Acorda Therapeutics Inc (ACOR) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for holding and welcome to the Acorda Therapeutics second-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. I would now like to introduce to 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 events with our products related to obtaining or failure to obtain regulatory approval of AMPYRA outside the United States and our dependence on our collaboration partner, Biogen Idec, in connection there with; competition; failure to protect Acorda Therapeutics' intellectual property, to defend against the intellectual property claims of others or to obtain third-party intellectual property licenses needed for the commercialization of our products; the ability to obtain additional financing to support Acorda Therapeutics' operations and unfavorable results from our research and development 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 use 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'd like to provide a brief housekeeping update for the Q&A session. We'll be accepting questions in the order they come to us. And in the interest of time we're asking callers to restrict themselves to one question and one follow-up. Thanks, and I will now turn the call over to Acorda's CEO, Ron Cohen.

Thanks, Tierney; good morning, everyone. This morning we reported our second quarter of '11 financial results. On today's call I'll provide you with an update on AMPYRA's performance for the quarter as well as the initiatives that we have implemented in the marketplace. I'll also cover ZANAFLEX and our pipeline and Dave will then review the financials for the quarter. And as you've heard from Tierney, afterwards we will open up the call for Q&A.

For the second quarter net revenue of AMPYRA was $51.8 million compared to $28 million in net revenue for the same quarter in 2010. There was an approximate 5% increase in net sales this quarter over Q1 after excluding the effect of the price increase that we took in March. With the effect of the price increase there was a 10% quarter-over-quarter increase. We are reaffirming AMPYRA's net sales guidance for the year of $205 million to $230 million.

In the second quarter IMS again tracked total prescription trends, though not volume, accurately. Since it appears that IMS has been accurately tracking total prescription trends, moving forward we'll provide quarterly net revenue and we'll not be commenting on IMS or other data services. There were approximately 11,000 new patients added in the first half of 2011.

Our market research shows evidence that the messages and programs we implemented at the beginning of the second quarter are resonating with prescribers. For example, physicians are recalling our messaging around the post-hoc analysis showing efficacy across a wide range of walking disability from mild to severe.

In addition, an increasing number of physicians are reporting that they intend to prescribe AMPYRA in their relapsing remitting patients who are typically less severe walking impaired than progressive patients. This is a shift from the attitudes that we saw in similar market research six months ago.

We're encouraged by this response just one quarter into our new marketing campaign and we're continuing to implement programs that highlight this new messaging. Over the coming months we'll be tracking how this translates into prescription growth.

Our first step program, which we piloted in the second quarter, provided selected prescribers with a limited number of 60-day -- or 63 60-day trials of AMPYRA for their patients. This had two objectives -- one, to encourage physicians to try AMPYRA in earlier stage patients with walking disability; and second, to allow physicians to assess responsiveness to AMPYRA before needing to fulfill managed-care requirements.

Physicians have been enthusiastic about Acorda developing a program that allows certain patients to try AMPYRA at no cost, and we expect that many of the patients who participated in the initial pilot program and responded to AMPYRA will convert to commercial customers. Based on the pilot we're now enhancing and expanding the program.

We also launched another pilot program to assist those practices that are disproportionately affected by managed care requirements. In this program Acorda's reimbursement professionals worked directly with these office staffs and related managed care organizations to help reduce the amount of time office staffs dedicate to initiating a patient on AMPYRA.

We're pleased that Aetna, one of the largest national health plans in the country that provides pharmacy benefits, now has listed AMPYRA as a preferred drug on their commercial formulary beginning today. With this addition to United Healthcare and CIGNA, three of the largest national health plans in the US now have AMPYRA in the preferred tiers of the commercial formulary.

Last week the European Commission announced the conditional approval of AMPYRA -- of FAMPYRA, the brand name for AMPYRA in the EU and other parts of the world. Our partner Biogen Idec expects FAMPYRA will be available beginning in September in Germany and other markets to follow. This approval triggered a $25 million payment to Acorda from Biogen; the next expected milestone is a $15 million payment due when the ex-US net sales reach $100 million over four consecutive quarters. We will also receive a tiered double-digit royalty on sales outside the US.

