenses |             |               | 29,003,551 |               |             |               | 19,152,018 |               |             |            | 55,087,860 |   |            |            | 41,558,202 | 
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Net operating loss                                   |                                                                                |                | (14,498,548 | )             |            |               | (11,637,693 | )             |            |               | (25,056,182 | )          |            |   | (5,076,932 | )         
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Other income (expense):                              |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest income                                                                |                |             | 4,216,637     |            |               |             | 5,660,429     |            |               |             | 8,741,652  |            |   |            | 11,259,395 |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest expense                                                               |                |             | (2,330,861    | )          |               |             | (2,308,476    | )          |               |             | (4,640,788 | )          |   |            | (4,703,656 | )         
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|                                                     |                                                                                |                | 1,885,776   |               |            |               | 3,351,953   |               |            |               | 4,100,864   |            |            |   | 6,555,739  |           
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Net (loss) income                                    |                                                                                |                | (12,612,772 | )             |            |               | (8,285,740  | )             |            |               | (20,955,318 | )          |            |   | 1,478,807  |           
|                                                    
|                                                    
|                                                    
|                                                    
|Preferred stock dividends                            |                                                                                |                |            |               |            |               | 1,867,714   |               |            |               |            |            |            |   | 3,735,591  |           
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Net loss attributable to common shareholders         |                                                                                | $              | (12,612,772 | )             |            | $             | (10,153,454 | )             |            | $             | (20,955,318 | )          |            | $ | (2,256,784 | )         
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Basic and diluted loss per common share              |                                                                                | $              | (0.20       | )             |            | $             | (0.19       | )             |            | $             | (0.33       | )          |            | $ | (0.04      | )         
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           
|Weighted average number of common shares
outstanding |                                                                                |                | 63,399,285  |               |            |               | 54,651,444  |               |            |               | 63,318,533  |            |            |   | 54,306,128 |           
|                                                     |                                                                                |                |             |               |            |               |             |               |            |               |             |            |            |   |            |           

See notes to consolidated financial statements.

