##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30, 2008o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission file number 1-14131
  ALKERMES, INC.
 (Exact name of registrant as
    specified in its charter)
  PENNSYLVANIA

23-2472830(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)88 Sidney Street, Cambridge, MA(Address of principal
    executive offices)

02139-4234(Zip Code)   Registrants
    telephone number including area code:(617) 494-0171 (Former
    name, former address, and former fiscal year, if changed since
    last report)
  þ o
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
    As of August 4,Class

2008Common Stock, $.01 par value


94,547,335Non-Voting Common Stock, $.01 par value


382,632




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##### 



ALKERMES,
    INC. AND SUBSIDIARIES
  INDEX
   
 Page No.PART I  FINANCIAL
    INFORMATIONItem 1.


Condensed Consolidated Financial Statements:


3Condensed Consolidated Balance
    Sheets  June 30, 2008 and March 31, 2008


3Condensed Consolidated Statements of
    Income  For the Three Months Ended June 30, 2008
    and 2007


4Condensed Consolidated Statements of
    Cash Flows  For the Three Months Ended June 30,
    2008 and 2007


5Notes to Condensed Consolidated
    Financial Statements


6Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


14Item 3.


Quantitative and Qualitative Disclosures about
    Market Risk


25Item 4.


Controls and Procedures


27PART II  OTHER
    INFORMATIONItem 1.


Legal Proceedings


28Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


28Item 5.


Other Information


28Item 6.


Exhibits


28Signatures


29Exhibit Index


30Ex-31.1 Section 302 Certification of Chief Executive OfficerEx-31.2 Section 302 Certification of Chief Financial OfficerEx-32.1 Section 906 Certification of C.E.O and C.F.O.   2




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##### Table of Contents



PART 1.
    FINANCIAL INFORMATION  Item 1.
    Condensed
    Consolidated Financial Statements: ALKERMES,
    INC. AND SUBSIDIARIES



CONDENSED
    CONSOLIDATED BALANCE SHEETS

(unaudited)  June 30,


March 31,2008


2008(In thousands, except share and per share amounts)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
106,423


$
101,241Investments  short-term


264,915



240,064Receivables


31,699



47,249Inventory


16,375



18,884Prepaid expenses and other current assets


5,305



5,720Total current assets


424,717



413,158PROPERTY, PLANT AND EQUIPMENT:Land


301



301Building and improvements


36,169



35,003Furniture, fixtures and equipment


64,373



63,364Equipment under capital lease


464



464Leasehold improvements


33,390



33,387Construction in progress


41,672



42,859176,369



175,378Less: accumulated depreciation


(65,552
)


(62,839
)Total property, plant and equipment  net


110,817



112,539INVESTMENTS  LONG-TERM


102,003



119,056OTHER ASSETS


11,302



11,558TOTAL ASSETS

$
648,839


$
656,311LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses

$
20,338


$
36,046Unearned milestone revenue  current portion


5,848



5,927Deferred revenue  current portion


238



Long-term debt  current portion






47Non-recourse RISPERDAL CONSTA secured 7% notes 
    current portion


12,917



Total current liabilities


39,341



42,020NON-RECOURSE RISPERDAL CONSTA SECURED 7% NOTES


134,375



160,324UNEARNED MILESTONE REVENUE  LONG-TERM PORTION


110,257



111,730DEFERRED REVENUE  LONG-TERM PORTION


27,584



27,837OTHER LONG-TERM LIABILITIES


8,658



9,086TOTAL LIABILITIES


320,215



350,997COMMITMENTS AND CONTINGENCIES (Note 12)SHAREHOLDERS EQUITY:Capital stock, par value, $0.01 per share; 4,550,000 shares
    authorized (includes 3,000,000 shares of preferred stock);
    none issued and outstanding






Common stock, par value, $0.01 per share;
    160,000,000 shares authorized; 103,355,726 and
    102,977,348 shares issued; 94,404,140 and
    95,099,166 shares outstanding at June 30, 2008 and
    March 31, 2008, respectively


1,033



1,030Non-voting common stock, par value, $0.01 per share;
    450,000 shares authorized; 382,632 shares issued and
    outstanding at June 30, 2008 and March 31, 2008


4



4Treasury stock, at cost (8,951,586 and 7,878,182 shares at
    June 30, 2008 and March 31, 2008, respectively)


(120,346
)


(107,322
)Additional paid-in capital


876,496



869,695Accumulated other comprehensive loss


(1,683
)


(1,526
)Accumulated deficit


(426,880
)


