Acorda Therapeutics Inc (ACOR) 2011 Q1 法說會逐字稿

Welcome to the Acorda Therapeutics First Quarter 2011 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'd like to introduce your host for today's call, 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 the 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 effects with our product, 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 these forward-looking statements and investors should not place undue reliance on these statements. Forward-looking statements made in the 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.

This presentation contains GAAP and non-GAAP financial measures. Non-GAAP net income loss excludes share-based compensation expenses. Information regarding our use of non-GAAP measures and a reconciliation of those measures to GAAP is available in our first quarter 2011 financial results press release which is now available in the Investor Relations section of the website at www.Acorda.com.

Before I turn the call over to Ron, I'd like to provide a brief housekeeping note for the Q&A session. We will accept questions in the order we receive them and in the interest of time we will ask callers to limit themselves to just one question.

And now I will turn the call over to Ron.

Thanks, Tierney. And welcome, everyone.This morning we reported our first quarter 2011 financial results. On today's call I'll provide an update on Ampyra's commercial performance and our plans to grow the business in 2011 as well as some comments on the recent patent allowance and then Dave will review the financials for the quarter. We'll then open up the call to your questions.

In the first quarter, net revenue of Ampyra was $46.8 million, bringing total Ampyra net sales for the 13 months since launch to $179.9 million. Recall, we had guided the sales in the fourth quarter of 2010 might be lower than the third quarter due mostly to patients discontinuing following the large pent-up demand at launch. Instead, sales in the fourth quarter continued to rise and the expected decline materialized early in the first quarter of '11. Although this led to a decline in net revenue in the first quarter compared to the fourth quarter of 2010, total prescriptions or TRXs were flat quarter over quarter. We expect our new marketing programs to build on this plateau and we are reiterating our guidance for Ampyra net revenue in '11 of $205 million to $230 million.

In the fourth quarter of '10 we noted that there was not a correlation between IMS data and our own internal data for either new or total prescriptions. IMS recently informed us that they changed their methodology at the beginning of the year in order to better capture specialty products like Ampyra. When compared to our internal data, IMS data in Q1 '11 were reasonably accurate with regard to the trends for TRXs. However, IMS data were not accurate with regard to the trends for new prescriptions or NRXs and they were also not accurate in regard to the absolute volume of either TRXs or NRXs. The key to growing the Ampyra business in '11 is to drive new patient use. In the following slides I'll touch on our plans to increase that sales trajectory.

First, some comments on the remaining unmet need. Walking impairments remains one of the most pervasive and concerning disabilities associated with MS. There are approximately 400,000 people in the US diagnosed with MS. Studies have reported that over 64% of people with MS have walking impairment and that 28% of MS patients who have been diagnosed for just two years or less report walking difficulties already. Our clinical trial data has shown that Ampyra is effective for patients across a range of walking disabilities from early through late stages. To date, Ampyra has been used by over 10% of the MS population. While this is impressive for a product that's only been on the market for a year, it also means that there is still a large number of patients who may benefit from Ampyra.

We're pleased by prescriber impressions of the brand to date. A syndicated survey of neurologists recently performed showed that 87% were moderately to highly satisfied with Ampyra and the neurologist estimated that about 45% of patients will respond to Ampyra. This is an excellent profile on which to build the future growth of the brand. In the first year of the launch, prescribers tended to write Ampyra for patients with more pronounced walking disabilities. The primary goal of our new marketing programs is to educate prescribers about the prevalence of walking disability from early to advanced stages of the disease and also about Ampyra's efficacy across that range.

This slide is taken from our new professional education materials which are being used by our sales people and also in our speaker and online education programs. These data were also presented at this year's American Academy of Neurology meeting. They show that in our clinical trials the percent improvement in walking speed and walking responders is comparable across the range of walking disability, including those at early stages of disability shown here on the left. And what you see is the EDSS scores at baseline, on the left the earlier EDSS scores showing mild disability, then moderate, and then severe. You see that the increase in walking speed was quite comparable across that entire range.

