Acorda Therapeutics Inc (ACOR) 2007 Q3 法說會逐字稿

Welcome to the Acorda Therapeutics Third Quarter 2007 Financial Results Webcast and Conference Call. At this time all participants are in listen-only mode, 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 would like to introduce your host for today, Tierney Saccavino, Vice President, Corporate Communications, at Acorda Therapeutics. Please go ahead.

Good morning, everyone, and welcome to Acorda's third quarter 2007 webcast and conference call. With me today are Dr. Ron Cohen, our President and Chief Executive Officer, and David Lawrence, Chief Financial Officer. 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 fact 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, failure to protect its intellectual property or to defend against the intellectual property plans of others, the ability to obtain additional financing to support Acorda Therapeutics' operations, and unfavorable results from its preclinical programs.

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 or 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.

Thanks, Tierney. Welcome, everyone. Thanks for joining us this morning. Today I'm going to provide you with updates on our Fampridine-SR clinical program and our Zanaflex Capsules business, as well as corporate update, and then Dave will review the financials with you.

Regarding Fampridine-SR, as of November 2nd our second Phase 3 study, MS-F204, had 198 participants enrolled out of the required 200. We are obviously very pleased with the rapid pace of enrollment in this study. We now expect to complete enrollment around the middle of this month, and we'll make an official announcement when we have reached that milestone.

Please note that we do anticipate some over enrollment due both to allowance for potential dropouts, as well as overall enthusiasm for the study. And we now expect data from the study in the second quarter of 2008.

In September, we began our Thorough QT study and we expect data from that study in the first quarter of 2008. Finally, we're invited -- we were invited to make both a platform and a poster presentation at the prestigious annual meeting of ECTRIMS, the European Committee on Treatment and Research in Multiple Sclerosis, which took place in Prague in October.

Moving on to Zanaflex, we continue to see gratifying progress of our Zanaflex Capsules franchise in the third quarter. Shipments to wholesalers in the quarter were $11.9 million and Zanaflex tablet shipments were $1.3 million for total shipments of $13.2 million. That represents an increase of 52% over third quarter 2006 shipments of $8.7 million.

I'd like to remind all of you that that dip that you see in the first quarter of '07 actually reflects overstocking, wholesaler overstocking that occurred in the fourth quarter of '06, with de-stocking in the first quarter. And you can see we have resumed the growth curve since then.

The next slide, you get, I think, a more accurate picture of the actual prescription growth as reported by IMS. We've had consistent quarter-over-quarter growth in Zanaflex Capsules prescriptions since the launch in the second quarter of '05. Dollarized prescription growth as reported by IMS grew 9.6% from the second to the third quarter of '07.

The market share of total Zanaflex Capsule and tablet prescriptions is now 6.7% and total share of the market for new prescriptions is close to 8%. Based on our current projections, we expect the Zanaflex commercial operations to be cash flow neutral by the end of the calendar 2007 year and cash flow positive in 2008.

Now, moving on to our corporate update, we recently import -- reported some impressive progress on our preclinical pipeline. As many of you know, we are working with the Mayo Clinic on the development of a monoclonal antibody technology, which has been shown to promote the growth of myelin in the central nervous system in animal studies.

On October 9th, scientists from Mayo presented details from a preclinical study at the American Neurological Association meeting in Washington, D.C. This study showed that the antibodies were able to repair myelin in a mouse model of progressive demyelination that is similar to certain types of multiple sclerosis.

The media coverage of that presentation generated over 50 stories in international broadcast and print, and Acorda and Mayo are collaborating to move this technology toward an Investigational New Drug Application, IND, and clinical trials. During the quarter, Acorda was also added to the NASDAQ NeuroInsights Neurotech Index.

And on September 5th, we received notification from Apotex Inc. that they had filed an Abbreviated New Drug Application, or ANDA, for generic versions of Zanaflex Capsules. On October 11th, we announced that we had filed a lawsuit against Apotex Corp. and Apotex Inc. for patent infringement of our intellectual property related to Zanaflex Capsules.

Finally, we filed an S-3 Shelf last night. We think it is prudent financial management to keep a shelf available, but we should make it clear that we do not have any plans for financing at this time.

And with that, let me move the discussion to Dave Lawrence, who will provide you with a financial update.

Thank you, Ron. In our press release this morning we outlined our third quarter financial results for 2007. I'll now review some of the financial information in more detail. As of September 30, 2007, Acorda held cash, cash equivalents and short term investments of $105.1 million. Turning to the operating statement data, for the quarter ended September 30, 2007, we reported gross sales of $11.5 million, compared to gross sales of $6.5 million for the same period in 2006.

Note that included in gross sales in the third quarter of 2007 is $0.5 million of recognized revenue from 2 mg tablet deferred revenue. In August of 2007 the right to return this product expired, allowing the Company to recognize the $0.5 million deferred revenue as gross sales.