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##### Table of Contents






ALKERMES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |           |             |             |  
|---------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------------------------------------- | --------- | ------------- | ----------- | ------------- | --------- | ----------- | ----------- | -
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           | Six Months    |             | Six Months   
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           | Ended         |             | Ended        
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           | September 30, |             | September 30,
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           | 2001          |             | 2000         
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |              
|Cash flows from operating activities:          |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |              
|                                              
|                                              
|                                              
|                                              
|                                               | Net (loss) income                                                                    |                                                                                              | $                                           | (20,955,318                                         | )         |               | $           | 1,478,807     |          
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to reconcile net (loss) income to net cash used by
operating activities: |                                                                                              |                                             |                                                     |           |               |             |               |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Depreciation and amortization                                                                |                                             |                                                     | 5,262,634 |               |             |               | 3,762,638 |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Noncash interest expense                                                                     |                                             |                                                     | 316,430   |               |             |               | 233,508   |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Compensation relating to issuance of common stock
and grant of stock options and awards made |                                             |                                                     |          |               |             |               | 859,147   |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Adjustments to other assets                                                                  |                                             |                                                     | 509,232   |               |             |               | 354,959   |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Changes in assets and liabilities:                                                           |                                             |                                                     |           |               |             |               |           |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      |                                                                                              | Receivables from collaborative arrangements |                                                     |           | (9,472,870    | )           |               |           | (27,664,972 | )          
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      |                                                                                              | Prepaid expenses and other current assets   |                                                     |           | 733,198       |             |               |           | (971,373    | )          
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      |                                                                                              | Accounts payable and accrued expenses       |                                                     |           | 1,022,668     |             |               |           | 2,136,441   |            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      |                                                                                              | Deferred revenue                            |                                                     |           | (895,871      | )           |               |           | (400,533    | )          
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      |                                                                                              | Other long-term liabilities                 |                                                     |           |              |             |               |           | (29,846     | )          
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|                                               |                                                                                      |                                                                                              |                                             | Net cash used by operating activities               |           |               | (23,479,897 | )             |           |             | (20,241,224 | )
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Cash flows from investing activities:          |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |              
|                                              
|                                              
|                                              
|                                              
|                                               | Additions to property, plant and equipment, net                                      |                                                                                              |                                             | (7,900,394                                          | )         |               |             | (3,629,026    | )        
|                                              
|                                              
|                                              
|                                              
|                                               | Purchases of available-for-sale short-term investments                               |                                                                                              |                                             | (94,695,430                                         | )         |               |             |              |          
|                                              
|                                              
|                                              
|                                              
|                                               | Sales of available-for-sale short-term investments                                   |                                                                                              |                                             | 91,843,792                                          |           |               |             |              |          
|                                              
|                                              
|                                              
|                                              
|                                               | (Purchases) maturities of held-to-maturity short-term investments, net               |                                                                                              |                                             | (20,499,839                                         | )         |               |             | 24,172,173    |          
|                                              
|                                              
|                                              
|                                              
|                                               | Maturities of long-term investments, net                                             |                                                                                              |                                             | 63,719,034                                          |           |               |             | 7,308,935     |          
|                                              
|                                              
|                                              
|                                              
|                                               | Increase in other assets                                                             |                                                                                              |                                             | (300,000                                            | )         |               |             | (186,456      | )        
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|                                               |                                                                                      |                                                                                              |                                             | Net cash provided by investing activities           |           |               | 32,167,163  |               |           |             | 27,665,626  |  
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Cash flows from financing activities:          |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |              
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from issuance of common stock                                               |                                                                                              |                                             | 2,134,515                                           |           |               |             | 2,439,869     |          
|                                              
|                                              
|                                              
|                                              
|                                               | Payment of long-term obligations                                                     |                                                                                              |                                             | (2,700,000                                          | )         |               |             | (2,850,000    | )        
|                                              
|                                              
|                                              
|                                              
|                                               | Payment of preferred stock dividends                                                 |                                                                                              |                                             |                                                    |           |               |             | (3,735,591    | )        
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from issuance of common stock to collaborative partner                      |                                                                                              |                                             |                                                    |           |               |             | 4,999,978     |          
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|                                               |                                                                                      |                                                                                              |                                             | Net cash (used by) provided by financing activities |           |               | (565,485    | )             |           |             | 854,256     |  
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Effect of exchange rate changes on cash        |                                                                                      |                                                                                              | 3,099                                       |                                                     |           |               | (53,861     | )            
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Net increase in cash and cash equivalents      |                                                                                      |                                                                                              | 8,124,880                                   |                                                     |           |               | 8,224,797   |              
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                                      |                                                                                              | 5,923,282                                   |                                                     |           |               | 6,100,643   |              
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Cash and cash equivalents, end of period       |                                                                                      | $                                                                                            | 14,048,162                                  |                                                     |           | $             | 14,325,440  |              
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          
|Supplementary information:                     |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |              
|                                              
|                                              
|                                              
|                                              
|                                               | Cash paid for interest                                                               |                                                                                              | $                                           | 4,256,955                                           |           |               | $           | 4,389,466     |          
|                                               |                                                                                      |                                                                                              |                                             |                                                     |           |               |             |               |          

See notes to consolidated financial statements.

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##### Table of Contents






ALKERMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements of Alkermes, Inc. (the Company) for the
three and six months ended September 30, 2001 and 2000 are unaudited and
include all adjustments which, in the opinion of management, are necessary to
present fairly the results of operations for the periods then ended. All such
adjustments are of a normal recurring nature. These financial statements
should be read in conjunction with the Companys Annual Report on Form 10-K for
the year ended March 31, 2001, which includes consolidated financial statements
and notes thereto for the years ended March 31, 2001, 2000 and 1999. In
addition, the financial statements include the accounts of Alkermes Controlled
Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II, Advanced
Inhalation Research, Inc. (AIR), Alkermes Investments, Inc., Alkermes Europe,
Ltd. and Alkermes Development Corporation II (ADC II), wholly owned
subsidiaries of the Company.