This graph shows that the Ampyra timed walk responders experienced clinically meaningful improvements in their walking as shown by the 12 item MS walking scale, also regardless of their baseline EDSS scores which includes here again early level of disability. EDSS is the accepted measure of MS disability and relies largely on measures of walking. These data also look similar, by the way, when they're stratified based on the actual baseline walking speed on the timed 25 foot walk rather than by EDSS. We are using the EDSS in our materials because we found that the neurologist respond more readily to the EDSS. It's a scale that they're quite used to and that they work with all the time. Worth noting that these data have elicited strongly positive responses from physicians in our market research.

Moving to life cycle management for the product, on April 19 we received notice from the US patent office or US PTO that the method of use patent application we filed in 2004 has been allowed. The patent, entitled sustained release aminopyridine composition which also is known at the 828 patent relates to methods of improving walking in patients with MS by administering 10 milligrams of sustained released 4-AP twice daily. The patent that issues from this application which will be eligible for listing in the FDA Orange book is set to expire in early February 2026.

This patent allowance was a major achievement for Acorda as it substantially expands the commercial runway for Ampyra. We believe that the patent also allows us to consider additional life cycle management programs for Ampyra that potentially may increase the value of the product over time, in particular with respect to exploring additional indications. Recall that we filed an additional method of use patent, the 559 patent in 2005. At the end of March we responded to the most recent non-final rejection of this patent and expect to receive a response back from the patent office within the next several months.

With respect to our current Ampyra formulation patents that are listed in the Orange book, the patent office is determined that both qualify to be considered for extension under Hatch-Waxman and has referred them to the FDA for determination of how long an expansion if any should be granted. This could potentially provide patent protection on the formulation of Ampyra into July of 2018.

We are also in the process of developing a once daily or QD formulation in collaboration with outside formulation groups and if we can successfully develop a suitable formulation we plan to assess it for use in additional clinical indications. These may provide additional patent protection as well as expand market opportunities for Ampyra going forward.

Now moving to Zanaflex, combined net revenue of Zanaflex capsules and tablets were $12.2 million in the first quarter which continue to provide a meaningful revenue stream for the Company. The trial date in our litigation against Apotexhas been moved to May 9 from April 25 and as a reminder, this litigation was originally filed in October 2007.

Our business development strategy remains as before. We remain interested in acquiring neurology products that can benefit from Acorda's expertise in identifying, developing, and commercializing products in this space. We're looking at both clinical and commercial stage products. With respect to clinical stage, we're focusing primarily on phase two type neurology products. While we're open to assessing compounds at other stages, we believe that Acorda's expertise and capabilities are most likely to enhance the value of products at this stage and to provide the most favorable return on investment and in addition we're assessing opportunities for commercial products that we can use to leverage our existing commercial capabilities and infrastructure.

I'll now turn over the call to Dave who will review the financials. Dave?

Thank you, Ron. For the first quarter ended March 31, 2011, the Company reported non-GAAP net income of $3.1 million or $0.08 per basic and diluted EPS compared to a non-GAAP net loss of $17.9 million or $0.47 per basic and diluted EPS for the same quarter in 2010. Net revenue for the first quarter was $58.9 million comprising $46.8 million of Ampyra sales and $12.2 million in Zanaflex capsules and tablets. Total operating expenses, including share based compensation expense for the quarter ended March 31, 2011 were $60.8 million compared to $37.9 million for the same quarter ended 2010. This increase in operating expenses is primarily due to costs of sales related to the increase in Ampyra sales and an increase in SG&A expenses. Total SG&A expenses were $38.1 million and included costs related to Ampyra sales and marketing activities and the Zanaflex capsules patent infringement litigation.

