Acorda Therapeutics Inc (ACOR) 2010 Q4 法說會逐字稿

Thank you for holding. Welcome to the Acorda Therapeutics fourth quarter and full year 2010 financial results conference call. At this time all participants are in a 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, Senior Vice President of Corporate Communications at Acorda Therapeutics. Please go ahead.

Good morning everyone and welcome. With me today are Dr. Ron Cohen, our President and Chief Executive Officer, and David Lawrence, our 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 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 Ampyra in the United States, and to successfully market Zanaflex capsules; third-party payers including government agencies may not reimburse for use of Ampyra at acceptable rates or at all, and may impose restrictive prior authorization requirements that limit or block prescriptions; the risk of unfavorable results from future studies of Ampyra; the occurrence of adverse safety events with our products; delays in obtaining or failure to obtain regulatory approval of Ampyra outside the United States, and our dependence on our collaboration partner Biogen Idec in connection therewith; competition; failure to protect Acorda Therapeutics' intellectual property or to defend against the intellectual property claims of others; the ability to obtain additional financing to support Acorda Therapeutics' operations; and unfavorable results from our 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. Forward-looking statements made in this presentation are made only as of the date hereof, and 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.

Before I turn the call over to Ron, I would like to provide a brief housekeeping update. For the Q&A session we will be accepting questions in the order they come to us, but in the interest of time we will be asking callers to hold themselves to one question and one follow-up question.

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

Thanks Tierney. Welcome everyone. Good morning. This morning we reported our fourth quarter and full year 2010 financial results.

Earlier this year, we provided an update on the fourth quarter and full year sales for Ampyra at the JPMorgan meeting. We are delighted that 2010 was such a strong start for Ampyra. It was well ahead of both our internal and the external expectations, in terms of sales as well as the number of physicians who prescribed Ampyra, and the number of patients who tried the drug.

We have established a solid base on which to build in 2011. On today's call I will provide a commercial update, and then Dave will review the financials for the quarter and for the year, and we will also provide guidance for 2011.

We launched Ampyra on March 1, 2010, and net sales of Ampyra for 2010 were $133.1 million. Please note that moving forward we will be reporting net sales rather than gross, which we have reported in the past.

As of December 31, 2010, approximately 7,000 physicians had written at least one prescription, and approximately 40,000 MS patients, or about 10% of all diagnosed MS patients in the US, had filled a prescription in just the first 10 months of launch. We are thrilled with these results. Recall that when we launched the drug in March, Street consensus for the year was approximately half of what we actually achieved.

Last quarter we provided launch data in an effort to help you calibrate prescriptions against external data sources. Through the third quarter it appeared that these sources were tracking trends relatively accurately although the actual numbers were significantly different. However, in the fourth quarter the trends were also inaccurate, and we don't believe it is possible at this time to calibrate our internal prescription data reliably against these data sources. Therefore, we are not providing prescription data; however, we are providing sales guidance for 2011.

In 2010, our focus was to provide prescribers with essential information about the label, and to address logistical issues that arose due to the huge pent-up demand, and to help prescribers navigate managed care requirements. In 2011, we are shifting our focus, or we have shifted our focus to sales and marketing programs that educate prescribers about the broad range of appropriate patients who could potentially benefit from Ampyra. We are also launching new programs to increase awareness, and encourage appropriate patients to go to their physicians and try Ampyra.

Studies have shown that approximately 65% of people with MS experience regular problems with mobility, and these problems are evident in all types of MS, and at all stages of the disease from early through late. A presentation at the European MS, or ECTRIMS meeting in October 2010, reported that 28% of MS patients who had been diagnosed for two years or less report walking difficulties. That is 28%.

We believe that this is not fully recognized among healthcare providers. This is at least in part because physicians and patients often don't discuss walking impairment. In fact, a 2008 Harris Interactive poll found that 40% of MS patients don't talk to their physicians about their walking issues. Therefore our educational efforts in this area represent substantial growth opportunities for the brand.