Moving now to our ZANAFLEX franchise. Combined ZANAFLEX CAPSULES and tablets second-quarter net revenue was $11.1 million and total shipments were $14.2 million. The litigation against Apotex in connection with its application for approval of a generic version of ZANAFLEX CAPSULES continues. The trial concluded in May 2011; the parties are completing post-trial briefs after which a court decision is expected.

Moving to Acorda's growing pipeline, on July 1 we announced that we licensed worldwide development and commercialization rights to a proprietary magnesium formulation from Medtronic which we are now calling AC105 -- that's the formulation; we're not calling Medtronic AC105.

We plan to study AC105 as an acute treatment for patients who have suffered neurological trauma such as spinal cord injury, traumatic brain injury or stroke. There are approximately 11,000 new spinal cord injuries reported in the United States each year and approximately 275,000 hospitalizations for traumatic brain injury. Our initial studies will be in spinal cord injury. We're excited to be in the clinic with a product for SCI, an area where we have significant expertise and we expect to begin Phase 2 SCI clinical trials in 2012.

We paid $3 million up front to Medtronic and we'll make up to $32 million in regulatory and development milestone payments. A single-digit sales royalty will also be paid by Acorda to Medtronic if AC105 is commercialized.

AC105 is an important addition to our existing pipeline providing a clinical stage compound to complement our clinical program for GGF2 and preclinical programs in remyelination and nerve repair. The GGF2 Phase 1 heart failure trial is ongoing and we're also exploring a number of other potential indications for this compound in preclinical studies including peripheral nerve damage, spinal cord injury and stroke.

rHIgM22, our remyelinating antibody being developed with the Mayo Clinic, is in the later stages of preclinical development. Based on its mechanism it could potentially be taken concurrently with AMPYRA and/or immunomodulators so that a treatment regimen, including all three approaches, could potentially address the disease on multiple levels.

Our chontroitinase program is progressing through preclinical studies. A paper published in the July 2011 edition of Nature showed that treatment with chontroitinase in combination with a peripheral nerve graft led to significant recovery of diaphragm function in a preclinical model of spinal cord injury improving or restoring -- pardon me, spinal cord injury.

Improving or restoring respiratory function is a critical therapeutic need in spinal cord injury as impaired breathing is one of the leading causes of death in people with spinal cord injury. I'll now turn the call over today to Dave for a review of the quarter's financials.

Thanks, Ron. For the second quarter ended June 30, 2011 the Company reported non-GAAP net income of $7.8 million, or $0.19 per diluted EPS, compared to a non-GAAP net loss for the same quarter in 2010 of $2.2 million or $0.06 per basic and diluted EPS. Net revenue for the quarter was $62.9 million comprising $51.8 million of AMPYRA sales and $11.1 million in ZANAFLEX CAPSULES and tablet sales.

Total operating expenses, including share-based compensation expense, for the quarter ended June 30, 2011 were $64.4 million compared to $48.5 million for the same quarter in 2010. This increase in operating expense is primarily due to cost of sales related to the increase in AMPYRA sales, increases in R&D costs including the development of the Company's preclinical -- pipeline products, and the $3 million upfront payment to Medtronic.

SG&A expenses increased primarily due to AMPYRA sales and marketing activities and expenses related to the ZANAFLEX CAPSULES patent infringement litigation. In the second quarter of 2011 the Company was cash flow positive and closed the quarter in a strong financial position with cash, cash equivalents and short-term investments of $228.2 million. Now I will open the call to Q&A.

(Operator Instructions). Michael Yee, RBC Capital.

Sure, thanks. A question on the sampling program. Maybe you could talk a little bit more about how many patients you think are on it, how many patients are being exposed or how many doctors this is being rolled out to and how more widespread this is going to be? I know you said more widespread. Why not just do this more broad-based I guess? Start there.

Hi, Michael. The program in the second quarter was really a pilot, so it was not a material number. We had selected prescribers around the country. We were looking for the impact of a program like this; we were looking for how it would be received, whether there were ways to make it more user-friendly and so on. So we literally piloted this. We don't expect a material impact from the pilot on overall numbers.

