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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, 2007o

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(State or other
    jurisdiction of
    incorporation or organization)

23-2472830(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
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
    As of August 3,Class

2007Common Stock, $.01 par value


101,559,841Non-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:Condensed
    Consolidated Balance Sheets  June 30, 2007 and
    March 31, 2007


3Condensed
    Consolidated Statements of Operations  For the Three
    Months Ended June 30, 2007 and 2006


4Condensed
    Consolidated Statements of Cash Flows  For the Three
    Months Ended June 30, 2007 and 2006


5Notes to Condensed
    Consolidated Financial Statements


6Item 2.

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


12Item 3.

Quantitative and
    Qualitative Disclosures about Market Risk


21Item 4.

Controls and
    Procedures


22PART
    II  OTHER INFORMATIONItem 1.

Legal
    Proceedings


23Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


23Item 6.

Exhibits


23Signatures


24Exhibit
    Index


25Section 302 Certification of CEOSection 302 Certification of CFOSection 906 Certifications of CEO and CFO   2




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PART 1.
    FINANCIAL INFORMATION  Item 1.
    Condensed
    Consolidated Financial Statements:  ALKERMES,
    INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS
 (unaudited)
  June 30,


March 31,2007


2007(In thousands, except share and per share amounts)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
60,990


$
80,500Investments  short-term


264,762



271,082Receivables


66,782



56,049Inventory


20,218



18,190Prepaid expenses and other current
    assets


9,063



7,054Total current assets


421,815



432,875PROPERTY, PLANT AND EQUIPMENT:Land


301



301Building and improvements


31,708



25,717Furniture, fixtures and equipment


65,042



64,203Equipment under capital lease


464



464Leasehold improvements


32,375



32,345Construction in progress


45,180



42,442175,070



165,472Less: accumulated depreciation and
    amortization


(44,807
)


(41,877
)Property, plant and
    equipment  net


130,263



123,595RESTRICTED INVESTMENTS


5,144



5,144OTHER ASSETS


7,036



7,007TOTAL ASSETS

$
564,258


$
568,621LIABILITIES AND
    SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued
    expenses

$
26,714


$
45,855Accrued interest


2,975



2,976Unearned milestone
    revenue  current portion


6,333



11,450Deferred revenue 
    current portion


705



200Long-term debt  current
    portion


1,288



1,579Total current liabilities


38,015



62,060NON-RECOURSE RISPERDAL CONSTA
    SECURED 7% NOTES


157,694



156,851LONG-TERM DEBT


28



47UNEARNED MILESTONE
    REVENUE  LONG-TERM PORTION


115,738



117,300DEFERRED REVENUE 
    LONG-TERM PORTION


23,242



22,153OTHER LONG-TERM LIABILITIES


6,622



6,749TOTAL LIABILITIES


341,339



365,160COMMITMENTS AND CONTINGENCIES
    (Notes 8 and 9)SHAREHOLDERS EQUITY:Capital stock, par value, $0.01 per
    share; authorized, 4,550,000 shares (includes
    3,000,000 shares of preferred stock); issued, none






Common stock, par value, $0.01 per
    share; authorized, 160,000,000 shares; 102,168,103 and
    101,550,673 shares issued, 101,344,426 and
    100,726,996 shares outstanding at June 30, 2007 and
    March 31, 2007, respectively


1,022



1,015Non-voting common stock, par value,
    $0.01 per share; authorized, 450,000 shares; issued and
    outstanding, 382,632 shares at June 30, 2007 and
    March 31, 2007


4



4Treasury stock, at cost
    (823,677 shares at June 30, 2007 and March 31,
    2007)


(12,492
)


(12,492
)Additional paid-in capital


848,955



837,727Accumulated other comprehensive
    income


228



753Accumulated deficit


(614,798
)


(623,546
)TOTAL SHAREHOLDERS EQUITY


222,919



203,461TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
564,258


$
568,621    3




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ALKERMES,
    INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
  Three Months Ended June 30,2007