(456,567
)TOTAL SHAREHOLDERS EQUITY


328,624



305,314TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$
648,839


$
656,311    3




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ALKERMES,
    INC. AND SUBSIDIARIES



CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME

(unaudited)  Three Months EndedJune 30,2008


2007(In thousands, except per share amounts)REVENUES:Manufacturing revenues

$
38,610


$
31,517Royalty revenues


8,581



6,982Research and development revenue under collaborative arrangements


31,450



23,450Net collaborative profit


1,351



6,989Total revenues


79,992



68,938EXPENSES:Cost of goods manufactured


14,314



10,145Research and development


22,261



32,619Selling, general and administrative


11,926



15,400Total expenses


48,501



58,164OPERATING INCOME


31,491



10,774OTHER (EXPENSE) INCOME:Interest income


3,616



4,402Interest expense


(4,226
)


(4,073
)Other (expense) income


(164
)


26Total other (expense) income


(774
)


355INCOME BEFORE INCOME TAXES


30,717



11,129INCOME TAXES


1,030



2,382NET INCOME

$
29,687


$
8,747EARNINGS PER COMMON SHARE:BASIC

$
0.31


$
0.09DILUTED

$
0.31


$
0.08WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:BASIC


95,361



101,324DILUTED


96,631



104,191    4




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ALKERMES,
    INC. AND SUBSIDIARIES



CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)  Three Months EndedJune 302008


2007(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
29,687


$
8,747Adjustments to reconcile net income to cash flows from operating
    activities:Share-based compensation


4,495



5,747Depreciation


2,517



2,930Other non-cash charges


1,336



1,064Change in fair value of warrants






(196
)Changes in assets and liabilities:Receivables


6,599



(11,805
)Inventory, prepaid expenses and other assets


1,845



(7,205
)Accounts payable and accrued expenses


(13,917
)


(19,414
)Unearned milestone revenue


(1,552
)


(6,679
)Deferred revenue


1,219



2,666Other liabilities


130



(28
)Cash flows from operating activities


32,359



(24,173
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment


(2,573
)


(6,462
)Sales of property, plant and equipment


7,717



Purchases of investments


(177,386
)


(140,812
)Sales and maturities of investments


169,384



146,562Cash flows from investing activities


(2,858
)


(712
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of common stock


2,370



5,627Excess tax benefit from stock options


19



58Payment of debt


(28
)


(310
)Purchase of non-recourse RISPERDAL CONSTA secured 7% notes


(14,100
)


Purchase of treasury stock


(12,580
)


Cash flows from financing activities


(24,319
)


5,375NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


5,182



(19,510
)CASH AND CASH EQUIVALENTS  Beginning of period


101,241



80,500CASH AND CASH EQUIVALENTS  End of period

$
106,423


$
60,990SUPPLEMENTAL CASH FLOW DISCLOSURE:Cash paid for interest

$
2,975


$
3,003Cash paid for income taxes

$
160


$
380Non-cash investing and financing activities:Purchased capital expenditures included in accounts payable and
    accrued expenses

$
2,812


$
3,136Receipt of Alkermes shares to satisfy minimum withholding tax
    obligations related to stock based awards

$
444


$
    5




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ALKERMES,
    INC. AND SUBSIDIARIES



NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (UNAUDITED)  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis
    of Presentation
    Form 10-K
    Principles of Consolidation ® ®
  Use of Estimates
  New
    Accounting Pronouncements
  No. 07-1, Accounting for Collaborative Arrangements Related to
    the Development and Commercialization of Intellectual
    Property No. 07-1). EITF No. 07-1 No. 07-1
  Disclosures
    about Derivative Instruments and Hedging Activities
 6




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2.
    COMPREHENSIVE
    INCOME    Three Months EndedJune 30(In thousands)

2008


2007Net income

$
29,687


$
8,747Unrealized losses on available-for-sale securities:Holding losses


(205
)


(525
)Reclassification of unrealized losses to realized losses on
    available-for-sale securities


48



Unrealized losses on available-for-sale securities


(157
)


(525
)Comprehensive income

$
29,530


$
8,222   3.
    EARNINGS
    PER COMMON SHARE      Three Months EndedJune 30(In thousands)

2008


2007Numerator:Net income

$
29,687


$
8,747Denominator:Weighted average number of common shares outstanding


95,361



101,324Effect of dilutive securities:Stock options


1,172



2,553Restricted stock awards


98



314Dilutive common share equivalents


1,270



2,867Shares used in calculating diluted earnings per common share


96,631



104,191     Three Months EndedJune 30(In thousands)