Now we are introducing new analyses of the clinical trial data as part of this educational campaign. For example, this slide shows that clinical improvement experienced by Ampyra timed walk responders versus placebo patients, as measured by the MSWS-12. Patients here have been stratified by their baseline EDSS scores, which primarily measure the degree of mobility impairment.

Recall that the MSWS-12 is a validated self-reported questionnaire, in which patients rated the impact of their MS on 12 items related to walking, such as the need for support, walking speed, maintaining balance, walking distance, the effort needed to walk, and gait, among others. The timed walk responders were shown to have improvements in all 12 items of the MSWS-12, regardless of whether their baseline walking disability was mild, moderate or severe as you see illustrated here in the graph. We expect that our new educational campaigns will contribute to the growth of the brand in 2011, and will begin to take effect over the first two quarters of this year.

We also plan to continue to present data and new analyses from our dalfampridine clinical studies at the major MS and neurology meetings in 2011, including the American Academy of Neurology or AAN meeting in April of this year.

With regard to Ampyra exclusivity, the US Patent Office has determined that both of our Orange Book patents qualify to be considered for extension under Hatch-Waxman, and has referred them to the FDA for determination of how long an extension, if any, should be granted. Recall that under Hatch-Waxman extensions may be granted for up to five years.

In addition, we have responded to the non-final rejection of the 828 patent filed in 2005, and expect a response from the Patent Office within the next few months. We will respond to the most recent non-final rejection on the 559 patent filed in 2004 by the response deadline in March. With regard to the EU, when granted the patent should expire in 2025, and we have received a notice of grant for that patent.

On life cycle extension, we are working with two external parties, one of them being Elan, on a potential once-daily formulation, and we are developing plans to explore new potential indications, both within MS and other diseases. We have investigator-initiated studies underway in MS looking at a range of neurological functions, and those would be functions beyond walking speed.

Turning to our Zanaflex franchise. Total shipments of Zanaflex capsules and tablets were 15.8 million in the fourth quarter and 57.3 million for the year. Net sales were $12.1 million in the fourth quarter and $48.5 million for the full year 2010. A trial date in our litigation against Apotex has been set for April 25, 2011.

On the R&D front, we are continuing to advance our pipeline. In December 2010 we initiated the first Phase 1 trial of GGF2 in patients with heart failure. This compound also has compelling preclinical data in stroke, and a paper published in 2010 showed recovery of function in stroke animal models when therapy was initiated, even up to 7 days after the event.

This is unique in the field. GGF2 works by a mechanism that is currently not represented in any approved drug for either heart failure or stroke, and appears actually to repair tissue that has been damaged in the heart or brain.

Our remyelinating antibody, rHIgM22, has gone through CGMP manufacturing, and also pilot toxicology studies. GLP toxicology studies are currently under way, and if those results are acceptable, we plan to file an IND for rHIgM22 for the treatment of MS. Recall that currently there is no therapy indicated to repair myelin in MS or any other disease.

Now I will turn the call over to Dave.

Thanks, Ron. For the fourth quarter ended December 31, 2010, the Company reported net income of $3.7 million, or $0.10 per basic EPS and $0.09 per diluted EPS, compared to a net loss of $22.5 million or $0.59 per basic and diluted EPS for the same quarter in 2009.

Net revenues for the fourth quarter was $64.4 million, comprising $52.3 million in Ampyra sales and $12.1 million in Zanaflex capsules and tablet sales.

Total operating expenses for the year ended December 31, 2010, increased over the full year 2009 by approximately 47%, primarily due to cost of sales and SG&A expenses related to the launch of Ampyra. As we guided on our earnings call last quarter, Research & Development expenses were expected to slightly decrease in 2010 over 2009. We reported today that R&D expenses decreased in 2010 over last year by approximately 12%.

This decrease was in part due to a delay in production of GGF2 clinical study medication, as a result of deficiencies in the vial filling process, and the consequent delay in the start of the Phase 1 trial, originally targeted for mid-2010. The production delay was resolved and the GGF2 trial initiated in December 2010.

