Acorda Therapeutics Inc (ACOR) 2007 Q2 法說會逐字稿

Thank you for holding. Welcome to the Acorda Therapeutics Second Quarter 2007 Financial Results Webcast and Conference Call.

(OPERATOR INSTRUCTIONS)

There will be a question-and-answer session to follow. Please be advised that this call is being taped at the company's request.

Now I'd like to introduce your host for today's call, Tierney Saccavino, Vice President, Corporate Communications at Acorda Therapeutics.

Please go ahead.

Good morning, everyone, and welcome to Acorda's Second Quarter 2007 Webcast and Conference Call.

With me today are Dr. Ron Cohen, our President and Chief Executive Officer; Dave Lawrence, Chief Financial Officer; and, Dr. Andrew Blight, Chief Scientific Officer.

As you can see, we're using a new format for these calls and have added an accompanying PowerPoint presentation which can also be viewed via webcast. If you wish to view the webcast and have not already done so, please log on to www.acorda.com and click the Investor Relations homepage for access to the correct link.

Before we begin, let me remind you that this presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding management's expectations, beliefs, goals, plans or prospects should be considered forward-looking.

These statements are subject to risks and uncertainties that could cause actual results to differ materially including Acorda Therapeutics' ability to successfully market and sell Zanaflex Capsules, the risk of unfavorable results from future studies of Fampridine-SR, delays in obtaining or failure to obtain FDA approval of Fampridine-SR, competition, the ability to obtain additional financing to support Acorda Therapeutics' operations, unfavorable results from its preclinical programs, and failure to protect intellectual property or to defend against the intellectual property claims of others.

These and other risks are described in greater detail in Acorda Therapeutics' filings with the Securities and Exchange Commission. Acorda Therapeutics may not actually achieve the goals and plans described in its forward-looking statements, and investors should not place undue reliance on these statements.

Acorda Therapeutics disclaims any intent or obligation to update any forward-looking statements as a result of developments occurring after the date of this presentation.

I will now turn the call over to our CEO, Ron Cohen.

Thank you, Tierney. Welcome everyone. Thanks for joining us this morning.

Today I'm going to provide you with both a corporate update and highlights from the Zanaflex Capsules business, Andy will review the Fampridine-SR program, and Dave will review the financials.

In the second quarter we sold approximately 4.2 million shares of the company's common stock at a price of $18.50, netting $72.3 million. This included the exercise of the underwriters' over-allotment of shares.

Currently, we have 28.4 million shares outstanding as of July 31, and that's 31.6 million fully diluted. Acorda was also added to the Russell 3000 Index in the quarter, and in July we announced that our Chief Operating Officer, Mary Fisher, resigned to pursue other interests.

While we will miss Mary, her contributions to Acorda included a top-flight sales force for Zanaflex Capsules and a very strong marketing and commercialization infrastructure.

I will now turn the call over to Andrew Blight to provide an update on the Fampridine-SR program.

Andy?

Thanks, Ron.

As many of you are aware, in June we initiated our second Phase 3 clinical trial of Fampridine-SR in MS. This trial is being conducted under a special protocol assessment from the FDA. We also plan to begin a Thorough QT study as soon as we've reached the final agreement with the FDA on the protocol.

Based on our communications with the agency to date, we expect to conduct the standard four-arm study comparing Fampridine-SR 10 mg twice a day and a supratherapeutic dose against placebo and a standard active control, moxifloxacin.

Our discussion with the agency is focused on clarifying the details of the supratherapeutic dose. We hope to come to an agreement soon, in which case we can expect data from this study by the end of 2007.

In the second quarter, we presented Fampridine-SR data from the first Phase 3 trial, MS-F203 at the American Academy of Neurology in Boston and the ACTRIMS meeting in Washington, D.C. We are in the process of completing a paper on this study for submission to a peer-reviewed journal, and we've also submitted a paper on the previous Phase 2 study, MS-F202.

With regard to overall MS patient experience with Fampridine-SR, we have over 800 patient years of exposure to date at the current dose of 10 mg twice a day.

I'd now like to update you on the progress of our current Phase 3 clinical trial. As of August 3, 33 centers were enrolling patients, and 58 people were enrolled in the trial. So far, enrollment is ahead of that in the previous two trials at a comparable point in time. 200 subjects are required to complete enrollment and based on current trends, we expect data from this trial approximately mid-year 2008. We'll continue to refine our guidance as enrollment progresses.

With regard to our Open-Label Extension Study, it's approximately 65% of the patients enrolled in MS-F202, Open-Label Extension Study, continue to participate, with an average of 3.1 years on drug.