Operating expenses for the quarter ended September 30, 2007 were $17.2 million, compared to $11.3 million for the same quarter in 2006, an increase of $5.9 million. This increase was primarily due to increases -- to an increase of $3 million in research and development expenses related to the continued clinical research and development of Fampridine-SR.

Sales and marketing expenses increased approximately $2.6 million due to increases in salaries, benefits and other selling related expenses resulting from the expansion of our Zanaflex Capsules sales force. General and administrative expenses increased approximately $0.3 million due to increases in headcount and third party services related to costs associated with compliance activities from being a publicly traded company.

We reported a net loss of $8.5 million for the quarter ended September 30, 2007, or $0.30 per diluted common share, compared to a net loss of $7.2 million, or $0.37 per diluted common share, for the same quarter in 2006.

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

Thanks, Dave. So, summing up, we saw excellent progress on the Company's key initiatives in the third quarter, and I'd like to open up the call now for your questions. Operator?

Thank you.

(OPERATOR INSTRUCTIONS)

And our first question comes from the line of Joel Sendek with Lazard Capital. Please proceed.

Hi. Good morning. Thanks. If I look back in my notes, it looks like you previously said that the data would come around mid '08. So is it 2Q '08 potential acceleration of the timeline?

Yes. The enrollment went rapidly and we're able to give a little bit more specificity there.

And how about any update on when you could file if the data is good?

We haven't said, Joel. So I don't want to project that out now. I will tell you that -- let me ask you. What are you used to seeing in terms of timeline for companies from the time they get their last study done till the NDA filing?

Well, it's -- we would -- to be conservative, we would put in a year, but in this situation I think -- I would hope that you could do it quicker than that.

We would hope so.

And then just quickly on Zanaflex, you mentioned the cash flow [positivity]. What -- can you quantify how much cash it could generate in '08?

We cannot. It's always tough to project out, particularly with a product like this. It's done, we think, extremely well considering the type of product it was and the market we're selling into. But we're glad we're seeing continued growth. It's just hard to know when that's going to plateau. I think we're comfortable saying that it should be cash flow positive next year, but how positive is -- I think that's a matter of speculation and everyone's going to have their best guess at that.

Okay. All right, thanks a lot.

And our next question comes from the line of David Amsellem with FBR. Please proceed.

Hi, Ron. Thanks for taking my question. So, just as you think about the launch of Fampridine and just in light of the shelf that was filed this morning, can you provide some color on the extent to which you're going to be expanding the sales force and when you may look to access the capital markets to fund commercialization activities?

Well, I guess there are two questions embedded there. With regard to the sales force, we think it's approximately a doubling of where we are now to get to full strength for a Fampridine launch. Right now we have a sales force of 65, out of which 52 are actually on the ground, in the offices, calling on the docs, and the rest is various levels of sales management and national account managers and so forth. So we think it's approximately a double from there.

With regard to financing, we have no plans at this point with regard to financing. It's something that we will continue to assess as we go forward. So again, the shelf is really a -- in our view, a routine financial housekeeping, if you will, just to make sure we have a shelf available over time for such time as we may need it. But right now we have no plans specifically for financing. And I really couldn't comment as to when -- if and when we might decide to access the capital markets again.

Okay, that's helpful. And then just one last question, if I may. Has your thinking at all regarding an ex-U.S. partner for Fampridine changed or evolved at all? And maybe just go through how you're thinking about it or your most up-to-date way of thinking about it.

Well, the short answer is we're continuing to assess that. I think at this point we don't feel any urgency to push ourselves in one direction or another. We think we have time to make that decision, given that we have a couple of milestones coming up, clinical milestones coming up. So we're continuing to assess it, but we have no decision on that at this time.

Okay. Thank you.

I will say -- one thing I will say is that we have been stepping up our own activities with regard to Europe because regardless of whether we do a partner or not, we want to have as much information about the European front as possible. So we are engaged with regulatory consultants.

We're looking to meet with regulatory agencies in Europe and make sure that we are covered as much as possible with the information we need so even if we decide to go with a European partner, we'll be in good position to discuss that and negotiate that because we'll have the information we need.

That's helpful. Thanks a lot.

And our next question comes from the line of Phil Nadeau with Cowen. Please proceed.

Good morning. Thanks for taking my question. First is on the IP around Zanaflex Capsules. Could you maybe briefly describe what is claimed in your patent?

It's a patent in the Orange Book, Phil, that goes to 2021. It involves a number of claims having to do with methods of use, uses, PK characteristics of the formulation and so forth. So there are actually a number of claims embedded in that patent. It's obviously a published and issued patent, so we'd be happy to get you a copy offline.

Okay, fair enough. Then second, on the Phase 3 trial, you mentioned the trial might be somewhat over-enrolled just because of the momentum of the trial. Can you remind us, what is the current powering and if you have any idea what that powering can become once the final reenrollment is completed, I'd be interested in hearing that.

Yes, we powered it at over 90% to hit the primary outcome. And I know you recall there's only one primary outcome measure in this study, which is the timed walk response. The FDA, under our SPA, did not require the other two measures that we needed in the first Phase 3 trial.

