Acorda Therapeutics Inc (ACOR) 2012 Q1 法說會逐字稿

Welcome to the Acorda Therapeutics first-quarter 2012 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's call, Jeff Macdonald, Senior Director of Corporate Communication 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 Dave 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 fact regarding Management's expectations, beliefs, goals, plans, or prospects should be considered forward-looking.

These statements are subject to risks and uncertainties that could cause actual results to differ materially including our ability to successfully market and sell AMPYRA in the United States; third party payers, including governmental 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 or from our other research and development programs including any acquired or in-licensed programs; the occurrence of adverse safety events with our products; delays in obtaining or failure to obtain regulatory approval of or to successfully market FAMPYRA outside of the US and our dependence on our collaboration partner Biogen Idec in connection therewith; competition, including the impact of generic competition on ZANAFLEX CAPSULES revenues; failure to protect our 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; and the ability to obtain additional financing to support our operations.

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 only as of the date hereof, and Acorda Therapeutics disclaims any intent or obligation to update any forward-looking statements as a result of the developments occurring after the date of this presentation. On a housekeeping note, for Q&A, we do ask that everyone limit themselves to one question and one follow-up. With that, I will now turn it over to Ron Cohen

Thanks, Jeff. Good morning, everyone. On today's call, I'll provide comments on AMPYRA's first-quarter performance and outlook for the rest of the year and also review revenue from ZANAFLEX and our ex-US partnership with Biogen and provide a brief overview of upcoming milestones on our pipeline. Dave will provide the financials for the quarter and then we'll open it up for your questions.

Beginning with AMPYRA. For the first quarter, net revenue of AMPYRA was $57.4 million. Several factors contributed to these results. The overall MS market declined in the first quarter of the year affecting other products in the space as well. Sales of AMPYRA were particularly weak in January. Factors included large numbers of people switching insurance plans or changing their pharmacy benefit providers, specialty pharmacies, at year-end. Consequently, many patients had to re-establish eligibility during the first few months of the year, particularly January.

Also, when the donut hole and patient deductibles reset at the beginning of the year, it can affect timely refills for consumers with financial constraints. We saw a rebound in sales beginning in February that continued through April. Based on the current sales trajectory, coupled with our persistency rates remaining high, and our expectation that our consumer marketing initiatives will continue to gain traction throughout the year, we're reiterating our 2012 AMPYRA's net sales guidance of $255 million to $275 million.

An update to our previous announcement regarding the withdrawal of US patent application 559, we're pleased to announce that the resubmitted patent application has now been re-allowed by the PTO. Recall that the other AMPYRA patent, number 826, was granted last year with a duration into 2027. With respect to growing AMPYRA in 2012, in January we expanded our First Step program with direct to consumer outreach. Vouchers for the program, which provides two months of drug at no cost, are now available at AMPYRA.com, in physicians' waiting rooms, consumer speaker programs, and at AMPYRA Journeys booths at MS walks.

In the first quarter, a significant percentage of new prescription requests were generated through the First Step program. We saw a steady increase in First Step prescriptions month over month through April, and our data also indicate that the program is driving an overall increase in prescribing. Recall that First Step provides an initial two months of free drug and then converts to a paid prescription if the patient elects to continue therapy.

We're continuing to roll out a comprehensive series of consumer initiatives, which you see listed on this slide, and we expect these will continue to raise patient awareness and increase trial of AMPYRA throughout the year. We're also continuing our focus on increasing prescriber awareness of AMPYRA's potential value to earlier stage patients and we've deployed additional reimbursement services which have been very well-received by both physicians and patients.

Turning to our additional sources of revenue this quarter, combined first-quarter net revenue of ZANAFLEX CAPSULES and tablets was $7.2 million. Revenue from our sales of authorized generic tizanidine hydrochloride capsules to Watson was $1.1 million, and our royalty from Watson sales of authorized generic capsules was $1.5 million. As the branded ZANAFLEX CAPSULES market share continues to erode this year, we expect the combined revenue from the branded ZANAFLEX franchise will decline. We also received $1.8 million in royalties from Biogen based on net sales of FAMPYRA in markets outside the US. We're reiterating our earlier guidance of at least $25 million in combined ZANAFLEX franchise including authorized generic revenues and FAMPYRA royalty revenue.

