Acorda Therapeutics Inc (ACOR) 2012 Q4 法說會逐字稿

Welcome to the Acorda Therapeutics fourth-quarter and full-year 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. I would now 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 our ability to successfully market and sell AMPYRA in the US.

Third-party payers including government agencies may not reimburse for the use of AMPYRA or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions, the risks of unfavorable results from future studies of AMPYRA or from other Research & Development programs including diazepam nasal spray, or any other acquired or licensed programs we may not be able to complete development of, obtain regulatory approval for or successfully markets diazepam nasal spray or other products under development. The occurrence of adverse safety events with our products, delays in obtaining or failure to obtain regulatory approval, or to successfully market FAMPYRA outside 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 or to defend against the intellectual property claims of others, or to obtain third-party intellectual property licenses needed for the commercialization of our products.

Failure to comply with regulatory requirements could result in adverse action by regulatory agencies, 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 may not actually achieve the goals and 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 disclaims any intent or obligation to update any forward-looking statements made as a result of developments occurring after the date of this presentation. Now on a housekeeping note, for the Q&A, we are going to ask everybody to limit themselves to one question, and I am going to turn the call over to our CEO, Ron Cohen.

Thanks, Tierney. Good morning, everyone. On today's call, I'll provide an update of AMPYRA's fourth-quarter and our full year performance. I'll also review revenue from ZANAFLEX and our ex-US partnership with Biogen, and then I'll provide an overview of the upcoming milestones for our product development programs. Dave will then provide the financials for the quarter and review our 2013 guidance, and I'll then summarize and we'll open the call for questions.

To recap AMPYRA sales performance in 2012, net sales for the fourth quarter were $72.7 million, an approximate 27% increase over Q4 2011. Full-year AMPYRA sales were $266.1 million, which is approximately 26% over 2011 full-year sales. We were very pleased with AMPYRA's performance during the year, and as our 2013 guidance indicates, we see additional growth for the brand in 2013. Turning to our additional sources of revenue, combined full-year net revenue from our ZANAFLEX franchise was $23.5 million, and this included net revenue from ZANAFLEX capsules and tablets of $13.2 million, revenue from Actavis's authorized generic capsules of $7.2 million, and $3.1 million in sales of generic capsules to Actavis.

In the fourth quarter of '12, net revenue from our ZANAFLEX franchise was $5.2 million, which included net revenue from ZANAFLEX capsules and tablets of $1.6 million, revenue from Actavis's authorized generic capsules of $2.5 million, and $1.1 million in sales of generic capsules to Actavis. We received $7.1 million in FAMPYRA royalties from Biogen for the full year, and $1.3 million in the fourth quarter based on net sales outside the US with Germany comprising the majority of overseas sales. As a reminder, Biogen has stated that they expect pricing to be finalized in Germany in Q1 of this year, FAMPYRA is now available for commercial sale and more than 15 countries with additional launches and regulatory filings expected in 2013.

Moving to our product development programs, we believe we have one of the most interesting pipelines in the neurology space. We have five programs including AMPYRA that are in clinical testing or expected to be by mid-2013. In December 2012, we completed the acquisition of Neuronex, Inc. This added an important pre-NDA stage product, diazepam nasal spray, to our pipeline. This is a treatment for people with epilepsy who experience cluster seizures, which are also known as acute repetitive seizures, that are not controlled by their antiepileptic medications.

We had a pre-NDA meeting with the FDA last year, and pending the additional clinical and CMC data, we plan to submit an NDA later this year, and based on our discussions with FDA, we're proceeding with a 505(b)(2) filing using Diastat as the reference drug. Diastat is a rectally administered form of diazepam, and we believe that the nasal spray formulation offers a more accessible and socially acceptable alternative for both current Diastat users as well as people who have previously not used Diastat because of its mode of delivery. We will be presenting PK data on diazepam nasal spray in a poster at the American Academy of Neurology meeting in March. We anticipate that our current infrastructure can support sales and marketing of the product, and market planning is underway.