The results of the Companys operations for any interim period are not
necessarily indicative of the results of the Companys operations for any other
interim period or for a full fiscal year.

The preparation of the Companys financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

2. COMPREHENSIVE INCOME (LOSS)

Comprehensive income is comprised of net income and other comprehensive income.
Other comprehensive income includes certain changes in the shareholders
equity of the Company that are excluded from net income (loss). Specifically,
other comprehensive income includes unrealized holding gains and losses on the
Companys available-for-sale securities and changes in cumulative foreign
currency translation adjustments.

Comprehensive income (loss) for the three and six months ended September 30,
2001 and 2000 is as follows:

|                                                    |  |                    |             |                    |  |   |            |  
|--------------------------------------------------- |  | ------------------ | ----------- | ------------------ |  | - | ---------- | -
|                                                    |  | Three Months       |             | Three Months      
|                                                    |  | Ended              |             | Ended             
|                                                    |  | September 30, 2001 |             | September 30, 2000
|                                                    |  |                    |             |                   
|Net loss                                            |  | $                  | (12,612,772 | )                  |  | $ | (8,285,740 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |  |                    | 14,813      |                    |  |   | (12,089    | )
|                                                   
|                                                   
|                                                   
|                                                   
|Unrealized loss on marketable securities            |  |                    | (1,886,923  | )                  |  |   | (1,389,000 | )
|                                                    |  |                    |             |                    |  |   |            |  
|Comprehensive loss                                  |  | $                  | (14,484,882 | )                  |  | $ | (9,686,829 | )
|                                                    |  |                    |             |                    |  |   |            |  

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##### Table of Contents



|                                                          |  |   |                    |   |                    |   |            |   | 
|--------------------------------------------------------- |  | - | ------------------ | - | ------------------ | - | ---------- | - | 
|                                                          |  |   | Six Months         |   | Six Months        
|                                                          |  |   | Ended              |   | Ended             
|                                                          |  |   | September 30, 2001 |   | September 30, 2000
|                                                          |  |   |                    |   |                   
|Net (loss) income                                         |  | $ | (20,955,318        | ) |                    | $ | 1,478,807  |  
|                                                         
|                                                         
|                                                         
|                                                         
|Cumulative foreign currency translation adjustments       |  |   | 4,238              |   |                    |   | (39,197    | )
|                                                         
|                                                         
|                                                         
|                                                         
|Unrealized loss on marketable securities                  |  |   | (1,877,741         | ) |                    |   | (1,243,750 | )
|                                                          |  |   |                    |   |                    |   |            |  
|Comprehensive (loss) income                               |  | $ | (22,828,821        | ) |                    | $ | 195,860    |  
|                                                          |  |   |                    |   |                    |   |            |  
|The accumulated other comprehensive income is as follows: |  |   |                    |   |                    |   |            |  
|                                                         
|Balance, March 31, 2001                                   |  | $ | 4,179,938          |   |                    |   |            |  
|                                                         
|                                                         
|                                                         
|                                                         
|Change for the three months ended June 30, 2001           |  |   | (1,393             | ) |                    |   |            |  
|                                                          |  |   |                    |   |                    |   |            |  
|Balance, June 30, 2001                                    |  |   | 4,178,545          |   |                    |   |            |  
|                                                         
|                                                         
|                                                         
|                                                         
|Change for the three months ended September 30, 2001      |  |   | (1,872,110         | ) |                    |   |            |  
|                                                          |  |   |                    |   |                    |   |            |  
|Balance, September 30, 2001                               |  | $ | 2,306,435          |   |                    |   |            |  
|                                                          |  |   |                    |   |                    |   |            |  

3. NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted Statement of Financial Accounting Standards, or SFAS, No.
133, Accounting for Derivative Instruments and Hedging Activities, on April
1, 2001. The adoption did not have any impact on the financial position and
results of operations of the Company.