We closed the quarter with cash, cash equivalents and short-term investments of $240 million.

Turning to guidance. In 2011 we are guiding to expect net revenue of Ampyra to be $205 million to $230 million, and that Zanaflex net sales may be lower in 2011. We expect that SG&A expenses will be $130 million to $140 million, excluding share based compensation charges, and that R&D expenses will be $40 million to $45 million, again excluding share based compensation charges.

Now I will turn the call back to Ron.

Thanks, Dave. So to recap our priorities for 2011, we are focusing this year on maximizing Ampyra through building on the base we established in 2010, continuing our work on the IP front to extend the exclusivity period, and also looking at development of new formulations and potential indications. We are also working to advance our existing pipeline, and are seeking to acquire additional pipeline assets in the neurology space, either clinical stage compounds and/or commercial stage compounds coming online in 2012 or beyond.

Now we will open up the call to your questions. Operator?

Thank you. (Operator Instructions). Our first question comes from the line of Michael Yee representing RBC Capital Markets. Please proceed.

Hey, thanks, Ron. Question on the guidance. What are your assumptions in the guidance? And also thinking about Q1, just trying to understand what you are seeing, in terms of scripts coming out into January and February? And then the shape of your curve as you go through the year, whether that is linear or more back end loaded?

Yes, our guidance is what it is, Mike in terms of the net sales for the year. We are not giving any blow-by-blow detail month to month. But maybe I can address it by just pointing out or reminding everyone of a few things.

Let's look at the trajectory of this launch. We had a blowout launch year last year, and as we have said and I think everyone now appreciates, there was a huge pent-up demand that was developed for this drug. It came online; as soon as we launched we had a huge number of patients pour in right up front into the drug.

Now recall what everyone's models were showing at the beginning of the launch. Everyone's models were showing a very typical kind of launch where you start at zero, and then you have a gradual increasing slope all the way through the end of the year, ending at about $70 million, which was consensus when we launched.

We doubled that, and we doubled it in a compressed time period. We effectively took all the patients that we were supposed to get in 2010, and then added all the patients we were supposed to get through probably the first three quarters or so of 2011, and we got them all in 2010. So that is really a blowout launch.

Now there is no way to sustain that. That is not sustainable. You kind of look at it and you kind of get to the peak, and everyone starts seeing sort of pink fairies and twinkly stars, but that is not reality. All right?

It was a pretty twinkly star year as it was, in terms of how high we got. But you come down the back end of that as you run out of the pent-up demand as large as it was. Once you do that you expect there is going to be a lull, there is going to be a decrease in new prescriptions relative to what you were seeing before. There just has to be.

The only question you have at that point is -- well, how far does that go, and how long does it last before you turn the trajectory back up? From our perspective this looks like a blowout launch. For the last few months we have been in that lull period.

Now to address that, we are doing what you are supposed to do, which is we have a vigorous sales and marketing campaign that we are introducing. We have begun to introduce it. It is going to roll out more over the next few months, and we expect that with those efforts we should see an upturn in the trajectory of prescriptions on the base that we have built.

So we are not looking at this day-to-day or even week to week, or even month-to-month, frankly. I mean maybe month-to-month, but certainly not day-to-day, week-to-week, because it is like watching water boil. It doesn't really give you the picture of what we are doing in this launch.

So from our perspective what we are interested in is seeing the impact of this next phase of the sales and marketing campaign as it rolls out over the first two quarters of this year. That is our trajectory. That is our timeline.

Okay. Can I ask a follow-up? My follow-up is -- are you seeing a similar maintenance rate? Remind us what kind of maintenance rate you are seeing, just so I can calculate some numbers.

Are you talking about the refill rate?

Yes, how many people are staying on drug versus what you are seeing fall off, et cetera?

We haven't updated the specific first refill rates. Again, we have -- the first refill rates have been strong, and I think we said at the last quarter that they were 67%. They were somewhat higher in the fourth quarter than that, but we are not giving a specific number. They were somewhat higher than the original rate of 67% that we reported.