We also made notable progress in our clinical stage pipeline programs in 2012. Our clinical team did an excellent job of advancing our AMPYRA lifecycle management programs. We initiated proof of concept studies in post-stroke deficits and cerebral palsy, and we expect to announce results of both studies in the second quarter of this year. We also completed a GGF2 Phase I clinical study in heart failure in 2012, which was a dose escalating trial designed to test the maximum tolerated single-dose. We plan to present the three month data from the trial in a platform presentation at the American College of Cardiology meeting in March.

We're also going to discuss the results with FDA before proceeding to a multiple dose study. In addition, we expect to begin enrolling patients in clinical trials for AC105 and acute spinal cord injury and rHIgM22 in MS by June of this year. Several weeks ago, we announced we received a $2.7 million Department of Defense contract to support the AC105 trial. Now I'll turn the call over to Dave for a review of the financials and our 2013 guidance. After that, I will come back with a closing summary, and then we will open the call for your questions. Dave?

Thanks Ron. Total revenue for the fourth quarter ended December 31, 2012 was $81.5 million compared to $72.6 million for the same quarter in 2011. Full-year 2012 total revenue was $305.8 million compared to total revenue of $292.2 million in 2011, which included $25 million in milestone revenue relating to Biogen Idec's conditional approval from the European commission for FAMPYRA. Total operating expenses including $6.1 million in share-based comp expense for the quarter ended December 31, 2012, was $80.1 million compared to $59.6 million and $5.4 million in share -based compensation expense for the same quarter in 2011. Full year operating expense in 2012 was $280 million -- $280.2 million, including $21.4 million in share-based compensation expense compared with $257.2 million and $19.3 million in share-based compensation expense for the full year 2011. Total operating expenses in 2011 included $15.5 million in accounting adjustments, related to ZANAFLEX capsules

In the fourth quarter of 2012, we determined that we would be able to utilize our deferred tax asset, therefore releasing our valuation allowance. Our conclusion was based on the guidance provided by ASC740 under GAAP and resulted in the recording of a nonrecurring income tax benefit in the fourth quarter of $132.7 million, and a deferred tax asset of $136.7 million. We were pleased to have delivered on all of our 2012 financial guidance. Our AMPYRA net sales, ZANAFLEX and ex-US FAMPYRA royalty revenue as well as R&D and SG&A expenses were all within our 2012 guidance ranges. In the third quarter of 2012, as a result of changes in the timing of several R&D programs, we reduced our R&D guidance from $50 million to $60 million to approximately $45 million, excluding share-based compensation and future expenditures related to the Neuronex acquisition. Actual 2012 R&D expenses adjusted for these items totaled $45.3 million. We closed 2012 on a strong financial position with cash, cash equivalents and investments totaling $333.2 million, an increase of approximately $37 million over our cash and investment balance at the end of 2011.

Turning to 2013 financial guidance, in January, we provided guidance for 2013 of AMPYRA net sales between $285 million and $315 million. Guidance for other revenue sources of $25 million, includes revenue from FAMPYRA royalties and ZANAFLEX sales and royalties from authorized generics. It also includes $9.1 million in amortized FAMPYRA license revenue. We provided 2013 R&D guidance between $60 million and $70 million and SG&A guidance between $170 million and $180 million. A substantial portion of increased in spend in SG&A and R&D over 2012 is related to additional spend on diazepam nasal spray, a product that could be launched in 2014. It's important to note that we have reduced AMPYRA commercial spend as a percentage of sales for 2013. We expect to be cash flow positive in 2013, but at a lower level than in 2012 due to investments needed for diazepam nasal spray. Now, I'll turn the call back over to Ron.

Thanks, Dave. So, to summarize, in 2012 we grew AMPYRA sales, we implemented development programs for additional indications for AMPYRA, we also acquired an exciting pre-NDA product in diazepam nasal spray, and we advanced our pipeline so we expect to have three additional clinical stage products in 2013 and, also worth noting, we're continuing to focus our business development initiatives on late stage or commercial stage products that have the potential for near-term accretive value. And with that, we'll open the call for your questions. Operator?

Thank you.

(Operator Instructions)

Please stand by for your first question. Chris Raymond, Robert W. Baird.