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 is effective for any business combinations
initiated after June 30, 2001. SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill will no
longer be amortized but will be subject to annual impairment tests in
accordance with the statements. Other identifiable intangible assets will
continue to be amortized over their useful lives should they be determinable,
otherwise they will be subject to the same annual impairment test. The
adoption of SFAS No. 141 did not have an effect on the Companys financial
position or results of operations as it does not currently have any goodwill on
its consolidated balance sheet. The adoption of SFAS No. 142 is not expected
to have a significant impact on the Companys financial position or results of
operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement will supersede SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets or for Long-Lived Assets to
Be Disposed Of, in its entirety, and Accounting Principles
Board, or APB, Opinion No. 30, Reporting the
Results of Operations- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, only for segments to be disposed of. The provisions of this
statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The Company has not determined the effect,
if any, that adoption of this statement will have on its financial position or
results of operations.

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4. EARNINGS PER SHARE

Basic net loss per share is based on the weighted average number of common
shares outstanding. For the three and six months ended September 30, 2001,
diluted net loss per common share was the same as basic net loss per common
share because the inclusion of the weighted average number of shares of common
stock issuable upon the exercise of stock options, which total 9,559,104, and
2,952,030 shares of common stock issuable upon conversion of the 3 3/4%
Convertible Subordinated Notes due 2007 (the 3 3/4% Notes), would have been
antidilutive. For the three and six months ended September 30, 2000, diluted
net loss per common share was the same as basic net loss per common share
because the inclusion of the weighted average number of shares of common stock
issuable upon the exercise of stock options, which total 7,271,182 shares, and
2,952,030 shares of common stock issuable upon conversion of the 3 3/4%
Notes, would have been antidilutive.

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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Alkermes, Inc. (together with our subsidiaries, we or us) is a leader in
the development of products based on sophisticated drug delivery technologies.
We have several areas of focus, including: (i) controlled, sustained-release of
injectable drugs lasting several days to several weeks, utilizing our ProLease®
and Medisorb® technologies and (ii) the development of pharmaceutical products
based on our proprietary Advanced Inhalation Research, Inc. (AIR) pulmonary
technology. Our first product, Nutropin Depot, was launched in the United
States by our partner, Genentech, Inc. (Genentech), in June 2000. Nutropin
Depot is a long-acting form of Genentechs recombinant human growth hormone
using our ProLease technology. Since our inception in 1987, we have devoted
substantially all of our resources to research and development programs. We
expect to incur substantial additional operating losses over the next few
years. At September 30, 2001, we had an accumulated deficit of $303.5 million.

We have funded our operations primarily through public offerings and private
placements of debt and equity securities, bank loans and payments under
research and development agreements with collaborators. We historically have
developed our product candidates in collaboration with others on whom we relied
for funding, development and/or marketing. While we continue to develop
product candidates in collaboration with others, we have begun to expand the
development of our proprietary product candidates which we fund on our own.

Forward-Looking Statements

Any statements herein or otherwise made in writing or orally by us with regard
to our expectations as to financial results and other aspects of our business
may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate to our
future plans, objectives, expectations and intentions and may be identified by
words like believe, expect, may, will, should, seek, or
anticipate, and similar expressions.