We provided a comprehensive review of our pipeline at our April R&D Day, which you can find on Acorda's website, acorda.com. So on today's call, I'll touch on just a few upcoming events. As a reminder, here is a snapshot of our pipeline which represents a series of potentially valuable product opportunities most of which are in clinical stages of development. Not shown here is our diazepam nasal spray opportunity for breakthrough seizures which we have the right to acquire following a pre-NDA meeting with the FDA and that work is progressing as well.

I'm pleased to report that we are ahead of schedule to start the AMPYRA proof of concept study and post-stroke deficits. We now expect to begin this study in the second quarter. This will be a 66-patient trial and involves at least 15 stroke centers. Our cerebral palsy study is ongoing and we continue to expect results from the first 10-patient cohort later this year. Our other programs are moving forward as listed here. Now I'll turn the call over to Dave for a review of the financials. Dave?

Thanks, Ron. For the first quarter ended March 31, 2012, the Company reported non-GAAP net income of $14.5 million or $0.36 per diluted EPS compared to non-GAAP net income at $3.1 million or $0.08 per basic and diluted EPS for the same quarter in 2011. Net product revenue for the first quarter was $65.7 million, comprising $57.4 million of AMPYRA sales and $8.3 million in ZANAFLEX CAPSULES, tablets, and authorized generic sales. Royalty revenue was $3.3 million in the first quarter of 2012 and total revenue this quarter was $71.2 million.

Total operating expenses, including share-based compensation expense for the quarter ended March 31, 2012, were $62.4 million compared to $60.8 million for the same quarter in 2011. This increase in operating expense is primarily due to the increase in AMPYRA sales and marketing expenses compared to the same quarter last year. We closed the first quarter of 2012 on a strong financial position with cash, cash equivalents, short and long-term investments of $295.3 million. Now I'll turn the call back over to Ron.

Thanks, Dave. So to summarize apart from an overall decline in the MS market in January that affected AMPYRA as well, we were encouraged to see a progressive increase in sales beginning in February and continuing through April. We also began to see increasing First Step prescriptions as we made these broadly available to MS patients and rolled out our other consumer programs.

Based on these trends, we are reaffirming our guidance of $255 million to $275 million in net sales for 2012. We're also very pleased to have been able to accelerate the start of our proof-of-concept study for AMPYRA in post-stroke deficits, which will begin later this quarter, and we are on track to have initial data from our adult cerebral palsy study with AMPYRA later this year. Now, we'll open up the mike for Q&A. Operator?

(Operator Instructions) Michael Yee, RBC Capital Markets.

Hi, thanks, Ron, a question and a follow-up since I am allowed a follow-up. One is, can you quantify and be specific -- the dollar amount of hit from the PBM issues, the inventory issues, all that so we can figure out what the real end-user demand number would have been? And part two to that is, you said that there were increasing new scripts from your marketing campaigns. But do you believe that the net total number of patients on your drug continues to increase into February and into March? Are there more patients on your drug every month? Thanks.

I don't have the exact number for you, the dollar figure in January. I can tell you it was a substantial hit in January. It was a quite substantial hit that accounted for the bulk of the shortfall, if you will. With respect to total prescriptions, I don't have that yet. I don't have that information, Michael.

I can tell you that the most encouraging thing we are seeing is that the First Step uptake is accelerating quite dramatically, and it did that beginning in February or so. We opened up the program in our consumer outreach in January and beginning in February, we started to see a progressive increase in the use of First Step by physicians. So, we'll get more data on that as to how that translates into total prescriptions as we get more experienced through the year.

Okay. Thank you.

Mark Schoenebaum, ISI group.

Hey, guys. It's Salim stepping in for Mark. A question and follow-up I guess. Similar to Michael's question on PMs, the sampling, how much impact did that have on the First Steps program? How much impact did that have on sales this month? And there was something about demand. There was something about demand in the press release saying that that was the primary reason for the number this quarter but the sampling -- it also said there was a significant portion of new Rx's. Can you just --?

