Alkermes Plc (ALKS)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	420,636	281,151	-154,264	-28,087	-87,878
Interest expense	US$ in thousands	22,578	23,032	13,040	11,219	8,659
Interest coverage		18.63	12.21	-11.83	-2.50	-10.15

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $420,636K ÷ $22,578K
= 18.63

Interest coverage ratio measures a company's ability to meet its interest obligations from its operating income. A higher ratio indicates a better ability to cover interest expenses.

For Alkermes Plc, the interest coverage ratio deteriorated significantly from -10.15 in December 2020 to -2.50 in December 2021, suggesting that the company's operating income was insufficient to cover its interest expenses during these periods.

In December 2022, the interest coverage ratio further deteriorated to -11.83, indicating a continued challenging financial situation for the company in meeting its interest payments.

However, there was a sharp improvement in December 2023, with the interest coverage ratio increasing to 12.21, indicating that Alkermes Plc's operating income was significantly more than enough to cover its interest expenses during that period. This improvement suggests a positive turnaround in the company's financial health.

Furthermore, the trend continued in December 2024, with the interest coverage ratio increasing even further to 18.63, indicating a robust ability to cover interest obligations and reflecting improved financial strength for Alkermes Plc.

Overall, the analysis shows that Alkermes Plc went through a challenging period in 2021 and 2022 in terms of meeting interest payments, but the company significantly improved its financial position in 2023 and 2024, demonstrating a stronger ability to cover interest expenses with its operating income.