So with 200 subjects, it was powered for over 90% to hit that and we actually -- we trimmed both sides of the differential so that whereas in the past we seem consistently to see about a 35% responder rate in the drug group versus about 8%, 8.5% in the placebo group, we assumed, I believe it was a 10% response rate in the placebo group and a 30% response rate in the drug group and we powered it at over 90% on that basis.

So it's actually powered for more than 90% to hit the difference that we've seen already in a couple of studies. In terms of how high that powering would go with the over-enrollment, I don't know. I don't know the answer to that.

Okay. And then --

It's already pretty high.

Yes, it's also -- it's very high. Last question is on QTC. I think it was on the last call you shared with us some hard data that you had. Have you accumulated any additional preclinical data in the last three months that speaks to Fampridine, either binding to the hERG channel or propensity to increase the QTC interval?

No. We've done no preclinical studies at all. We've met the required burden already, so there really wasn't any reason to do any more preclinical work. As far as we know, we've done pretty much what is available to do, including the optional dog Purkinje fiber testing and I think you've seen that in our filings before.

So the preclinical data remain as they have been, which is that in the hERG channel testing, the IC50, and for those on the call who may not know, that's the concentration at which we inhibit 50% of the hERG channels, is at about 10,000 times the therapeutic concentrations achieved at 10 mg twice a day with Fampridine.

Okay, great. Thank you very much.

(OPERATOR INSTRUCTIONS)

And our next question comes from the line of Caroline Stewart with Piper Jaffray. Please proceed.

Good morning. Most of my questions have been answered, but just have a couple of follow-ups. Can you comment on the dropout rate at all for the second pivotal Phase 3? Is it more or less, approximately the same as what we've seen in the previous studies?

No, I can't.

Thanks a lot, Ron.

But I will tell you that overall we're very pleased with the way this study has enrolled and has been conducted.

Okay. And then when you were talking about over-enrollment, approximately how many are you targeting for over-enrollment? At what point do you cut it off?

It's always a fun exercise to try to calibrate that because what happens is, particularly when you have enthusiasm for a trial, as you get closer to the end, people -- the investigators want to get as many of their patients who are left in the trial as possible. So you wind up in some senses kind of holding your hand up against the tide coming in. So we manage that as best we can.

I can't give you a specific number because the logs come -- there's some delay in the logs coming in on this stuff, so that's part of the challenge and the exercise of closing off enrollment in a study. You also want to make sure that you maintain the good relationships that you've built up with your investigators and the patients, so you don't want to arbitrarily tell people who believe that they were going to be in the study -- nope, sorry, we're done.

So, as I say, by the middle of the month, which I guess is the end of next week-ish, we'll be done. But until then I really won't know exactly how many we have in.

And then I guess lastly, probably you won't answer this, but you reiterated the timeline for the QTC study completion. Is there any commentary or color you can give (inaudible)?

No. That's two questions that you've given me that I can just answer no. There's nothing we can tell you other than that the study is in progress and we still expect data in the first quarter. We get no information on data from the study until it's unblinded and we get the report, which again would be in the first quarter.

It looks like her line has dropped. And our next question comes from the line of Eugene Trogan with Morgan Joseph & Co. Please proceed.

Hi. Good morning. Thank you for taking my questions. I was wondering, Ron, if you can comment as to how many patients are on the open label portion from the -- going back to the Phase 2 F203 and the first Phase 3 trial? And also if you can give perhaps what is the maximal time that a patient has been on Fampridine-SR?

Yes, Eugene, I don't have a current number for you. We update that on a biyearly basis, so every six months, because otherwise it just -- three months is not enough to get you enough of a change to make it material, we feel. So when we last updated in the second quarter, I think you may have those numbers and I think they would be in the -- were they in the Q in the second quarter?

They were in the Q and the press release.

Yes, they were in the Q and the press release for the second quarter. I don't have them at my fingertips, but it was something like 65% were still in the 202 extension and about 80% were still in the 203 extension. The 202 extension started with 177 subjects; the 203 started with 268 subjects. So you can follow it from there.

With regard to the longest exposure, it's over three and a half years by now. So the 202 study, I think even in the end of the second quarter the average time for the people who were still on the study, for that 80% or so who were still on study was about three years or somewhat over three years, and the -- that's the 202 study. In the 203, the average time was over a year at that point.

Right. And another question on the expense side. You mentioned that you expect to be cash flow positive next year. Do your estimates include legal fees related to the Apotex filing, the generic filing, in terms of defending your patents?

You know, we can't comment on legal fees because we don't -- we don't have those fees yet. It's purely speculative. So this would be on an operating basis for the business.

I see. Okay, thank you very much.

And there appears to be no additional questions at this time. I would now like to turn the call over to Mr. Ron Cohen for any closing remarks.

Well, that concludes our call for today. Thank you all for joining us and we appreciate your interest. That will conclude the call. Thank you, Operator.

Thank you. This concludes your presentation. You may now disconnect and have a great day.