I'm sorry. I didn't understand the last part of your question.

Yes, so, Ron, in the press release, it says that demand was the primary reason for the decline or the $57.4 million in January? Right?

Yes. What we're saying there is people -- as near as we can tell, we had a very large number of people who wind up switching insurance plans and/or specialty pharmacies at the end of December. And what you wind up -- plus, in January, everyone resets their donut hole and their deductible obligation. So when you combine that, what happens is you get into January, there can be a fair amount of confusion. I think there is with various patients in terms of the transition of getting their drug from one specialty pharmacy, now they're getting it from another one, and sometimes that is not a smooth transition. So, they actual miss getting their refills in a timely way and that takes a month or two to sort out. That is one issue. Another issue is that people, when they know the donut hole has been reset and their financial obligations have been reset on deductibles, they just defer -- some of them just defer their refills. And so that is also part of it. And all of that really hits in full in January.

Okay. So has that -- is there pent-up demand then still needing to be processed that we're going to see in the second quarter?

I'm sorry. Say that again.

Is there pent-up demand? Is there any pent-up demand that we're going to see in the second quarter?

I don't know, in this context what pent-up demand means. Something that is worth pointing out is everyone should realize that we have been seeing a progressive increase in the use of First Step beginning in February, but it takes two months for every First Step prescription that is going to convert to commercial to actually convert to commercial pay. That means that, for example, the First Steps that were written in April, we're not going to see the impact of that until beginning in June. And so on. So the ones that were written in March, we're not going to see until various corresponding times in May.

Okay. Got it. Thank you.

Joel Sendek, Stifel Nicolaus.

I wanted to get more details on the stroke trial, Ron. You said 66 patients. I am wondering. And also, why were you able to accelerate it? Was there interest on the part of the centers? Are the centers international or just US? How much of a deficit do these patients have? Is it a controlled trial? Any more details that you can provide.

It's a US-based trial. In fact, there was a huge amount of interest generated when we presented the animal data at the big stroke meeting in New Orleans in February. So we got approached by quite a few top stroke centers who wanted to be part of it and that helped a lot in terms of accelerating the trial. Also our team -- if I may say so, the team is really good. And under our Chief Medical Officer, Enrique Carrazana, they just did a heck of a job getting the centers onboard and getting everything processed through the IRBs and so on.

And what about -- along those lines, I guess it would be fair to say the enrollment might be pretty quick. I mean when could we see some data, do you think?

Well, as I said, we're not ready to commit to that yet. But, as I said, we're going to have at least 15 centers. We're starting this quarter, and we're going to try and get it done as fast as we can. As soon as we see what the actual enrollment rate begins to look like, we'll have a better handle on it. But obviously, we're going to try and get this as quickly as we can.

Okay. Thanks.

David Amsellem, Piper Jaffray.

Just a couple. First, just to be clear, are you seeing any additional step editing or prior off pressures in AMPYRA? Is that something that we should be thinking about going forward? And the second question is -- it's more of a longer term question. But how do you think the newer chronic agents like Gilenya and BG-12 will impact AMPYRA to the extent that there may be fewer relapses and less pronounced disability progression? How do you think about that longer term? Thanks.

So, in terms of the PAs and step edits, no, we are not actually -- we have been fairly stable. In fact, we have had a few nice wins, if you will, just getting some providers to roll back some particularly onerous PAs or step edits, and maybe the most effective thing we have done is to deploy reimbursement specialists in the field. That has really taken hold. The feedback has been great from the physicians' offices. Really appreciate the help in just navigating the various PAs that there are. So actually maybe the most encouraging thing is that when we do our marketing surveys, our ATU surveys, and so on, the degree to which we get back complaints about reimbursement has plunged since last year. So actually that situation from the prescriber's point of view is vastly improved over what we were seeing, let's say a year ago. I'm sorry. The other piece of it. Well, the long term. Yes.

Yes.