In the MS-F203 Extension Study, approximately 81% of patients enrolled continue to participate with an average of 1.3 years on the drug. Seizure rates across the Fampridine-SR studies at 10 mg twice a day remain within historical rate for MS patients in trials of other products.

Now, because there's interest in the potential outcome of the planned Thorough QT Study, I'd like to provide some background on our previous experience with cardiac studies of Fampridine.

We've evaluated the potential for cardiac effect in preclinical studies, looking at the interaction of Fampridine with the hERG channel, its effects on isolated canine heart cells, and the potential for effect on cardiac electrical activity in dogs in vivo.

The hERG channel or human ether-a-go-go related gene channel, is the primary channel responsible for repolarization of the ventricle and for setting the QT interval in regular heart rhythm.

We have also performed routine safety electrocardiograms in subjects in all of the clinical studies to date, including spinal cord injury and MS at doses up to 40 mg twice a day.

Earlier laboratory investigations have shown that Fampridine interacts with the hERG channel at millimolar concentrations, and we have confirmed that in our own studies, showing that the IC50, the concentration that produces half maximal block of the channel, is approximately 10,000 higher than that achieved in the plasma with a 10 mg twice a day dose.

Our studies on isolated dog cardiac Purkinje fibers showed that Fampridine does not affect the characteristics of the electrical action potential at 50 micromolar, or approximately a hundred times the expected plasma concentration but does lengthen the action potential at 1,000 times the expected levels of 500 micromolar. This is consistent with the data on the hERG channel interaction.

Finally, in in vivo dog studies, we did not see effects on cardiac electrical activity, including the QT interval at doses up to a maximum dose of 1.5 mg/kg given intravenously, which represents a greater than 10-fold increase above the clinical dose level.

Our experience with recording ECGs in human clinical trials is based on safety monitoring, which typically involves measuring one electrocardiogram before treatment and one or two times during treatment for each subject. We have not seen signals of concern within the regular safety monitoring of ECGs in patients treated with Fampridine; however, this kind of monitoring is not designed to evaluate the potential for relatively small effects on the QT interval, which is why a Thorough QT Study is now usually required by the FDA for new chemical entities.

A Thorough QT Study is designed with large numbers of ECGs recorded from each normal healthy subject, both at baseline and during maximal plasma levels of the drug. This involves blinded comparison of QT intervals among the four treatment arms.

I'll now turn the call back over to Ron for a Zanaflex Capsules update.

Thanks, Andy.

Moving on to Zanaflex Capsules, we were pleased with the progress of the Zanaflex Capsules franchise in the second quarter. The Zanaflex Capsules shipments to wholesalers are shown here. For the second quarter, they were $10.9 million. And Zanaflex Tablet shipments -- shown in blue -- were $1.2 million, resulting in total shipments for the quarter of $12.1 million.

As we previously reported, shipments in the first quarter were lower than the trend due to wholesaler overstocking in the fourth quarter of 2006 in expectation of a price increase at the beginning of 2007.

As expected, in the second quarter, shipments once again increased as wholesaler inventories normalized. A more accurate reflection of the growth trend can be seen in the IMS prescription data, which I'll show you on the next slide.

We've experienced here consistent quarter-over-quarter growth in Zanaflex Capsules prescriptions from launch in the second quarter of 2005 through the current quarter in '07. The dollarized capsule prescriptions grew by 23% from the first to the second quarter of 2007.

These results reflect the success of our sales force expansion, which took us from 32 to 65 people in January. We increased our target prescriber call universe from 3,200 to 7,400. And we also have been able to increase our call frequency significantly.

If the current trends continue, we expect the Zanaflex business to be cash flow neutral by the end of calendar 2007 and cash flow positive in 2008.

In summary, we continue to be encouraged by the performance of the commercial operation and this provides the foundation for ultimately launching Fampridine-SR in the U.S., if approved.

I'll now turn the call over to Dave Lawrence for the financial update.

Thanks, Ron.

In our press release this morning, we outlined our second quarter financial results for 2007. I will now highlight some of the important aspects of these results. Additional details are available in the press release issued this morning.

Due to our recent financing, we are currently in a favorable cash position. As of June 30, 2007, Acorda held cash, cash equivalents and short-term investments of $104.7 million. On a pro forma basis, including the underwriters' over-allotment, cash holdings totaled $114.3 million.

Included in the accounts payable and accrued expenses balance of $14.9 million at June 30, 2007 is a $5 million Zanaflex milestone accrual due to Elan, which will be paid in the third quarter of this year.