But that is first refill rate, and really what we are interested in is what we would call the terminal refill rate. Which is when you get out to the eighth, ninth, tenth refill, how many people are staying on the drug for the duration, and it is too soon to say that yet.

Okay. Thanks.

Our next question comes from the line of Joel Sendek representing Lazard Capital Markets.

Hi thanks. I wanted to know if you are seeing any -- let's get beyond the script trends I guess, and if you are seeing anything that is different with regard to reimbursement and the requirements of the payors. Are they getting any more restrictive, or has it been effectively the same as it been the last couple months?

Joel, I wouldn't say we have seen any substantive changes. Managed care pretty much implemented most of what it was going to do middle, latter part, or let's say by third quarter-ish of last year. So previously we said that about 75% of covered lives were getting through with either no, or what we would consider light, PAs, and that about 25% had harder or more restrictive PAs.

What we found is that over time with appropriate hand holding and assistance from our own team out there that the physicians have been adapting as they do to those things. So that has been good.

We had some gratifying news with respect to some of the bigger plans. We were put on Tier 2 with essentially no restrictions by United Healthcare, by CIGNA, by Health Net. That was actually very gratifying news.

We expect that the managed care environment continues to shift over time. So some plans might decide that they want to get more restrictive. Others might decide they want to get less restrictive. That is normal, and that is what we would expect over the course of time.

But fundamentally we haven't seen any material or substantive changes. And the best thing that we continue to see is that when we poll the market, we get consistent feedback from the prescribers that they like this drug, that they want to prescribe it, that the patients like the drug. And that is really where we want to be.

And then when you get to the next level of doctors that you haven't detailed yet or that haven't prescribed as much yet, is the hurdle rate higher for them maybe from a reimbursement standpoint? Or is it easier because you can kind of give them the tools that you have learned with the other higher prescribing physicians?

Actually every physician or every prescriber has their own characteristics, right. I mean you have the early adopters, the people who jump on it before anyone else does. You have people who want to wait six months or a year and see how their buddies are doing with it, and then they come on. There are people who are just resistant, and they require approaches that are different or more intensive than other people. That is just a typical sort of launch terrain out there, if you will.

What we are finding is that as people have used the drug and as they are getting good results, we get our speakers -- we have a speakers' bureau. Our speakers are able to come out, talk to other groups of doctors who maybe haven't prescribed yet and share with them their experiences. We find that is really an effective tool for getting those resistant doctors to at least try the drug. Then once they try it, if they have success that carries on a life of its own.

I guess the other piece to call attention to is that we now have over 7,000 doctors, mostly neurologists, who have written for the drug. That is really spectacular. Remember we started out the launch with a call list of 5,500.

Based on the market feedback we expanded it to 10,000 targets. Over 7,000 have now put pen to paper, changed their behavior, which is what you look for with a new drug launch, and actually written for the drug. That is really a very encouraging base now on which we can build, because once they have written it once, it is easier to get them to write it again.

Got it. Okay, thanks.

Our next question comes from the line of Mark Schoenebaum representing ISI Group. Please proceed.

Hey, Ron. I had some questions about the pink fairies and twinkly stars that you mentioned earlier.

Are you still seeing those, Mark? Because we are working on some other drugs I should talk to you about.

I am off the Red Bull now. I just wanted to ask, I know this question might be a little bit aggravating, but it is on everybody's mind, and I have just gotten pummeled this morning with it, so I thought I would maybe turf it to you guys.

All right.

The bottom end of the guidance basically seems -- and I am asking this question with the expectation that if I have made a mistake you will correct me. But the bottom end of the guidance seems to imply basically no growth from the fourth quarter run rate. I am just wondering why the low end would even be included in the guidance.

On one hand it is Ron Cohen being very conservative, and making sure he protects his analysts and shareholders. On the other hand, that is a realistic possibility that the Company sees internally. I am just trying to understand especially the low end of the guidance.