Now that we have good information from the pilot, we are expanding it; we are rolling it out further. But it's part of the mix. There's no one program that we consider to be the end all and be all. This is part of a mix of programs including our new marketing messages, including various sales messaging that we have going on, all with the aim of continuing to enhance the user experience, both the prescriber and the patient, and in any way possible providing access to appropriate patients for the drug.

So we're going to continue to expand it in a graduated way over time and to the extent we think it is continuing to be successful in meeting the products' needs, namely to make it easier for physicians and patients to try the drug and to see whether they are responsive to the drug, in which case presumably they would then go on to be commercial customers, we'll do that.

But at this point it's just part of the mix of overall programs. I don't want to overemphasize it or underemphasize it. It's I think a useful program among many that we're employing.

Okay, my follow-up just is do you have any data on how many people are actually converted over to pain drug from the sampling program?

Well, we don't. Remember it's a two-month sample program. We just started doing it in the second quarter. So we don't expect to really see that until the third quarter when people are rolling off the two months and presumably converting into commercial customers.

Okay, thanks.

Joel Sendek, Lazard Capital.

Thanks. I have a question on the spending. First of all, the SG&A, just comparing the first six months of the year, it looks like the prediction would be an SG&A decline in the second half. I'm wondering if I'm reading that right especially since you're rolling out these pilot programs. And then I have a follow-up on R&D spend. Thanks.

Joel, yes, this is Dave. Yes, you're reading it right. We had some higher spend in the first six months of the year. And again, we reiterated our guidance in both SG&A and R&D. So you're reading it correctly.

Okay. And then in R&D and -- specifically I just want to make sure I have this right in my model. The $3 million for the licensing, that is included in the full-year guidance, is that right?

It is. The $3 million was expensed in the second quarter.

In the second quarter -- okay, great. Thanks. That's it.

Yaron Werber.

Great, thanks for taking my question, really appreciate it. So two questions if you don't mind. One, just help us understand the $25 million that you're going to get from Biogen. How long would you amortize that payment throughout? Is it over 10 years for the life of the market exclusivity in Europe or is it 15 years for the patent in Europe? Would you just help us understand that? And also, two, if you can just give us the growth for net adjustments from AMPYRA, that would be really useful if you can, thanks.

So the payment we expect to get from Biogen will be recognized as revenue immediately in the third quarter. That won't be amortized. As far as the D&A gross to net, what we will do at the end of the year in our 10-K, as we did last year, is we'll provide a D&A rate, but we'll just be reporting net sales on our quarterly calls and not get into the gross to net adjustments.

If we're at around low teens, is that a reasonable ball park?

We're not --.

Yes, we're not going to give disclosure or guidance on our gross to net.

Okay, fair enough. Thank you.

Geoffrey Meacham.

Hi, this is [Chris Shagordy] on behalf of Geoff Meacham. Thanks for taking my question. I have a question on the 1,100 new patient adds in the first half of this year. How does it compare with the second half of 2010 in terms of the growth? And I have a follow-up after that.

Yes, we're not breaking it down that way. Again, it's really important to separate conceptually what happened in 2010 to what's going on now and into the future. 2010 was an extraordinary year because we had that huge pent-up demand that was working its way through most of the year. So I don't know that it's really useful to have that comparison. What we're really looking for going forward, now that we're in a different graded stage of the launch, is looking at what the trends are from this year forward and that's what we're reporting on.

Okay. I just have a follow-up on that. What's the updated MS market share currently we can assume for AMPYRA?

I don't have that number for you.

Okay, thank you.

Josh Schimmer.

This is Steve Yoo calling for Josh Schimmer. The question that I had was if you could give us an update on the lifecycle extension activities for AMPYRA and when we might get additional updates on those activities?

You know, we don't disclose specifics or details on our lifecycle management activities except to say that we have a number of additional studies planned, either our own studies or supporting investigator initiated studies as is traditional, and looking for other potential indications for AMPYRA both within MS and outside of MS in other indications. But we are not providing specifics with respect to that. At such time as we may have data that are relevant that we are going to present at a meeting or publish, we'll be talking about it then.