This milestone was reached based on cumulative Zanaflex Capsule and Tablet gross shipments of 75 million since our acquisition of the product. This is one of the two remaining $5 million milestone payments related to the Zanaflex acquisition. The final milestone payment will be due when we achieve $105 million in cumulative shipments.

Turning to the operating statement data. For the quarter ended June 30, 2007, we reported gross sales of $10.5 million compared to gross sales of $7.9 million for the same period in 2006.

Note that included in gross sales recorded in the second quarter of 2006 was $2.2 million of recognized revenue from tablet inventory acquired from Elan by the company as part of the 2004 Zanaflex acquisition. This inventory was shipped by the company during the period July 2004 through March 2005, but revenue specific to this inventory was deferred until the right of return expires.

In June 2006, the right of return on the inventory expired and the company recognized the $2.2 million deferred revenue balance as gross sales. Absent this adjustment, sales in the second quarter of 2006 would have been $5.7 million versus the $10.5 million reported in the second quarter of 2007.

Operating expenses for the quarter ended June 30, 2007 were $15.6 million compared to $10.9 million for the same quarter in 2006, an increase of $4.7 million. This increase is primarily due to an increase of $1 million in research and development expenses related to the continued clinical research and development of Fampridine.

Sales and marketing expenses increased approximately $2.8 million due to increases in salaries, benefits and other selling-related expenses resulting from the expansion of our Zanaflex Capsules specialist sales force.

General and administrative expenses increased approximately $0.9 million due to increases in head count and third-party services related to costs associated with compliance activities from being a publicly-traded company.

I'll now turn the call back over to Ron.

Thanks, Dave.

We'll now open the call up to your questions.

Operator?

Yes. At this time, we will go ahead and take your questions.

(OPERATOR INSTRUCTIONS)

Your first question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Hi, good morning.

Good morning.

Good morning, Joel.

Two questions. First, can you share with us what your target date for enrollment completion is in the Fampridine ongoing study?

Yes, we don't really have a target date. Everyone [motors] as hard as they can. I think the good news is that we are ahead of where we were in the last two trials at this point. But the reality is we just never know until we really get into the meat of the order, as it were.

August historically has been a slower month in previous trials. We'll see if that is the case here. I think by September we will have a much clearer idea of when enrollment would be complete.

Just to remind you, in the last couple of trials, in each trial, enrollment took about 7 months. Based on the current trends, we think we'll do better than that and probably quite a bit better but we'll have to wait and see how things go in August and then through September.

Thanks.

And then I was wondering if you could give us some background on the extension studies. Obviously the -- it seems to me you have a high percentage of patients in there, given the fact that only about a third of them respond. So what makes up the difference in the patients -- are those patients that maybe responded on the secondary endpoint or--

(CROSSTALK)

Yes, I'm glad you raised it because it's something we try to get across. We need to be very careful with the terminology. When we say "responder" in the context of our Phase 3 clinical trials and Phase 2 trials, it's a very specific kind of response and it's entirely related to the design of the clinical trial rather than to the breadth of what the drug may potentially be doing for these patients or might be doing for these patients.

So we're specifically talking about timed walk responders, or people who are responding on the walking measures in these trials. It really says nothing about whether or not they might be responding on other measures such as leg strength -- which we've shown in the trials, as you know -- as spasticity, other types of neurological functions.

Obviously, we would need to do specific trials to look at those outcomes as primary outcomes in order to prove that in a formal way.

But interestingly, as you point out, even after an average of three years in the open-label study, which is the 202 open-label study, we still have about 65% of the patients on drug in the trials. And the stipulation for those trials is that patients are required to drop out if they and/or their physicians no longer feel that there is efficacy or that they're getting anything out of the drug.

So, presumably, those people who stay on continue to feel and/or their physicians continue to feel that they are getting some benefit out of the drug. In the case of the 202 study, after an average of over 3 years, it's about 65% persistence. In the 203 extension, after about 1.3 years, it's about 81% persistence, which, by the way, is consistent with the first extension study at a similar point in time.

So I think it tells us that there's more work we can do there. There are more studies we could do to really get at the breadth of a potential response to the drug. But overall, I would say we're encouraged to see that we have this level of persistence over time in the open-label studies.

How long are you going to keep them open?

I believe the plan is to keep them open through the NDA process.

Okay. Thanks a lot.

Your next question comes from the line of Phil Nadeau with Cohen and Company.

Please proceed.

Good morning. Congratulations on a solid quarter.

Thanks, Phil.

My first question is on the QTC data that you presented, the preclinical data. Could you put that into perspective by saying where drugs that have had QTC problems have fallen out on these assays? Are their IC50s in line with what you see in plasma 100-fold higher? Where would a drug with QTC fall out on these different measures?