Although we believe that our expectations are based on reasonable assumptions
within the bounds of our knowledge of our business and operations, our business
is subject to significant risks and there can be no assurance that actual
results of our development and manufacturing activities and our results of
operations will not differ materially from our expectations. Factors which
could cause actual results to differ from expectations include, among others:
(i) we may be unable to continue to manufacture our first product, Nutropin
Depot, or to manufacture future products on a commercial scale or economically;
(ii) Nutropin Depot and our product candidates, if approved for
marketing, may not produce significant revenues and, in commercial use, may
have unintended side effects, adverse reactions or incidents of
misuse; (iii) even if clinical trials are completed and the data is submitted to the
United States Food and Drug Administration (FDA) as a New Drug Application
(NDA) for marketing approval and to other health authorities as a marketing
authorization application, the NDA or marketing authorization application could
fail to be accepted, or could fail to receive approval on a timely basis, if at
all; (iv) our collaborators could elect to terminate or delay programs at any
time; (v) we
and our collaborators may not be permitted by regulatory authorities to
undertake new or additional clinical trials for product candidates
incorporating our technologies, or

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clinical trials could be delayed; (vi) our product candidates could be
ineffective or unsafe during clinical trials; (vii) disputes with collaborators
or failure to negotiate acceptable new collaborative arrangements for our
technologies could occur; (viii) even if our product candidates appear
promising at an early stage of development, product candidates could fail to
receive necessary regulatory approvals, be difficult to manufacture on a large
scale, be uneconomical, fail to achieve market acceptance, be precluded from
commercialization by proprietary rights of third parties or experience
substantial competition in the marketplace; (ix) technological change in the
biotechnology or pharmaceutical industries could render our product candidates
obsolete or noncompetitive; (x) difficulties or set-backs in obtaining and
enforcing our patents and difficulties with the patent rights of others could
occur; (xi) we could incur difficulties or set-backs in obtaining the
substantial additional funding required to continue research and development
programs and clinical trials; and (xii) disputes with Alkermes Clinical
Partners, L.P. (Clinical Partners) over rights to Cereport® and related
technology could occur.

Results of Operations

Our research and development revenue under collaborative arrangements for the
three and six months ended September 30, 2001 was $14.5 and $30.0 million
compared to $7.5 and $36.5 million for the corresponding periods of the prior
year. The increase for the three months ended September 30, 2001 as compared
to the three months ended September 30, 2000 was the result of an increase in
funding earned under collaborative agreements. The decrease for the six months
ended September 30, 2001 compared to the six months ended September 30, 2000
was primarily the result of a significant non-recurring milestone earned in the
six months ended September 30, 2000. The decrease for the six months ended
September 30, 2001 compared to the same prior year period was offset by an
increase in funding earned under other collaborative agreements during the
current fiscal year.

Total operating expenses were $29.0 and $55.1 million for the three and six
months ended September 30, 2001 as compared to $19.2 and $41.6 million for the
three and six months ended September 30, 2000. The increase for the three and
six months ended September 30, 2001 as compared to the three and six months
ended September 30, 2000 was due to increases in research and development
expenses and general and administrative expenses, which are discussed below.

Research and development expenses for the three and six months ended September
30, 2001 were $22.6 and $43.3 million as compared to $16.5 and $30.9 million
for the corresponding periods of the prior year. The increase in research and
development expenses for the three and six months ended September 30, 2001 as
compared to the three and six months ended September 30, 2000 was mainly the
result of increases in headcount, external research expenses and lab supplies
as we advance our proprietary product candidates and our collaborators product
candidates through development, clinical trials and commercialization. There
was also an increase in occupancy costs and depreciation expense as we continue
to expand our facilities in both Massachusetts and Ohio. We expect an increase
in research and development expenses during fiscal 2002 resulting from the
continuing development of our proprietary product candidates and collaborators
product candidates.

General and administrative expenses for the three and six months ended
September 30, 2001 were $6.4 and $11.8 million as compared to $4.9 and $9.8
million for the corresponding periods of the prior year. The increase in the
three and six months ended September 30, 2001 as compared to the three and six
months ended September 30, 2000 was primarily a result of an increase in
personnel as well as increased professional fees and consulting costs.