Okay, and my one follow-up question was can you comment on the duration of therapy for AMPYRA patients right now?

No, we don't -- we're not commenting on duration, except to say broadly that we continue to be pleased with the persistency rates on drug and the overall enthusiasm of patients who get on drug and respond and they tend to stay on drug. So we're pleased with that.

Thank you very much.

Mark Schoenebaum.

Hi, guys, it's Salim stepping in for Mark. Just a couple questions. On the net patient adds, can you guys just provide -- I know you guys provided 11,000, what is the net patient adds? And then two, on inventory impact for AMPYRA for the quarter?

I'm not sure what you mean by net patient adds?

Net new patient adds.

That is the new patient adds, it's 11,000 new patient adds in the first --.

Does that also include those that have fallen off the drug -- that have gotten off the drug?

No, that's just new patient adds. We don't -- once you start getting into who's falling off and who's staying on it gets extremely complicated. That's just the new patients who tried -- who got at least one prescription for AMPYRA in the first half of the year.

Okay. And then inventory impact?

Inventory, it's similar to first quarter, it's approximately two weeks in the channel.

Okay, thank you.

David Amsellem, Piper Jaffray.

Yes, hi, this is actually Misha for David. Just I guess a question on the balance between the new patient additions from the earlier stage patients that you guys have recently started targeting and the attrition. Are they balancing each other? Are you seeing less drop-off in treatments? And what do you think, I guess, the overall attrition rate is?

Yes, we're not commenting on that at all. For one thing, once you start getting into that area it becomes extremely complicated to try to parse everything out just so in an accurate way. So we're giving you the new patient adds and the ultimate determinant, which is our net sales. And hopefully that continues to go in the right direction.

Okay. Is there any update also on the once daily formulation?

That work continues as part of our overall lifecycle management strategy.

Okay, thank you.

Phil Nadeau, Cowen & Company.

Good morning, Ron, thanks for taking my question. You said on several occasions that one of the goals of your marketing program over the next several months or quarters was to get further stage patients on therapy. You discussed this a little bit in your prepared remarks. But could you give us maybe more data on the success of that program, any kind of measures that you're looking at to determine what those characteristics are of the new patients that are starting therapy?

Yes, it's -- first of all, it's early to get at that, Phil, but it is an opportunity to remind everyone of what we're doing here. If you look at the first part of the launch, let's say the first year of the launch from March to the first quarter of this year -- March of '10 to the first quarter this year, that was the so-called low hanging fruit, right.

That was the obviously walking impaired patients, the ones who very often were using walkers, were progressive patients using canes and other [assistive] devices. You know, the one who very clearly were -- they walk into the office and it hits you square between the eyes. So that was the low hanging fruit and we were extremely successful in getting that segment of the population.

What we realized as we proceeded with the launch is that what we require now is a -- if you will, a paradigm shift in the way patients are treated in neurologists offices. Because up until now there really hasn't been anything for walking -- improving walking, improving walking speed -- other than to give people assistive devices. And most people resist like crazy going on assistive devices usually long after they really need one.

So people don't want to go to a cane. By the time they go to a cane they probably should have been using one for a year or two, then they don't want to go to a walker, then they don't want to go to a scooter, then they don't want to go to a wheelchair. So it's a constant struggle of denial on the part of the patient and frankly on the part of the prescriber who up until now had nothing other than to have an unpleasant conversation with a patient about hey, you really need to start using a cane or a walker here.

So, going into that environment, what we need now -- so it was easy when a patient is already on a cane or a walker to say, ah, here's AMPYRA, that will help you. What we're doing now is educating physicians that that conversation doesn't need to be unpleasant anymore, right.

You can get a patient who is just starting to lose walking ability, it's affecting them at work, it's affecting them at home, it's affecting their ability to go shopping, it's affecting their ability to go to school with their kids, whatever it is. And you can have a not unpleasant conversation and say here, try this, this could potentially help you with this problem.