And you want me to clarify it on the terms you just mentioned. All right. Well, first of all --

I guess what I am asking is, am I interpreting that right? Is the low end really no growth, and is that really a scenario that the Company thinks is possible?

No. First let me check some assumptions here, because we are not sure what you and the other folks on the Street are using, for D&A for example. Because we have a sense that some people may still be using the rate that they are seeing this year, which I think was about 6%, and we expect that rate to increase in 2011.

So remember, we are giving a net number, and we are not giving you specific guidance on what that D&A is going to look like. There are uncertainties in that with healthcare reform, the doughnut hole, and so on. But 6% is not a realistic number for an established drug.

Okay.

If you look at Zanaflex, and I am not guiding you to use the Zanaflex number for Ampyra by the way, at all, but just by a handy comparator, you can see Dave, what are we, 12%?

Yes, 12%.

On Zanaflex, which is obviously an established drug. So that may be one source of the issue out there.

Okay. That is very helpful. That clears up the pink fairies.

On the twinkly stars, the EU patent that you mentioned would expire in 2025. That is significantly longer than I had assumed that the molecule would have exclusivity in the EU. What kind of patent is that? Can you describe, is it composition, is it a method of use, et cetera?

Yes, it is a method of use. It is the, what is the word I'm looking for? The corresponding -- it corresponds to -- which one? The 2005 patent here or the 2004? We would have to look it up. It corresponds to one of those two patents that we filed here either the 2004 or the 2005, which fundamentally is a method of use that looks, that talks about the 10 milligrams twice daily of sustained release formulation of 4-aminopyridine to improve walking in MS.

Okay. Thanks. I will get back into queue.

Our next question comes from the line of Geoff Meacham representing JPMorgan. Please proceed.

Hi, guys. Thanks for taking the question. I want to ask you a question at the patient, not the script, level. This would be how is the duration of therapy (technical difficulty) change over the course of 2010 (technical difficulty) these metrics?

Geoff, it sounds like a cell phone. We heard every other syllable. I am sorry. I didn't get the question.

Sounds like he dropped off.

Hello?

He has removed his cell from his queue. Our next question will come from the line of Phil Nadeau representing Cowen and Company. Please proceed.

Good morning, thanks for taking my question. Ron, I was wondering if you could elaborate on your comment about script trends that you made during the prepared remarks. If I heard you correctly, you said that through Q3 the prescription trends were correct, and then into Q4 the prescription trends kind of lost touch with reality.

Could you elaborate on what data you have to suggest that is true, and kind of what you are seeing?

We haven't given specific numbers as we said, particularly because we just don't think they are useful for calibration at this point. What we did is we took our internal numbers, which are really the best data available because we have our closed specialty pharmacy system, and we compared them as we did last quarter to the IMS numbers.

And up through the third quarter what we saw, or what we thought we were seeing, was that the IMS numbers were clearly substantially off, in terms of the actual absolute numbers. But the trends seemed to be reasonably tracking, in terms of if they were going up by X percent or down by Y percent, roughly it was tracking pretty well.

In the fourth quarter we lost that as well. So it was not predictable based on what our internal numbers were, relative to what the IMS trends were saying. So we really have no compass there, and that is why we are not giving the numbers. We just don't think it is going to help you calibrate anything at this point. We can't calibrate it.

I guess it's a last part I am a little curious on, because when I look at the IMS scripts for Q4, total scripts were up some modest small single-digit percentage, and that does correlate pretty closely with the net revenue that you reported. So it seems like at least the total script number for Q4 reflected revenue.

I don't remember it word and verse at this point. I can tell you it depends what you are looking at, and what month or week you are looking at, so PRXs versus NRXs versus -- and also recall that an additional complicating factor that is coming in, is that over time as patients refill prescriptions and get a new script --.

In other words, so a patient has three refills, and they go through their three refills, then they get another prescription from the doctor for another three or six refills. When IMS gets that, they count that as a new RX.