It's hard to generalize, but I think, typically, with that kind of margin you would not expect to see QT issues. But obviously you can't rely on these preclinical measures for predicting the clinical response. But in most cases you would not have such a safety factor between the clinical plasma concentration and the IC50.

Okay.

And in the past, some drugs that have had QTC problems have had them because their PK wasn't consistent from patient to patient; where there seemed like there was a large safety margin in some patients but in others, where there's drug accumulation, there was virtually no safety margin.

How consistent is the PK profile of Fampridine from patient to patient?

It's reasonably consistent. When you have 100-fold or greater margin then you would not expect that to be an issue if that 100-fold margin is truly reflective of the clinical situation. The [Cmax] in these studies typically can vary by as much as a factor of 2 so that the highest you'd see may be twice what the lowest is, but we're certainly not dealing in [orders] of magnitude difference in the normal population.

Okay, great.

Then a couple of financial questions. The payment to Elan in the third quarter. It's not clear to me if that is simply a balance sheet item or a P&L item as well.

Well, right now it's accrued. We're paying it this quarter. Those payments are amortized over the patent life of Zanaflex. So those payments go out and we'll amortize them through 2021 on the balance sheet.

Okay, perfect. And then, last, could you remind us of the cost of goods and royalties owed on Fampridine?

On Fampridine?

Yes, that's right.

Go head, Ron.

It's about 20% [all in]. So Elan gets approximately 20% which includes the cost of goods. So the cost of goods is calculated the way you would calculate a royalty, as a percentage of sales. That does not ratchet or vary with the level of sales, so it's a fixed percentage and it's subsumed within that 20%.

So bottom line is, our gross margin is about 80% when you take out royalties and cost of goods.

Okay, perfect. Thanks a lot.

Your next question comes from the line of David Amsellem with Friedman, Billings, Ramsey.

Please proceed.

Hi, and thanks for taking my question.

So on Fampridine, one question I had is do you have a better sense of the seizure rates seen with compounded Fampridine? And is this higher or similar to the seizure rate that we know of in the underlying MS patient population?

David, there's just no available data that we know of that speaks to seizure rates with compounded drug. It's a kind of a [sub rosa] activity. So as you know, it's not sanctioned by the FDA. Most physicians don't prescribe the compounded drug, and those that do tend to prescribe for a lot of patients.

But there's no catalog, there's no registry where you get this sort of information. So you get dribs and drabs by anecdote, but we really don't know the answer.

Okay.

And then one question on Zanaflex. Given the growth of the franchise, and you may have alluded to this previously. Do you plan any additional expansion of the sales force either this year or anywhere down the road?

Well, assuming that we get a Fampridine approval, we would expect to expand the sales force at that time to take into account the additional needs for Fampridine. But there are no plans right now to expand the sales force other than that for that.

Okay. Understood. Thank you.

(OPERATOR INSTRUCTIONS)

Your next question comes from the line of Caroline Stewart with Piper Jaffray.

Please proceed.

Good morning.

Hi, Caroline.

Good morning, Caroline.

I was wondering -- I know you mentioned that the one topic under discussion with FDA concerning the QTC Study was the supratherapeutic dose. Can we expect that supratherapeutic dose to be a dose that's already been studied in your previous clinical trials?

I think you can. We haven't reached final clarification over the FDA's expectations on this point. But it's not just about the nature of the dose but also the nature of the balancing of -- the issue of side effects at higher doses and how best to treat the supratherapeutic dose arm. So it's more a matter of a design issue.

There's been no intimation so far from the FDA that they would require us to go higher than doses we've already used.

Okay.

Can you comment -- maybe you can't comment on all -- but between crossover versus the parallel study design? Based on kind of the half short life of the drug, can we expect it to be a crossover design?

We are at the moment expecting a parallel design.

The half life of the drug is actually fairly prolonged in the sustained release form--

Right.

So it's about three, three and a half hours to Cmax and then about six to eight hours--

Five to six--

Five to six-hour half life (inaudible)

Oh, okay.

So our expectation is that we need look at (inaudible) we're looking at a parallel group design.

And then, I guess lastly, in terms of the arms -- in order to make sure that they're double-blind, placebo controlled within the four-arm study -- do you have the capsule placebo prepared? I guess my question has to do with would you over-encapsulate, for instance, the active arm drug?

That's obviously something that the FDA likes to see. It's not something that is required at the present time.

Okay. Thank you.

Your next question comes from the line of [Rod Wong] with BK Partners.

Please proceed.

Hi, good morning.

Good morning, Rod.

Good morning, Rod.

Good morning, Rod.