Thanks. In just a quick question on the guidance. So, you highlight the fact that Biogen result, the pricing for FAMPYRA in Germany, but that was after you initially provided the of $25 million guidance number. Is there -- should we just take from that, that there's really not enough upside to revamp the guidance? Or, do you think there's upside going forward? Thanks.

We built into our guidance the expectation of the results with -- that Biogen had, so there should be no change to the guidance at this point.

Great. Thank you.

Mark Schoenebaum, ISI Group.

Hey, Ron, it's Salim here in for Mark. Fortunately I have no amazing hair or teeth jokes today, so I'll jump straight into my question.

Thank you.

So I understand you've mentioned before $100 million in branded peak sales. I'm just curious were there any other drugs when Diastat was peaking that split the market with and what the sales were for that? Just trying to get --

Not to our knowledge, no. As far as we know, Diastat was an actually remains the only approved and available at home rescue if you will for cluster seizures or acute repetitive seizures.

Okay, thank you.

Michael Yee, RBC Capital Markets.

Good morning, this is Charmaine on behalf of Mike. With the upcoming stroke trial readout, can you help us understand what the hurdle is to go forward in terms of response rates and magnitude of response? Or magnitude of advocacy on each of the end points please? Thank you.

We really can't. Because you wind up getting into a very complex series of conversations. We have several different outcome measures that we're looking at, functional outcome measures that involve the upper extremities, the lower extremities, gait and mobility as well as some more global measures, so you have several different measures in the trial, and it really is going to depend on what the signals look like for any given outcome or combinations of outcomes. So, we really can't say in advance, we can't draw a bright line and say -- well, if it looks like this side of the line, no, and this side of the line yes. We're going to have to wait and see the data, talk to the clinicians and make the determination, and hopefully, if we have a positive signal, it will be obvious enough that we can come out and tell everyone why we're moving forward.

Understood. So, if I may, how good of a correlation do you see with responses in the different endpoints? And if a patient lets a response in upper extremity, do you expect response in other measures or just lower gauge?

We can't say at this point. This is the first time we have actually studied this in humans with stroke. We can talk to you about how it correlates in rats. It correlates terrifically in rats, but that's how we can say right now.

Okay. Understood, Ron. Thank you.

Joel Sendek, Stifel Nicholas.

Hi, thanks. And, this actually is Joel Sendek. Just to be clear. I have a question on --

Hi, Joel. Great to have you.

Is it really you?

Is a really you?

I'm wondering about the timeline both to get the CMC data, and if you can give us any more details about what that data is, the clinical and the CMC data, and then the filing under the 505(b)(2), what's the timeline for that?

We haven't broken it down any more than to say we expect to file this year, so we expect to file the end of this year. And in terms of the data were waiting for, we're not getting into detail on it, but I would -- there's one clinical study that finishing up, and there's some standard CMC type data that we need to have for any NDA that were waiting to complete. So beyond that, I can't give you any more detail except to say that at this point, pending getting those data, we expect to file the NDA this year.

Okay, thanks.

David Amsellem, Piper Jaffray.

Thanks, so wanted to come back to the market opportunity on Diazepam. How are you thinking about peak sales opportunities given that one, there's a generically available Diazepam rectal gel, and then two, [Upture Smith] is developing a nasal spray formulation of midazolam for cluster seizures, and I believe that is in Phase III?

Right. So, generic or not, rectal gel is used by a minority of the patients who could benefit from an at home rescue for cluster seizures. For the reasons that we've talked about, and I think most people on the call can probably intuit, it's very -- number one, it's very unpalatable to use a rectal gel and use a plunger and do all that stuff you have to do through the rectal administration route. Secondly, particularly for older children and adults, it's actually physically difficult. You have someone who's just had a seizure or is in the middle of having clusters of seizures, and to have someone turn them over and pull their pants down and administer the gel is -- it is not an easy or a pleasant experience. So, the result is that a lot of people, most people, most adults and even older children wind up defaulting to going to the emergency room and getting an IV there of Diazepam or whatever they give them.