Also included in total operating expenses are research and development costs which were $10.7 million for the first quarter 2011. R&D expenses included costs related to Ampyra post marketing studies, Ampyra life cycle extension programs, closeout costs for the long-term extension studies, and the development of the Company's preclinical pipeline products. We closed the first quarter of 2011 with cash, cash equivalents, and short-term investments of $225.3 million. I'll now turn the call back over to Ron.

Thanks, Dave. Operator? We can open up the call for Q&A now, thanks.

(Operator Instructions) The first question will come from the line of YaronWerber, Citigroup.

Hi. This is Kumar calling in for YaronWerber. Can you provide more color on the impact of donut hole and the (inaudible) and also an update on the European response to filing?

Dave? Do you want to talk about the donut hole?

Sure. The charge was relatively small in the first quarter. But we do expect a larger impact in Q2.

With respect -- do you have more?

I was just going to say we did have an increase in D&A Q1 over Q4.

Yes. As expected.

Right. And then with respect to Europe, that's something that by agreement with Biogen Idec we leave to them to comment on that. The appeal is progressing and that's really all we can say at this point.

Thank you.

The next question will come from the line of Mark Schoenebaum, ISI Group.

Hi. This is [Celine] stepping in for Mark. Thanks for taking our question. Can you just give us some color around the inventory impact around Ampyra?

Inventory impact? I mean, we did see an increase. We increased our inventory Q4 -- Q1 over Q4. I'm not sure what your question is though.

I guess we're just trying to understand the demand. You touched upon the discount a little bit in the prior question. Was there any impact from inventory?

Inventory in the field -- I'm sorry. I misunderstood your question. On the balance sheet we increased our internal inventory. Inventory in the field is still two weeks. There's two weeks in the channel.

Three weeks?

Two weeks.

Two weeks. Okay. Great. Thank you.

The next question will come from the line of Michael Yee, RBC Capital Markets.

Hi. This is [Sharman] on behalf of Michael. My question is can you give us some color on the number of physicians targeted in the quarter and the number patients who have tried Ampyra up to date?

We're no longer regularly supplying that. We gave those numbers last year in the first part of the launch because we really didn't have anything else to give. At this point we still have a target universe of 10,000 neurologists. We're very pleased with the overall penetration there. But since we've moved to reporting net sales on the product, we're really sticking with that and not getting into the minutia month to month, quarter to quarter.

Okay. Great. So, if I might just follow-up with the D&A impact that you said, you expect it to increase in Q2 because of donut hole? Would that donut hole impact spill over to the second half of '11 as well?

We expect that it will spill into the second and third quarter, yes.

Thank you.

I think what we should all make sure we all understand out there is it's a bit of a black box because for all the companies in the industry, we're still flying a bit blind until the government makes clear how this is going to roll out based on what we understand at this point. The impact was relatively small. It was there in the first quarter. But it was relatively small. We expect based on our reading of the new regime that the impact should increase in the second quarter, possibly in the third and then probably moderate thereafter as most of the patients make their way through the donut hole.

Great. Very helpful. Thank you.

The next question will come from the line of GeoffMeacham, JPMorgan.

Hi. This is [Christian Gordy] on behalf of Geoff. Thanks for taking my question. Ron, I'm just wanting to ask you, the new data we just heard and the new marketing strategy based on that to target early to moderately severe patients with walking disability, when can we see tangible results from this marketing strategy and do these patients -- do they come into the revenue guidance? I mean, is this new segment included in the revenue guidance?

Our guidance for the year is in part predicated on our assessments of what we think the impact of that program's going to be as the year rolls out. Giving a specific target of exactly what day or what month even, we're going to see something is fraught with peril as we've just learned given that we missed by a very small amount our projection of the fourth quarter being less than the third quarter. In fact, the fourth quarter was higher but directionally we were correct. What we expected to see materialized early in the first quarter. So, I'm a bit more humble about telling you it's going to be in this particular month. But taking a more intermediate, longer-term view, we do believe that we're going to see -- and we're actually quite confident that we're going to see an impact, a positive impact of these marketing programs on prescriber behavior as the year rolls out and we are maintaining our guidance of $205 million to $230 million of net sales.