2006(In thousands, except per share amounts)REVENUES:Manufacturing revenues

$
31,517


$
22,193Royalty revenues


6,982



5,139Research and development revenue
    under collaborative arrangements


23,450



14,464Net collaborative profit


6,989



9,742Total revenues


68,938



51,538EXPENSES:Cost of goods manufactured


10,145



9,338Research and development


32,619



25,863Selling, general and administrative


15,400



16,530Total expenses


58,164



51,731OPERATING INCOME (LOSS)


10,774



(193
)OTHER INCOME (EXPENSE):Interest income


4,402



4,335Interest expense


(4,073
)


(5,473
)Other income (expense), net


26



787Total other income (expense)


355



(351
)INCOME (LOSS) BEFORE INCOME TAXES


11,129



(544
)INCOME TAXES


2,382



171NET INCOME (LOSS)

$
8,747


$
(715
)EARNINGS (LOSS) PER COMMON SHARE:BASIC

$
0.09


$
(0.01
)DILUTED

$
0.08


$
(0.01
)WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING:BASIC


101,324



93,784DILUTED


104,191



93,784    4




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ALKERMES,
    INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
  Three Months EndedJune 30,2007


2006(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
8,747


$
(715
)Adjustments to reconcile net income
    (loss) to cash flows from operating activities:Share-based compensation


5,747



8,347Depreciation and amortization


2,930



2,826Other non-cash charges


1,064



1,215Change in fair value of warrants


(196
)


(846
)Gain on sale of equipment






5Changes in assets and liabilities:Receivables


(11,805
)


(1,551
)Inventory, prepaid expenses and
    other current assets


(7,197
)


(5,401
)Accounts payable, accrued expenses
    and accrued interest


(19,414
)


(7,529
)Unearned milestone revenue


(6,679
)


81,103Deferred revenue


2,666



(50
)Other long-term liabilities


(28
)


18Cash flows from operating activities


(24,165
)


77,422CASH FLOWS FROM INVESTING
    ACTIVITIES:Additions to property, plant and
    equipment


(6,462
)


(6,160
)Purchases of short and long-term
    investments


(140,812
)


(63,374
)Sales and maturities of short and
    long-term investments


146,562



67,096(Increase) decrease in other assets


(8
)


14Cash flows from investing activities


(720
)


(2,424
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from issuance of common
    stock


5,627



2,268Excess tax benefit from stock
    options


58



Payment of debt


(310
)


(294
)Purchase of treasury stock






(2,627
)Cash flows from financing activities


5,375



(653
)NET (DECREASE) INCREASE IN CASH AND
    CASH EQUIVALENTS


(19,510
)


74,345CASH AND CASH
    EQUIVALENTS  Beginning of period


80,500



33,578CASH AND CASH
    EQUIVALENTS  End of period

$
60,990


$
107,923SUPPLEMENTAL CASH FLOW DISCLOSURE:Cash paid for interest

$
3,003


$
4,511Cash paid for income taxes

$
380


$
Non-cash investing and financing
    activities:Conversion of 2.5% convertible
    subordinated notes into common stock

$



$
125,000Purchased capital expenditures
    included in accounts payable

$
3,136


$
    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
  Income
    Taxes
  Accounting for Uncertainty in Income
    Taxes Accounting for Income Taxes.
  New
    Accounting Pronouncements
  Fair Value Measurements
 6




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    The Fair Value Option for Financial Assets and
    Financial Liabilities Including an Amendment of FASB Statement
    No. 115
  07-03, Accounting for Nonrefundable Advance Payments for Goods
    or Services to Be Used in Future Research and Development
    Activities, (EITF 07-03), EITF 07-03, EITF 07-03 EITF 07-03,
  2.
    COMPREHENSIVE
    INCOME (LOSS)    Three MonthsEndedJune 30,2007


2006(In thousands)Net income (loss)

$
8,747


$
(715
)Unrealized (loss) gain on
    available-for-sale investments


(525
)


334Comprehensive income (loss)

$
8,222


$
(381
)   3.
    EARNINGS
    (LOSS) PER COMMON SHARE   7




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Three MonthsEndedJune 30,2007


2006(In thousands)Numerator:Net income (loss)