With us, we don't because we know each patient identifier, so once they are in the system everything is a refill, and we don't double count. So the numbers just wind up going way off, and at this point we cannot make sense of them relative to our numbers.

Okay. And one final question at the risk of annoying you. Scripts are down about 13% quarter-over-quarter in Q1. Are you suggesting that you are not seeing that type of decrease in patient demand? Can you give us some idea of Q1?

Not suggesting anything at all with respect to the specific numbers. I mean let me just say what we have said is that the numbers did decline in the fourth quarter relative to what people were seeing earlier in the launch, during the summer when we were getting all the pent-up demand and so on. But we are not giving blow-by-blow guidance.

What we are saying is that we expected to see a decline. It is typical for a launch, particularly a launch with this characteristic and the huge hump in the beginning. And what we really are looking for is to move the trajectory up over the next several months with the new marketing campaign, the new sales campaign, and so on.

That is really where the money is, if you will. That is where the action is for this launch, and that is what I would guidance everyone to be focusing on over the next couple of quarters. This quarter and next quarter, what are we doing with that trajectory?

Okay. Great. Thanks for taking my question.

And our next question comes from the line of Raghuram Selvaraju representing Noble Financial Group. Please proceed.

Thanks very much for taking my question. Ron, I just wanted to get a little bit more clarification on the R&D spend guidance for 2011. Can you confirm whether this indeed includes expenditures that might come from product candidates that you might in-license over the course of 2011?

And then secondly, could you give us some color on what your thinking is on that strategic front? If your preference would be to in-license marketed products, or product candidates that are in clinical development?

Yes, the guidance does not assume an acquisition. If there were to be an acquisition we would have to update that for you all. The guidance reflects what we have on the table now, which is all of the Ampyra life cycle management programs, the preclinical programs and clinical programs that we have now in-house with GGF2 and the antibody.

In terms of what we are looking for, that is still consistent with what we have been looking for last year and continuing into this year, which is to leverage the expertise of the Company in developing interesting neurology assets. We would like to do that preferentially by finding a clinical stage product in the neurology space that we are enthusiastic about.

I can't tell you exactly what stage it would be, because first we have to find one that meets our criteria. But if we had a wish list, we would say it would be somewhere around Phase 2. That is not an absolute; but in terms of value for money spent, we think that the greatest inflection points tend to be available at that stage.

Then the other major asset of the Company we feel is our commercial organization in the specialty area of neurology. It is a well-tried and extremely successful commercial group and sales force. If we could find a commercial product that was coming online, let's say not earlier than the beginning of next year, because we really want everyone focused this year on maximizing the Ampyra launch, if we could find a commercial product that we could co-promote or acquire outright, that we could put in as a P2 detail in the bag, that would be attractive.

Again, it would depend on the nature of the product, the price versus value. That is always the issue.

So we are continuing to look. We are not going to lock ourselves into any timeline this year, because if we find something that we think adds to the value of the Company then we will act on it. If we don't, then we won't.

Thanks very much.

Our next question comes from the line of David Amsellem representing Piper Jaffray.

This is actually Misha Dinerman for David. Can you outline the steps involved in the appeals process in Europe, and give us a sense of the timeline for that?

I guess the main steps are that you file an intent to appeal which we understand Biogen has done. Our understanding is that the CHMP assigns new rapporteurs, and that a new filing is made, and the process should take about six months from the time of the notice to appeal.

Okay, great.

It can take less, but it shouldn't take more than about six months.

Okay, great. Then in terms of getting new patients onto Ampyra is there any particular sub category of patients that might be a low-hanging fruit for you, beyond what you already called out so far?

Our impression is that in the early going the low-hanging fruit was in fact the people who were obviously impaired. The sort of the easy ones to spot, the people who were walking into the doctor's office with a cane, or a walker, or really obviously terribly impaired. Those are the ones that were top of mind. Those are the ones that the physicians jumped on in terms of -- hey, we really should try Ampyra for you.