I just have one more question if I may. The patent, based on the life cycle management for the new patent extension, you suggested that additional indications could come into play. Could you give us an idea as to what new trials you're expecting? And what these additional indications are for Ampyra?

You're talking about what new indications we're going to go after?

Yes.

We're no longer specifying the indications for proprietary reasons. So, we really don't want to get into that publically. But I will tell you that there are a number of indications, both within MS, so for other indications within MS which I can talk to you in a little more detail. Things like upper extremity function, visual function, endurance type of things. So, that's within MS. Then there are a number of disease states outside of MS in which demyelization or myelin damage plays a significant role and we are going to be exploring those as well.

Thank you.

The next question will come from the line of David Amsellem, Piper Jaffray.

Thanks. Any color on the breakdown between patients with primary or secondary progressive MS and Ampyra versus relapsing remitting MS patients? Thanks.

I don't have the exact breakdown here, David. But we have -- in general, it has resembled what we saw in the clinical trials which is to say that there's a mix of relapsing remitting and progressive forms. We see all types. There's a pretty healthy representation of primary and secondary progressive forms in addition to relapsing remitting. It's quite consistent with the mix that we saw in our clinical trial and it's what you would expect given that the drug showed efficacy across all of the major subtypes or courses of MS. We can also tell you that about 40% of the patients have been taking Ampyra in the absence of disease modifying therapies or DMTs. So, it's about 60% who are taking DMTs together with Ampyra. But there's about 40% who are just taking Ampyra and not taking DMTs and that also gives you a sense of the fact that there's a substantial presence of progressive patients who generally speaking would not qualify for DMT therapy.

Okay. That's helpful. Thanks.

The next question will come from the line of Phil Nadeau, Cowen and Company.

Good morning. Thanks for taking my question. Ron, could you talk about the reimbursement trends that you've seen in the quarter? Any change in the portion of plans that require some sort of walk test or prior auth before putting a patient on Ampyra?

It's been stable, Phil. I would say over the last three quarters, since the end of the third quarter. It's been pretty stable. About 75% of covered lives with minimal to no prior auths and about 25% who have more, harder prior auths.

In that 25% with the higher, harder prior auths, is there some percentage of those for whom using patients will be difficult? Are any of those criteria geared towards getting the more severe walking disabilities on drug and therefore kind of mitigating some of your new marketing message? At least in some portion of the population?

It's hard to say although the answer is probably a tentative yes in the sense that if you have patients who are currently having more challenges getting on drug to the extent that you're trying to go earlier, it's not -- there's nothing about those plan's prior auth that's going to make it easier to get those patients on drug. But having said that, we're -- first of all, there's an awful lot of business to be had in that 75% and so we're focusing on that laser like. But we're not by any means abandoning the 25%.

First of all, it's not that they're not getting drug. A lot of them are getting drug. It just takes more effort on the part of the practice and one of the challenges that we're addressing in the market is for those practices that either don't want to or simply don't have the capability to spend the time that it takes to get through those challenges, we're providing them with additional help, with people who are actually going in, looking at their processes, giving them information that will make it easier for them to get through the processes and that's been extremely well received.

So, I think the take home here is that it's not that the 25% don't get drug. Ultimately, most of them do get drug. It just takes more time and more effort and we're addressing that and we believe that that's actually getting better in the sense that the practices are becoming more acclimating to dealing with it and addressing it successfully so that their patients do get on drug. So, overall it's part of the mix. I don't think that our new messaging really changes the fundamentals in what we're doing. It's always going to be there. It's always going to be part of the mix as part of our sales and marketing effort. This new education program I don't think changes that meaningfully.

Great. That's very helpful. Thank you.