Just a couple of follow up questions on QT.

Rod, it's a little hard to hear.

Oh, I'm sorry. Is this any better?

A little bit.

Okay. Just a couple of follow up questions on QT. One, I was wondering if you could tell us the number of patients you're planning for the QT Study?

Yes, it's a fairly standard power of calculation, so approximately 50 per group.

Okay. And then I was wondering if you could comment at all on the QT Study that Jack [Siegel] did with [4-AP] and whether you had any thoughts on that study.

And then, finally, when I was looking at other data for hERG studies, my take away understanding was that generally the IC50 over peak plasma, if the ratio's under a hundred, the risk is generally accepted to be quite low. Is that consistent with your understanding? And if you guys are up to 10,000, wouldn't that suggest an incredibly low risk relative to the --

Well, I'm glad you said that.

As for the Jack Siegel paper, I think what he was able to show is very similar to the kinds of data that we've also seen in spinal cord injury studies. I think it's [fine] that he's put that out there. It's obviously a gain.

It's not at the level of a Thorough QT study in terms of its ability to measure relatively small differences. It can still be clinically significant. But it's just one further set of data that indicates that in [terms of] experience, at least it's not easy to see any of [efffect].

And then on the ratios --

Indeed. The 10,000 times ratio is encouraging, but, obviously, it's only one piece of data. So we still need to see what the Thorough QT comes up with.

I think what you're hearing from us is that the body of data that we have is all internally consistent, and to the extent that it is capable of doing so indicates that the probability of a significant QT effect is low. That's the best we can say at this time without actually going ahead and getting the data from the Thorough QT.

So, again, all of the data is internally consistent and says that it seems like a low probability that we would see something. But, again, until you get in there and do the Thorough QT with the added rigor and statistical power of that test, that's what we need in order to know for sure.

Thank you, guys.

Your next question comes from the line of [Ran Filavaggio] with Rodman and Renshaw.

Please proceed.

Thanks very much for taking my question. I just had a very quick clarification question for Dave Lawrence. You had mentioned the figure for adjustment of Zanaflex sales in this quarter. Could you give me that figure again?

Yes, Ran, it was actually, it was the same quarter of 2006. It was a $2.2 million adjustment to sales. It was actually the tablet inventory that we acquired from Elan and we could not recognize the revenue when we sold it because we couldn't identify that inventory as sold by us or sold by Elan.

And then once the expiration period ended, or the return period ended on that product, we were then able to record that revenue. The point being that we picked up an additional $2.2 million in gross sales in this quarter of 2006.

Okay, and so this would not impact the figure that you recorded for this quarter of 2007?

No, no.

Thank you.

You're welcome.

Your next question comes from the line of Eugene Trogan with Morgan Joseph and Company. Please proceed.

Hi, guys. Thank you for taking my questions.

Hi, Eugene.

Can you give us a little bit more update with respect to the seizures that perhaps occurred in the two (inaudible) trials? Can you give us a little bit more information as to the number of seizures that may have occurred?

Yes, the guidance we're giving is what you've heard from Andy earlier which is that the overall rate of seizures to date per patient year and over time is within that that we historically expect from trials of other products in MS. We are not reporting specific incidences of seizures from open-label studies nor, for that matter, any other adverse events. By their nature, open-label trials are not placebo-controlled and its extremely difficult, probably impossible, to draw conclusions based on individual events. Those trials are intended to be the subject of an integrated safety summary that takes place at the time of NDA, as you probably know. So our guidance is that the overall rate of seizures across over 800 patient years of experience at 10 mg twice a day in MS patients so far is within the rates that other products and other groups have reported for MS patients followed over similar periods of time.

Right. And what was the primary reason for patients discontinuing from either the two open-label studies? Was it lack of efficacy? Was it adverse events? Can you comment on that?

Yes, there's quite a mixture of things, as you would expect, over that period of time. Some people did report lack of efficacy and dropped out for that reason. Some dropped out for adverse events. Some showed progression of disease and therefore were not really benefiting from the drug in terms of the benefits they may have seen earlier. Other people had family issues and moved away and were unable to return to the investigational site, that kind of thing. So it's a real mixture of reasons behind the drop outs over time.

Okay. And lastly, how many patients would you expect to have in the QTC study?

As I said, it's a four-arm study with about 50 per group.

Okay. Well, thank you very much.

And those are not patients, by the way. Those are healthy, normal subjects.

Right.

And there are no further questions at this time. I'd like to turn the call back over to Mr. Ron Cohen.

Right. Thank you very much, operator. Thank you all for joining us. This concludes our conference call and we will see you next time.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Good day.