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Noncash compensation (income) expense relates primarily to restricted common
stock and stock options granted to certain employees, consultants and other
individuals associated with our wholly owned subsidiary, Advanced Inhalation
Research, Inc. (AIR), prior to its acquisition in February 1999. A significant
number of shares of such restricted common stock and stock options completed
vesting during the three months ended March 31, 2001. Noncash compensation
expense is not significant for the three and six months ended September 30,
2001.

Interest income for the three and six months ended September 30, 2001 was $4.2
and $8.7 million compared to $5.7 and $11.3 million for the corresponding
periods of the prior year. The decrease in such income for the three and six
months ended September 30, 2001 as compared to the three and six months ended
September 30, 2000 was primarily the result of a lower average cash and
investment balance as compared to the prior year. Interest income also
decreased as a result of a decline in interest rates as compared to the same
periods in the prior year.

Interest expense for the three and six months ended September 30, 2001 was $2.3
and $4.6 million as compared to $2.3 and $4.7 million for the corresponding
periods of the prior year. The decrease in interest expense for the six months
ended September 30, 2001 as compared to the six months ended September 30, 2000
was primarily the result of a small decrease in the outstanding debt balance as
compared to the prior year.

We do not believe that inflation and changing prices have had a material impact
on our results of operations.

Liquidity and Capital Resources

Cash and cash equivalents and short-term investments were approximately $285.7
million at September 30, 2001 as compared to $254.9 million at March 31, 2001.
The increase in cash and cash equivalents and short-term investments was
primarily the result of investments classified as long-term at March 31, 2001
now having a maturity period of less than 12 months which, as a result, are
classified as short-term investments at September 30, 2001. There was also an
increase in cash and short-term investments due to funding from collaborators.
The increase in cash and short-term investments was partially offset by cash
used to fund our operations, to acquire fixed assets and to make principal
payments on our indebtedness.

We invest in cash equivalents, U.S. Government obligations, high-grade
corporate notes and commercial paper. Our investment objectives for all of our
investments taken as a whole are, first, to assure liquidity and conservation
of capital, and second, to obtain investment income. Investments classified as
held-to-maturity at September 30, 2001 included $3.8 million principal amount
of U.S. Government obligations with a maturity of 14 months.

In August 2001, Janssen Pharmaceutica Products, LP submitted an NDA with the
FDA for a long-acting injectable formulation of Risperdal®
(risperidone) based on our proprietary Medisorb technology.
Similar filings are being submitted with health authorities worldwide. If
approved, it would be the first atypical antipsychotic medication available in
a formulation suitable for long-term use that requires administration just once
every two weeks, instead of daily doses.

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We have funded our operations primarily through public offerings and
private placements of debt and equity securities, bank loans and payments under
research and development agreements with collaborators. We expect to incur
significant additional research and development and other costs in connection
with collaborative arrangements and as we expand the development of our
proprietary product candidates, including costs related to preclinical studies,
clinical trials and facilities expansion. Therefore, we expect that our costs,
including research and development costs for our collaborators and our
proprietary product candidates, will exceed revenues significantly for the next
few years, which will result in continuing losses from operations.

Capital expenditures were approximately $7.9 million for the six months ended
September 30, 2001, principally reflecting equipment purchases and building
expansion and improvements. We expect our capital expenditures to increase
significantly during fiscal year 2002 as we expand our facilities in both
Massachusetts and Ohio. Our capital expenditures for equipment, facilities and
building improvements have been financed to date primarily with proceeds from
bank loans and the sales of debt and equity securities. Under the provisions
of our existing loans, Fleet National Bank has a security interest in certain
of our assets.