The next question will come from the line of Josh Schimmer, Leerink Swann.

Good morning. Thanks for taking the questions. Ron, I was hoping you might be able to clarify your comment about the NRX trends not being captured, who drives your confidence in that, and what do you really think is happening to NRX?

You know, we are reporting primarily on TRXs and what we said is that the TRXs were flat quarter over quarter, Q4 and Q1 '11. NRXs are much more difficult for outside groups to access. The reason it's difficult for them is that when you get patients who get to the end of their refills, so a doctor writes a prescription, let's say six months ago, for a prescription and six months of refills. Then they get to the end of their refills. So, the doctor has to write another prescription which is effectively a refill but he or she has to write a new piece of paper that says -- here's another drug. That winds up getting captured by IMS and others as a new prescription. It's not a new prescription because it's not a unique new patient.

So, when we look at the data internally because it's a closed system we see all the prescriptions as they come in or the vast, vast majority of them as they come in. We're able to see what is a new patient and what is not. So, each patient in our system has a unique identifier number. So, even when the physician writes another prescription which is really a refill, we know that and so we don't call it an NRX. We call it -- it's part of the refill. The outside groups tend not to do that. So, you wind up particularly as the launch progresses, you get more and more people who get these new refill prescriptions, you wind up getting more and more disparity between the outside groups and what's actually going on in the NRXs. That's really what accounts for it. What we saw in the fourth quarter and particularly in the first quarter was that there was a line break. So, IMS was tracking the NRXs pretty well in terms of trend.

Also in the earlier part of the launch before you got to this refill issue and then really almost on schedule if you will, what you would've predicted is as we got out to the -- toward ten months, a year of the launch, we started seeing a break in the pattern. The NRX line was no longer following our NRX line. So, we can't comment and tell you. Believe me, we would prefer to be able to tell you that the NRX is accurate but we can't say that anymore. On the other hand, the TRX line which is I think what we care about most and what everyone cares about most because that's where it translates directly into sales, the TRX, they were following the trends quite accurately. So, we were pleased to see that in the first quarter they reestablished accuracy on that.

So, if you look at the script trends that you're seeing, you can probably model out based on your sense of discontinuations, refills, and new patients that -- whether your current trajectory is now going to lead to an increase in TRX. Do you have that confidence at this point? If not, what might be missing from your data set to give you that confidence?

I'm sorry to do this to you, but can you repeat the question? I'm not quite sure what you were asking.

Sure. If you got better granularity into NRX and you probably have better granularity into patient drops, you can probably get a sense as to what that TRX is likely to look like even if you cannot increase the number of new patients coming on if you just hold that steady. It should give you a sense as to when that TRX line should start to inflect and move up. I'm wondering if you've been able to model that out and if so when do you expect just by natural patient accumulation to start to see the scripts to move up? I would've thought you might've seen it already but depending on some of the assumption we might not be seeing it until after?

I think at heart that's similar to something I addressed earlier. I'm not going to speculate on exactly when you're going to see a trend line change. What we are doing is reiterating our guidance for the year of $205 million to $230 million in net sales.

Maybe one last question if I may, if and when Zanaflex generics launch, will we see a reduction in the SG&A spend line and if so might you be able to quantify how much?

I can't quantify it at this point. Most of the SG&A spend is dedicated to Ampyra as you would expect. I would say the vast majority of the SG&A spend is dedicated to Ampyra. Of course you have some COGs cost built into the Zanaflex. There are a small portion of marketing costs and sales costs that are allocated to Zanaflex but at this point I can't give you exactly what that impact would be. But it's not going to be a major impact.

Right. Okay. Thank you very much.

This concludes the question and answer portion for today. I would now like to turn the call to Dr. Ron Cohen, President and CEO, for any closing remarks.

Thank you for joining us, everyone. This concludes our call today. Have a great day.

Thank you again, everyone, for your participation. You may now disconnect. Have a great day.