2008


2007Stock options


14,506



11,956Restricted stock awards


9



Total


14,515



11,956  7




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    INVESTMENTS             8




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        5.
    FAIR
    VALUE MEASUREMENTS  Fair Value
    Measurements FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2)
      Level 1
  Level 2
  Level 3
 9




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      SignificantOther


SignificantQuoted Prices in


Observable


UnobservableJune 30,


Active Markets


Inputs


InputsDescription

2008


(Level 1)


(Level 2)


(Level 3)(In thousands)Assets:Cash equivalents

$
56,037


$
56,037


$



$
U.S. government and agency debt securities


245,022



245,022







Corporate debt securities


103,270



4,240



99,030



Asset backed debt securities


7,686











7,686Auction rate securities


9,205











9,205Strategic equity investments


1,735



1,735







Total

$
422,955


$
307,034


$
99,030


$
16,891      10




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Description

Fair Value(In thousands)Balance, April 1, 2008

$
18,612Total unrealized losses included in earnings


Total unrealized losses included in comprehensive income


(792
)Purchases, issuances and settlements


(929
)Balance, June 30, 2008

$
16,891   The Fair Value Option for Financial Assets and
    Financial Liabilities Including an Amendment of FASB Statement
    No. 115
    6.
    INVENTORY  first-in,
  June 30,


March 31,(In thousands)

2008


2008Raw materials

$
8,879


$
8,373Work in process


2,806



3,060Finished goods


4,690



7,451Total

$
16,375


$
18,884   7.
    ACCOUNTS
    PAYABLE AND ACCRUED EXPENSES    June 30,


March 31,(In thousands)

2008


2008Accounts payable

$
4,792


$
7,042Accrued compensation


4,911



11,245Accrued interest


2,937



2,975Accrued restructuring  current portion


1,065



4,037Accrued other


6,633



10,747Total

$
20,338


$
36,046  11




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    RESTRUCTURING  ®
  ®
    2004


2008


Total(In thousands)

Restructuring


Restructuring


LiabilityBalance, April 1, 2008

$
230


$
7,848


$
8,078Facility closure


(74
)


(192
)


(266
)Severance, continuation of benefits and outplacement services






(2,803
)


(2,803
)Other contract losses






(54
)


(54
)Balance, June 30, 2008

$
156


$
4,799


$
4,955   9.
    SHARE-BASED
    COMPENSATION    Three Months EndedJune 30(In thousands)

2008


2007Cost of goods manufactured

$
429


$
626Research and development


1,588



1,851Selling, general and administrative


2,478



3,270Total

$
4,495


$
5,747     10.
    EXTINGUISHMENT
    OF DEBT   12




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    INCOME
    TAXES      12.
    COMMITMENTS
    AND CONTINGENCIES      13.
    SEGMENT
    INFORMATION    14.
    SUBSEQUENT
    EVENTS   13




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  ® ® ®
    Forward-Looking
    Statements
     14




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and/or and/or and/or scale-up and/or
    Our
    Strategy
   15




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Product
    Developments
  RISPERDAL
    CONSTA
  ®
          VIVITROL
   16




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Exenatide
    Once Weekly
  ® and/or
    ALKS
    29
   17




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ALKS
    27
    ALKS
    33
  in vivo in vitro
  Critical
    Accounting Policies
  Form 10-K
  Results
    of Operations
   18




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##### Table of Contents



Revenues
  Three Months Ended


ChangeJune 30,


Favorable/(In millions)

2008


2007


(Unfavorable)Manufacturing revenue:Risperdal Consta

$
36.0


$
30.2


$
5.8Vivitrol


2.6



1.3



1.3Total manufacturing revenue


38.6



31.5



7.1Royalty revenue


8.6



7.0



1.6Research and development revenue under collaborative arrangements


31.4



23.4



8.0Net collaborative profit


1.4



7.0



(5.6
)Total revenues

$
80.0


$
68.9


$
11.1          19




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Three Months EndedJune 30,(In millions)

2008


2007Milestone revenue  cost recovery

$



$
5.3Milestone revenue  license


1.3



1.3Total milestone revenue  cost recovery and license


1.3



6.6Payments made to Cephalon


(0.6
)


(5.2
)Payments from Cephalon


0.7



5.6Net collaborative profit

$
1.4


$
7.0        20




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Expenses
  Three Months Ended


ChangeJune 30,


Favorable/(In millions)