So, we don't see the generic Diastat as being any different from the branded in that respect in terms of what the market need is. There are, as you point out, Upture Smith is developing a potential competitor in the space using a different benzodiazepine midazolam because that does not exist for the indication currently as Diastat does with Diazepam. They have to do a full-bore Phase III program under an ordinary NDA rather than a 505(b)(2). Our understanding is that they are recruiting in their Phase III trials, and assuming we both were to get to markets, we would be competing in this space. We think the market is large enough to handle that, obviously, we would love to get to market first. And right now if we can file our NDA on schedule this year, we think we would be in a lead position.

All right, thanks, Ron.

Yaron Werber, Citi.

Sound like they have problems on their audio. Maybe we should go to the next questioner until they resolve that?

Okay, thank you. Geoff Meacham, JPMorgan.

Good morning, guys can you hear me?

Are you really Geoff Meacham?

I am, the one and only.

Wow, we're taking notes.

(laughter) Thanks for taking the question. One for you on manufacturing for Diazepam, so should I -- is there a device component to the 505(b)(2), Ron? Is that right? And if so, what are the gating doctors you can talk about with respect to finishing the CMC section, and are you guys going to manufacture it?

Well, we're going to contract to manufacturer. Obviously we don't have are own device manufacture, but we have contractors to do that, and we qualify them, so that's an ordinary part of the NDA. The FDA is quite familiar with intranasal devices of various kinds, so we don't see this as a special gating factor. It would be a gating factor only in the event that there was something wrong with the manufacturing or something we had not accounted for, just the usual. But our clinical regulatory teams have been working on this for some time, and right now, we feel based on everything we're seeing, we should be able to file this year.

So really, it's not a matter of clearing the device manufacture, just a matter of getting the CMC data altogether, is that a fair characterization?

Yes, I think that's fair. I think that's reasonable.

Okay. All right, thanks.

Phil Nadeau, Cowen & Company.

Good morning, thanks for taking my questions. Just two brief financial housekeeping questions, could you guys give us an update on where your NOLs stood at the end of 2012 and where your expectations are for cash taxes in 2013 and beyond? And then second, the Zanaflex line is kind of lumpy, and it's not that big of a deal, but it's not clear to me why that is. Could you give us some sense of what determines what kind of quarterly pattern of Zanaflex sales and royalties? Thanks.

Sure. So the NOLs at the end of '12 were approximately $194 million. We are not giving guidance on our 2013 effective tax rate at this point, Phil, because we just need better visibility into what that might look like this year. As far as Zanaflex goes, I don't have a good answer about the lumpiness. It definitely tails off during the year we had higher revenue Q1 and then the generics hit in. I think overall it was downward sloping for the year, and then there may been some lumpy --

Maybe I can chime in. Just remind everyone at what Dave just said, but just to emphasize it, the first quarter was obviously much better than the rest of the year because some of that was still selling branded drug. So you can really discount the first quarter completely from any pattern, and then there's a general sloping down, which you expect after a drug goes generic, so it doesn't just fall off the table all at once, you get a pretty big hit up front, but then it continues to decline until it reaches a some low steady state over time. So it's not unexpected, and naturally, worth reminding everyone we're able to mitigate some of that by having Actavis, originally Watson, now called Actavis, launch an authorized generic, so we're able to keep some of the revenue that we otherwise would have lost.

Thanks.

Yi Chen, Aegis Capital.

Hi, thanks for taking my question. Regarding AMPYRA data for post stroke deficit and cerebral palsy, which one will be reported first within this year? And also could you update us on the status of once daily formulation of AMPYRA? Thank you.

Yes. We haven't broken down the order except to say that we expect both of them will read out, both of the trials will read out in the second quarter, so that's the best we can tell you right now. And then I'm sorry, the other question?

The once daily formulation of AMPYRA?

We are continuing to work on that, and that's moving along. We have a couple of outside formulator groups that we're collaborating with, both of them are developing prototypes or have developed prototypes, and we're continuing to progress with those programs.

Thank you.

Thank you very much. I would now like to turn the call back to Dr. Cohen for closing remarks.

Only that this concludes our call and thank you everyone. Have a great day.

Thank you. So this concludes our call. Thanks and have a great day.