We will continue to pursue opportunities to obtain additional financing in the
future. Such financing may be sought through various sources, including debt
and equity offerings, corporate collaborations, bank borrowings, lease
arrangements relating to fixed assets or other financing methods. The source,
timing and availability of any financings will depend on market conditions,
interest rates and other factors. Our future capital requirements will also
depend on many factors, including continued scientific progress in our research
and development programs (including our proprietary product candidates), the
magnitude of these programs, progress with preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the
costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the establishment of additional
collaborative arrangements, the cost of manufacturing facilities and of
commercialization activities and arrangements and the cost of product
in-licensing and any possible acquisitions.

We may need to raise substantial additional funds for longer-term product
development, including development of our proprietary product candidates,
regulatory approvals and manufacturing and marketing activities that we might
undertake in the future. There can be no assurance that additional funds will
be available on favorable terms, if at all. If adequate funds are not
available, we may be required to curtail significantly one or more of our
research and development programs and/or obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates or future products.

Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards, or SFAS, No.
133, Accounting for Derivative Instruments and Hedging Activities, on April
1, 2001. The adoption did not have any impact on our financial position and
results of operations.

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 is effective for any business combinations
initiated after June 30, 2001. SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill will no
longer be amortized but will be subject to annual impairment tests in

(12)



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##### Table of Contents



accordance with the statements. Other identifiable intangible assets will
continue to be amortized over their useful lives should they be determinable,
otherwise they will be subject to the same annual impairment test. The
adoption of SFAS No. 141 did not have an effect on our financial position or
results of operations as we do not currently have any goodwill on our
consolidated balance sheet. The adoption of SFAS No. 142 is not expected to
have a significant impact on our financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement will supersede SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets or for Long-Lived Assets to
Be Disposed Of, in its entirety, and Accounting Principles
Board, or APB, Opinion No. 30, Reporting the
Results of Operations- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, only for segments to be disposed of. The provisions of this
statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The Company has not determined the effect,
if any, that adoption of this statement will have on our financial position or
results of operations.

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##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures About Market Risk

As part of our investment portfolio we own financial instruments that are
sensitive to market risks. The investment portfolio is used to preserve our
capital until it is required to fund operations, including our research and
development activities. Our short-term investments and investments consist of
U.S. Government obligations, high-grade corporate notes and commercial paper.
The amount of the short-term investment portfolio that is held-to-maturity is
comprised of investments that mature within one year, are not callable by the
issuer and have fixed interest rates. Our investments are subject to interest
rate risk, and could decline in value if interest rates increase. Due to the
conservative nature of our short-term investments and investments we do not
believe that we have a material exposure to interest rate risk. Although our
investments are subject to credit risk, our investment policies specify credit
quality standards for our investments and limit the amount of credit exposure
from any single issue, issuer or type of investment.

Our available-for-sale marketable securities are sensitive to changes in
interest rates. Interest rate changes would result in a change in the fair
value of these financial instruments due to the difference between the market
interest rate and the rate at the date of purchase of the financial instrument.
A 10% decrease in quarter-end market interest rates would result in no
material impact on the net fair value of such interest-sensitive financial
instruments.

The interest rates on our 3 3/4% Notes are fixed and, therefore, are not
subject to interest rate risk.

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##### Table of Contents






PART II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits:
| | --- |  | ---------

|       |  |                                                                                                                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                       
|3.1    |  | Third Amended and Restated Articles of
Incorporation as filed with the Pennsylvania Secretary of
State on June 7, 2001. (Incorporated by reference to
Exhibit 3.1 to the Companys Report on Form 10-K for the
fiscal year ended March 31, 2001).     
|      
|      
|      
|      
|      
|3.2    |  | Amended and Restated By-Laws of Alkermes,
Inc., effective as of February 11, 2001. (Incorporated by
reference to Exhibit 3.2 to the Companys Report on Form
10-K for the fiscal year ended March 31, 2001).                                          
|      
|      
|      
|      
|      
|4.1    |  | Specimen of Common Stock Certificate of
Alkermes, Inc. (Incorporated by reference to Exhibit 4 to
the Companys Registration Statement on Form S-1, as
amended (File No. 33-40250)).                                                                  
|      
|      
|      
|      
|      
|4.2    |  | Specimen of Non-Voting Common Stock
Certificate of Alkermes, Inc. (Incorporated by reference to
Exhibit 4.4 to the Companys Report on Form 10-K for the
fiscal year ended March 31, 1999).                                                           
|      
|      
|      
|      
|      
|4.3    |  | Indenture, dated as of February 18, 2000,
between Alkermes, Inc. and State Street Bank and Trust
Company, as Trustee. (Incorporated by reference to Exhibit
4.6 to the Companys Registration Statement on Form S-3, as
amended (File No. 333-31354)).
|      
|      
|      
|      
|      
|10.1   |  | 1998 Equity Incentive Plan, as amended.+                                                                                                                                                                                                              