So, you know, it's hard to [get that]. We think of it this way. There is an installed base right now of about 400,000 MS patients. About half of them have enough walking impairment or they have walking impairment where they could be eligible for the drug. That is not really going to change because of BG-12 or Gilenya, at least not for the next many years.

What may happen is as new diagnoses come in and new patients come on, which is typically about 2.5%, 3% a year of the population. To the extent that they get on more effective drugs that delay the time to obvious disability over the long term that could begin to cut into the number of people who are newly walking impaired, which is great for the patients. I think that is a good thing. So, but fundamentally as in terms of whether we see this as a significant issue for the business over the next 10 years? No.

All right, thanks.

Geoff Meacham, JPMorgan.

This is actually Mike in for Geoff. Thanks for taking the question. Just curious. You guys have been sort of trying to drive use of AMPYRA in the earlier stage disease. Just curious if you have a sense of what percentage of AMPYRA patients have earlier stage disease versus later stage disease? Thanks.

I don't have an exact number for you. It is a substantial number. If you just look at the overall population curves and EDSS scores, it is a substantial number but I don't have an exact number for you.

Yaron Werber, Citi.

Great. Thanks for taking my question. Just one, if you don't mind just a couple of questions. One, on the price increase, give us a little bit of a sense -- obviously it doesn't all roll in immediately in January. How does it sort of roll in throughout the year and then I had a follow-on also?

I'm not sure what you mean, Yaron, about it not rolling in in January. You know, in terms of our wholesale price, if you will, for the, you know, for the pharmacies that are ordering drug, it does kick in in January. Now, for those who have stock that is from last year, then it takes them a while to go through that stock, but they still have to reorder for the current demand based on the current price.

Okay. So that is kind of -- that helps.

Now, I mean it's worth reminding everyone which I'm sure everyone knows is that not all of the price increase translates into the net, right, because there is a fair amount that comes off the top.

So how much will the price increase? The second part of the question was related to how much inventory is in the channel, and that is kind of what I mean, and how much of the actual price increase actually does roll into the net?

Dave?

Yes, Yaron. One other point about it, so we pay 18% of that selling price on our AMPYRA inventory. So as that inventory -- as we work through that inventory, you'll have a slightly lower cost of sales for several months until we work through all that inventory. So that is another impact on the P&L. Favorable impact on the P&L.

In what sense? I'm sorry. Can you clarify that?

It will show a lower cost of sales for a period of time until we sell through the inventory that we had the lower cost on.

Right.

Say 18% net selling price. So, our historical selling price was lower prior to the price increase so as we are selling through that inventory we are selling lower costed inventory.

Got you. And how much inventory is in the channel and did you see any changes in January?

It's been steady at about two weeks for a very long time, all of last year and into now. And as I said earlier, the wiggle room around that is that, you know, we can -- we get a report from a specialty pharmacy that they have got two weeks of inventory, let's say. Now, when they say two weeks, could it be 11 business days instead of 10? Could it be 12? Could it be 9? Yes, it could. So there is a little bit of wiggle room there where, you know, we could be shading it a day or two on either side. Maybe even three days, and that -- depending on where you are in the process, that could wind up in making a difference of low single digit millions to a given assessment.

Great, thank you.

Ram Selvaraju, Aegis.

Thank you very much for taking my questions. I just wanted to ask whether you could provide us with a dollar figure regarding the amount of FAMPYRA that Biogen Idec sold in the first quarter of this year, and if you could also give us some color as to which territories in Europe FAMPYRA is currently being sold in, and how many more additional territories in Europe, if any, the drug could be introduced into by the end of this year?

Yes, you know, I'm sorry not to be able to answer any of your questions, Ram. By mutual agreement, we defer to Biogen to take the lead on answering all those questions. They just had their call I think a couple of days ago. They have announced that they are in Germany, for one thing, and they have announced that they are in a number of other European countries right now, and they expect to roll out in several more this year. But apart from that, we have to defer to them to answer those questions.

They have also said publicly that the launch has gone very well so far from their point of view in Germany and wherever else they have rolled it out.

Okay, and then one quick follow-up. Do you have any plans to move immediate release for aminopyridine into clinical development any time soon or are you focusing on the sustained release for the time being?