And so that's the education that we're involved with now beginning with these data that we rolled out in the second quarter. Now it's early yet, so what we're pleased with is that even though it's only been a quarter, in our initial formal market-research we were very pleased to see that physicians are spontaneously recalling the messages. And that when you ask them what are your patterns going to be going forward, we're seeing more of them come in and say, well, I'm going to be prescribing more for the relapsing remitting patients which tend to be the earlier walking disabled patients.

So what we can say at this point is in the early going we're pleased, it's encouraging. Obviously we're going to need to see this continue to take hold over the next several quarters as we continue to go out with the messaging in various ways and then they hear it repeated and so on. So the real proof of the pudding is going to come over the next few quarters. But for what we have now, this is where we'd like to be. I mean this is what we wanted to see in the early going. Now we're going to have to continue it.

Okay, great. Thanks for taking my question.

Maged Shenouda, Stifel Nicolaus.

Sure. Thanks for taking my questions. So you say in your comments that there's an increasing number of physicians who intend to prescribe AMPYRA. Can you quantify that somewhat? And I have a follow-up as well.

No, can't quantify it for you at this time.

Okay. Now, I know you don't want to quantify persistence of treatment, but qualitatively do (technical difficulty) anything you can do to extend that or do you think that's just entirely a function of AMPYRA's product profile?

Actually the answer is yes, there are things we can do and we are doing. One of the advantages of the closed specialty pharmacy system that we have is that we have what our marketing people like to call a high touch process with patients and prescribers.

So the specialty pharmacies are incentivized to call patients, contact patients on a regular basis to make sure that they're getting their refills, to see if there are any issues that need to be addressed and so one because that's their business model, right. They get paid when they ship drugs. So, it behooves them to reach out, stay in close touch with a patient, make sure that they're flagging any issues up front that might be addressable and so on.

So just the fact that the patients get regular periodic contact, personal contact with respect to AMPYRA is a big plus in this model because it reminds them, hey, I need a refill. Hey, do I have any questions that need to be addressed and so on. So from that area alone we believe that that gives us a lot more persistency and patient satisfaction than we otherwise would get let's say in a pure retail model.

Okay, thank you.

Chris Raymond, Robert Baird.

Thanks. Just a question on this pilot program. It seems like there's maybe a dual action here from this, number one, targeting earlier stage patients, but also you mentioned the benefit of physicians not having to jump through the reimbursement hoops without understanding if the patient actually responds.

I guess the question is, what is the criteria for qualifying for this pilot program? Is it patient specific or is it physician specific or is it nature of the disease or the payor? Maybe a little more color on that would be helpful.

There are no specific criteria for patients. What we do is, at least in the pilot program, we distributed the drug to selected prescribers with the message that this was a two-month free drug for the patients and we really allowed the -- we allowed the patient -- excuse me, we allowed the physician to select the patient.

I think that's part of what we learn as we go through with a program in terms of where the physician finds the value in the program and what sort of things we can tweak to make it even more useful to them. So we leave it up to the physician to decide where he or she is going to use the program.

Obviously it's in the context of a detail in which they're being educated about the data and the fact that earlier stage patients may benefit as well, people with early-stage walking disability. And also in the context of selecting practices, at least in the pilot stage, where they may have disproportionate managed care issues.

So that the physician knows that if they're having disproportionate managed-care issues here's an opportunity for them at least to see if their patient is responding so that it's worth their time to go and push on the managed-care front for that particular patient as opposed to having an open field where they have all the patients and, for all they know, they have to fight for all of them without knowing if the patient is actually getting a benefit.

So, is there a quota per physician or it's just open ended?

In the initial pilot we had a quota. It was selected physicians and then it was a quota per physician. So each physician got a certain number, up to a certain number of prescriptions that they could put in in the first step program. And now as we go forward we're expanding it. But it continues to be a certain number of prescriptions per physician. So we are controlling that.

Great, thank you.

Ladies and gentlemen, with no further questions this concludes our question-and-answer session. I would now like to turn the call back over to Dr. Cohen for closing remarks.

Thank you, operator, this concludes our call. Thank you, everyone, and have a great week.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a good day.