Much, much less were they looking at the 30-year-old mother of two, who ambled into the clinic apparently looking fine, and in the 10 minutes the doctor has with her, her chief complaint is that she has some double vision, and he or she wants to address that.

The doctor is not necessarily thinking -- hey, I should ask how she is doing with her walking at home. And the data says that 30% or more of those patients are going to come back and say, yes, boy, I have been slowing down, I actually have stopped taking my kids to school, I really miss it, that kind of thing. Or I can't do the grocery shopping. I have to wait for my husband to do it now.

Those are the patients that we are really bringing to the attention of the healthcare providers now with data that makes it clear that those patients also benefit, and they can benefit substantially by Ampyra, just as people who are obviously impaired. So that is really where we think the next phase of the launch is going.

Great, thank you.

Our next question comes from the line of Maged Shenouda representing Stifel Nicolaus. Please proceed.

What is your market intelligence telling you about the use of compounded 4-AP now, and how has that developed over the year?

It is less but we didn't know exactly how much it was to begin with, so we can't tell you how much it is now because we don't know. We don't feel it is a major factor. It was never a major factor. It was never as much of a factor as some people were concerned about.

Even at its best when we started, the more optimistic assessments were that maybe about 10,000 MS patients were taking drug all the way down to maybe 3,000 or 4,000. We know that many of these patients have switched over to Ampyra. We know that there are some who have not, but that is really where it is. And that is not our number one, two or three focus at this point.

Can you just provide a quick clarification on expected gross to net allowance for 2011? Did you say that is 12% for Ampyra?

No.

No?

No. We are specifically not giving a number. We are simply saying that you should expect that it will be higher than this year's number. This year's number is not a realistic reflection in the first 10 months of launch of what you see when the drug becomes more established.

I pointed to Zanaflex, which is the other drug that we have as just one example of an established drug, and in the case of Zanaflex we are showing a 12% D&A line. Now that is specifically not guidance with respect to Ampyra, merely an example to say that for established drugs, 6% is not a realistic number. You expect a higher number as the launch develops.

Okay. Thank you.

Our next question comes from the line of [Kumar Rajah] representing Citigroup. Please proceed.

Hi. I am calling on behalf of Yaron Werber, can you give us guidance on revenue per patient, and also color on SG&A and R&D going forward?

I am sorry; you wanted guidance on, what was the first thing you said?

The revenue per patient?

We have not provided that number. We don't have that number for you.

And what about the SG&A going forward?

SG&A going forward, Dave?

Beyond the guidance we have provided. Beyond the $130 million to $140 million (multiple speakers)

Yes, sorry. We have guided to $130 million to $140 million on SG&A.

But we want to know like why there is an increase?

Why is there an increase?

Well, actually it's -- we did $133 million in SG&A in 2010.

Yes, but the launch is fully ramped up right now, Ampyra.

Yes, I mean it is not showing a substantial increase over 2010. We are still in launch phase. We still are investing significantly in the launch to make sure that we get the highest possible trajectory, but it is not increasing substantially over last year.

Okay. Thank you.

Our next question comes from the line of David Moscowitz representing Madison Williams. Please proceed.

Hi, good morning. Thanks for taking the question.

Hi, David.

Hi, Ron. I just have a question on the 5 milligram strength. Is that something you guys had talked before? Recognizing in the press release it says it is a post-marketing commitment. I am just wondering about that.

What are the reasons for going forward with that strength, and what can you tell us about it from a Company perspective?

It is a post-market commitment meaning we committed to FDA that we would do that study. We did not have a 5 milligram. We didn't have any dose strength lower than 10 available when we were doing the original clinical trial program.

Our PK/PD data indicated that 10 milligrams was the optimal dose, and that lower than 10 was not likely to be optimal, but the FDA wanted us to get a lower boundary, and to show what 5 milligram does relative to 10. We are frankly delighted to have the opportunity to have a 5 milligram formulation, because for certain patients it may be advantageous to have a 5 milligram out there. So we are doing that study.