We have no plans to work on an immediate release form. We don't believe that that is a competitive form. We think that the sustained release is in fact better for the patient and a better form. So we don't see a real need to go with an immediate release.

Thank you.

Phil Nadeau, Cowen.

Good morning. Thanks for taking my questions. Just one kind of technical question then a broader follow-up. On the new patient starts, those patients who go into the First Step program, when they get those two free months of drug, are those recorded as scripts? So are there two free scripts that are recorded by IMS or NDC?

No. That does not show up in IMS or anywhere else as far as I know until it converts to a commercial prescription which would be after two months.

Okay, great, and then second, the more broad question on new patient starts. Could you give us some idea of who are the patients who are starting AMPYRA today? Obviously, it's been on the market for a couple of years. Are these patients who have new walking disability, or are they patients who weren't aware of the drug before?

It's all across the board. There is no particular trend that we're aware of. You know, there are patients who -- there are patients who have been aware of it since the beginning and it just took them two years to get to the point where they felt yes, I'm going to try it. Each patient is different. Each consumer is different. They have different outlooks, different risk benefit calculations that they make.

Sometimes it's just a matter of inertia where you know it yourself. Sometimes you just keep thinking about I'm going to go buy that thing. I'm going to buy it, going to buy it, and then get myself a new iPad, and then one day you do it and it's actually not so different in terms of how people think about starting on medications.

Now, one thing we have seen overall is that we for the last several months, and beginning last fall, we are seeing the trend that we had been hoping to see which is overall the patients are getting younger which is how we can track the degree of disability because it tends to correlate pretty well. So overall the new patients on drug on average are getting younger and we are seeing more relapsing remitting patients than we did before.

In the beginning, it was overwhelmingly the progressive patients so we are starting to see more relapsing remitting and also the average age is declining and all of that is good from our point of view because it means more patients at earlier stages are getting a chance to try the drug.

Okay. That was very helpful. Thanks for taking my question.

Steve Byrne, Bank of America.

I wanted to ask you about your market research and what it tells you about those 30% of patients that don't refill. What can you attribute the reasons being? Is it cost or efficacy? Is there other buckets you can put that in for me?

First of all, let me just make sure it's clear that that 30% you are referring to is after one month. So we get 70% refilling after the first month and then by six months, we get 40% of the original cohort refilling. So after six months of drug, about 40% are still refilling so there is a curve that gets smaller and smaller as you go down, so you lose the bulk of the patients earlier on which makes sense. And the reason you do is primarily perceived lack of efficacy. Occasionally, it will be because of adverse events that they don't tolerate well.

And then there is lesser but miscellaneous reasons, you know, people move, they go to some other place, they don't get a doctor right away, they drop the refills. There are financial reasons, sometimes, and they wind up going on our patient assistance program. So, it varies. But the primary reason is lack of efficacy or perceived lack of efficacy.

And are you finding patients that are cycling off and then back on when they realize there is an efficacy benefit?

We have a steady stream of anecdotal reports that has been throughout the launch of the drug of doctors who tell, and even patients who tell us that they went through exactly that experience where they are not sure it's working for them, they stop it for several days or a week and then they go, oh my goodness, that was working and they go back on the drug. So we see that a fair amount.

And just lastly, where is your average treatment duration at now?

I don't have that number for you. I'm sorry.

Okay. Thank you.

Chris Raymond, Robert Baird & Company.

I just wanted to follow up, I think on Yaron's question. I'm not sure I heard the answer. What exactly -- can you describe the gross to net dynamics? How much of that price increase has -- basically, what is the net difference in your selling price pre and post price increase? How much of that is flow-through?

Yes, it's approximately two-thirds. And just to be clear, that is gross to net. The point I was making earlier is it's a cost of sales issue which is not a net revenue item.

So the net effect is 10% net.

This is very approximate but that is the ballpark.

Right.

Perfect. Thank you.

With no further questions in queue, I would now like to turn the call back to Dr. Ron Cohen for any closing remarks. Please go ahead.

Well, that concludes our call, everyone. Thank you for joining us and have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.