$
8,747


$
(715
)Denominator:Weighted average number of common
    shares outstanding


101,324



93,784Effect of dilutive securities:Stock options


2,553



Restricted stock awards


314



Dilutive common share equivalents


2,867



Shares used in calculating diluted
    earnings (loss) per common share


104,191



93,784     Three Months EndedJune 30,2007


2006(In thousands)Stock options


11,956



19,420Restricted stock awards






1272.5% convertible subordinated notes






7,4383.75% convertible subordinated
    notes






10Redeemable convertible preferred
    stock






630Total


11,956



27,625   4.
    SHARE-BASED
    COMPENSATION    Three MonthsEndedJune 30,2007


2006(In thousands)Cost of goods manufactured

$
626


$
260Research and development


1,851



2,836Selling, general and administrative


3,270



5,251Total

$
5,747


$
8,347    8




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    INVENTORY  first-in,
  June 30,


March 31,2007


2007(In thousands)Raw materials

$
8,448


$
7,238Work in process


3,967



4,291Finished goods


7,803



6,661Total

$
20,218


$
18,190   6.
    ACCOUNTS
    PAYABLE AND ACCRUED EXPENSES    June 30,


March 31,2007


2007(In thousands)Accounts payable and accrued
    accounts payable

$
10,987


$
12,097Accrued expenses related to
    collaborative arrangements


947



16,155Accrued compensation


4,645



10,917Accrued interest


2,975



2,975Accrued other


7,160



3,711Total

$
26,714


$
45,855   7.
    RESTRUCTURING
    OF OPERATIONS  ®
    Balance



BalanceMarch 31,



June 30,2007

Payments

2007(In thousands)Facility closure

$
1,079


$
(96
)

$
983Total

$
1,079


$
(96
)

$
983   8.
    INCOME
    TAXES   9




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          9.
    LEGAL
    MATTERS     10




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ALKERMES,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      10.
    SEGMENT
    INFORMATION   11




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  ® ® ®
    Forward-Looking
    Statements
    scale-up
 12




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and/or
    Product
    Developments
  Our
    Strategy
    RISPERDAL
    CONSTA
  ® ®
    VIVITROL
   13




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AIR
    Insulin
  ®
  Exenatide
    LAR
  ® and/or
  ALKS
    29
   14




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ALKS
    27
  ®
  AIR
    parathyroid hormone
  ®
  Critical
    Accounting Policies
  Form 10-K Form 10-K.
  Provision for Income Taxes
        Results
    of Operations
   15




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®
   16




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2007


2006(In thousands)Milestone revenue  cost
    recovery(1)

$
5,256


$
27,424Milestone revenue 
    license


1,309



1,191Total milestone
    revenue  cost recovery and license


6,565



28,615Payments to Cephalon to reimburse
    their net losses up to the cumulative loss cap


(5,223
)


(18,873
)Payments from Cephalon to
    reimburse our expenses incurred after the cumulative loss cap
    was reached


5,647



Net collaborative profit

$
6,989


$
9,742     (1)
    
    For the three months ended June 30, 2007, consists of the
    portion of Cephalons net losses and Alkermes
    expenses incurred on VIVITROL that were funded by us up to the
    cumulative loss cap. For the three months ended June 30,
    2006, consists of $18.9 million of Cephalons net
    losses incurred on VIVITROL that were funded by us,
    $8.3 million of our expenses incurred on VIVITROL on behalf
    of the collaboration and $0.2 million of our expenses
    incurred on VIVITROL outside the collaboration, for which we
    were solely responsible.       17




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18




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Financial
    Condition
               19




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Liquidity
    and Capital Resources
        and/or
     20




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Contractual
    Obligations
  Form 10-K
  Off-Balance
    Sheet Arrangements
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk            Foreign
    Currency Exchange Rate Risk
   21




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Item 4.
    Controls
    and Procedures  (a)
    Evaluation
    of Disclosure Controls and Procedures  Rule 13a-15(e)
  (b)
    Change
    in Internal Control over Financial Reporting   22




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PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-Q Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 6.
    Exhibits    ExhibitNo.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).  23




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SIGNATURES    
  By:
    /s/  David
    A. Broecker      By:
    /s/  James
    M. Frates       24




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EXHIBIT INDEX  ExhibitNo.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).  25