Okay. Excellent. The other question I had is the cash actually moved down in the quarter. Was that because of the Paul Capital royalty, or was there anything else in expenditures that caused the cash to move down, despite reporting positive earnings?

You are right. It was primarily the $5 million payment to Paul Capital, which is the second of two payments we had to make.

Okay. And just back to the 5 milligram trials, Ron, and I will let you go, when do you think you guys will have those complete, those studies?

When do we think we will have the data?

Yes.

We are not projecting that yet, David. It is a little early for us to do that. And just to be clear it is one study. So it's one comparator study with three arms -- 5 milligrams, 10 milligrams, twice a day, and placebo.

Got it. Okay. Thanks very much, appreciate it.

Sure.

Our next question comes from the line of Chris Raymond representing Robert W. Baird. Please proceed.

Thanks for taking the question. Another question on the post-marketing study, so I just want to clarify first. It is -- so you are combining the renal impairment commitment with the 5 milligram?

No, that is a separate study. The renal study is actually 7.5 milligram, not to be too confusing for you. But the renal study is a 7.5 milligram study in renally impaired people.

Okay, thanks. But what I was really getting at it is how big are these studies in terms of the number of patients and with your guidance is there some -- and this again might be another question that you might not want to answer. But should we assume that there is some maybe moderation of revenue embedded in your guidance as a result of these studies?

You mean in terms of funneling patients into the study instead of commercial?

Yes, exactly.

I don't have a good way to answer that. We are not going to be giving the exact numbers of patients for these studies. I will tell you renal studies typically are not huge, right. You are looking for PK curves. That is not a material number.

The 5 milligram, 10 milligram study, it is more along the lines of what we did for the original studies, right, but even those were not huge. We were talking about a few hundred patients in those studies. So I don't think it is terribly material.

Okay, thank you.

And our next question comes from the line of Geoff Meacham representing JPMorgan. Please proceed.

Hi, guys. Is that better?

Yes.

Hey, Geoff.

Sorry about that. So my question is, not at the script level but from a patient perspective can you guys talk a little bit about maybe how the duration of therapy and discontinuation rate changed over the course of 2010 as you rolled it out? And not specifically but just directionally, are you guys assuming this gets better or worse in 2011?

Very hard to project at that level, Geoff. We were very pleased with the maintenance rates overall. You may have not been on when we were mentioning this, but what we have given so far is the rates of first refill, which is the ones we are most confident, and those edged up in the fourth quarter above the 67% that we had in the third quarter. But we are not giving anything more specific than that.

What we can say is that the rates of first refill are high. I mean we think those are very solid rates of first refill. The maintenance rates are high.

But at the end of the day the number that we want to know, and that I think you all really want to know, is the terminal refill rate. And that is going to be 18 to 24 months into the launch before we even begin to get a solid sense of that. Meaning the people who have committed to the drug for a year, a year and a half, two years, not the first refill or even the second refill. That is really the rate that ultimately determines the standing go-forward rate of your base, and what you are adding to.

So that we have a ways to go before we understand that better. But so far at least in terms of the early trialing of the drug and the initial willingness to reup and get a refill, those rates have been high, higher than 67% in the fourth quarter.

And I know it is early in the launch, and I know you love anecdotes but is there any data that you have commercially on retreatment, patients that maybe get a refill for 30 days, 60 days, stop and then have come back?

I would love to see those data. We don't have them yet, but that is something that is in our minds to track if we can going forward, because it is an interesting idea. The idea that because these patients progress over time someone who tried it once and didn't have apparent success, would it be worth seeing if they had success if they tried it in six months or a year from now if they had had a change in their status?

It is medically a very interesting and important question. We don't have data on that right now.

Got you. Okay. Thanks a lot.

Thank you. This is all the time that we have now. With no further questions in the queue, I would now like to turn the call back over to Dr. Ron Cohen for closing remarks. You may proceed.

Thank you very much, operator. Thank you everyone for tuning in. This concludes our call today.

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