| | + |  | Constitutes a management contract or compensatory plan required to be filed
as an Exhibit to this Report pursuant to Item
6(a) of Form 10-Q.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | During the quarter ended September 30, 2001, the Company filed no Reports
on Form 8-K.
| | --- |  | --------------------------------------------------------------------------------------

(15)



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                        |  |                            |  |                                                                                                                                          
|----------------------- |  | -------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|                        |  | ALKERMES, INC.(Registrant)
|                       
|                       
|                       
|                       
|                        |  |                            |  |                                                                                                                                          
|                       
|                       
|                       
|                       
|                        |  |                            |  |                                                                                                                                          
|                       
|                       
|                       
|                       
|Date: November 13, 2001 |  | By:                        |  | /s/ Richard F. Pops

Richard F. Pops
Chief Executive Officer and Director
(Principal Executive Officer)                                  
|                       
|                       
|                       
|                       
|                        |  |                            |  |                                                                                                                                          
|                       
|                       
|                       
|                       
|                        |  |                            |  |                                                                                                                                          
|                       
|                       
|                       
|                       
|Date: November 13, 2001 |  | By:                        |  | /s/ James M. Frates

James M. Frates
Vice President, Chief
Financial Officer and Treasurer (Principal
Financial and   Accounting
Officer)

(16)



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##### Table of Contents






Exhibit Index

|        |  |                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                       
|3.1     |  | Third Amended and Restated Articles of
Incorporation as filed with the Pennsylvania Secretary of
State on June 7, 2001. (Incorporated by reference to
Exhibit 3.1 to the Companys Report on Form 10-K for the
fiscal year ended March 31, 2001).     
|       
|       
|       
|       
|       
|3.2     |  | Amended and Restated By-Laws of Alkermes,
Inc., effective as of February 11, 2001. (Incorporated by
reference to Exhibit 3.2 to the Companys Report on Form
10-K for the fiscal year ended March 31, 2001).                                          
|       
|       
|       
|       
|       
|4.1     |  | Specimen of Common Stock Certificate of
Alkermes, Inc. (Incorporated by reference to Exhibit 4 to
the Companys Registration Statement on Form S-1, as
amended (File No. 33-40250)).                                                                  
|       
|       
|       
|       
|       
|4.2     |  | Specimen of Non-Voting Common Stock
Certificate of Alkermes, Inc. (Incorporated by reference to
Exhibit 4.4 to the Companys Report on Form 10-K for the
fiscal year ended March 31, 1999).                                                           
|       
|       
|       
|       
|       
|4.3     |  | Indenture, dated as of February 18, 2000,
between Alkermes, Inc. and State Street Bank and Trust
Company, as Trustee. (Incorporated by reference to Exhibit
4.6 to the Companys Registration Statement on Form S-3, as
amended (File No. 333-31354)).
|       
|       
|       
|       
|       
|10.1    |  | 1998 Equity Incentive Plan, as amended.+                                                                                                                                                                                                              



|+ |  | Constitutes a management contract or compensatory plan required to be
filed as an Exhibit to this Report pursuant to Item 6(a) of Form 10-Q.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------

(17)