2008


2007


(Unfavorable)Cost of goods manufactured:Risperdal Consta

$
10.8


$
9.1


$
(1.7
)Vivitrol


3.5



1.1



(2.4
)Total cost of goods manufactured


14.3



10.2



(4.1
)Research and development


22.3



32.6



10.3Selling, general and administrative


11.9



15.4



3.5Total expenses

$
48.5


$
58.2


$
9.7          21




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Other
    (Expense) Income
  Three Months Ended


ChangeJune 30,


Favorable/(In millions)

2008


2007


(Unfavorable)Interest income

$
3.6


$
4.4


$
(0.8
)Interest expense


(4.2
)


(4.1
)


(0.1
)Other (expense) income


(0.2
)


0.1



(0.3
)Total other (expense) income

$
(0.8
)

$
0.4


$
(1.2
)     other-than-temporary other-than-temporary
  Provision
    for Income Taxes
  ChangeThree Months Ended June 30,


Favorable/(In millions)

2008


2007


(Unfavorable)Income taxes

$
1.0


$
2.4


$
1.4       Liquidity
    and Capital Resources
    June 30,


March 31,(In millions)

2008


2008Cash and cash equivalents

$
106.4


$
101.2Investments  short-term


264.9



240.1Investments  long-term


102.0



119.1Total cash, cash equivalents and investments

$
473.3


$
460.4Working capital

$
385.4


$
371.1Outstanding borrowings  current and long-term

$
147.3


$
160.4  22




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other-than-temporary other-than-temporary
      Operating
    Activities
    Investing
    Activities
    Financing
    Activities
   23




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Borrowings
      and/or
  and/or
      Contractual
    Obligations
  Form 10-K
 24




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Off-Balance
    Sheet Arrangements
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk  held-to-maturity available-for-sale; available-for-sale, other-than-temporary.
     25




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26




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Foreign
    Currency Exchange Rate Risk
      Item 4.
    Controls
    and Procedures  (a)
    Evaluation
    of Disclosure Controls and Procedures  Rule 13a-15(e)
  (b)
    Change
    in Internal Control over Financial Reporting   27




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PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Approximate DollarTotal


Value of SharesNumber of Shares


that May YetTotal Number


Average


Purchased as


be Purchasedof Shares


Price Paid


Part of a Publicly


Under thePeriod

Purchased(a)


per Share


Announced Program(a)


Program(In millions)April 1 through April 30





$







$
81.6May 1 through May 31





$







$
81.6June 1 through June 30


1,038,455


$
12.11



1,038,455


$
109.1Total


1,038,455


$
12.11



1,038,455     (a)
    
    In November 2007, our board of directors authorized a program to
    repurchase up to $175.0 million of our common stock to be
    repurchased at the discretion of management from time to time in
    the open market or through privately negotiated transactions.
    The repurchase program has no set expiration date and may be
    suspended or discontinued at any time. We publicly announced the
    share repurchase program in our press release dated
    November 21, 2007. In June 2008, the board of directors
    authorized the expansion of this repurchase program by an
    additional $40.0 million, bringing the total authorization
    under this program to $215.0 million. We publicly announced
    the expansion of the repurchase program in our press release
    dated June 16, 2008.    Item 5.
    Other
    Information    Item 6.
    Exhibits    ExhibitNo.10
.1

Alkermes Fiscal Year 2009 Reporting Officer Performance Pay plan
    (Incorporated by reference to Exhibit 10.1 to the
    Registrants Current Report on Form 8-K, as filed on
    May 16, 2008).31
.1

Rule 13a-14(a)/15d-14(a)
    Certification (furnished herewith).31
.2

Rule 13a-14(a)/15d-14(a)
    Certification (furnished herewith).32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (furnished herewith).     
    
    Indicates a management contract or any compensatory plan,
    contract or arrangement. 28




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SIGNATURES    
  By:
    /s/  David
    A. Broecker       By:
    /s/  James
    M. Frates        29




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EXHIBIT INDEX  ExhibitNo10
.1

Alkermes Fiscal Year 2009 Reporting Officer Performance Pay plan
    (Incorporated by reference to Exhibit 10.1 to the
    Registrants Current Report on Form 8-K, as filed on
    May 16, 2008).31
.1

Rule 13a-14(a)/15d-14(a)
    Certification (furnished herewith).31
.2

Rule 13a-14(a)/15d-14(a)
    Certification (furnished herewith).32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (furnished herewith).     
    
    Indicates a management contract or any compensatory plan,
    contract or arrangement. 30