Acorda Therapeutics Inc (ACOR) 2013 Q1 法說會逐字稿

Welcome to the Acorda Therapeutics First Quarter 2013 Financial Results Conference Call. (Operator Instructions.) Please be advised that this call is being taped at the Company's request. Now, I would like to introduce you 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 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 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 governmental 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 risk of unfavorable results from future studies of AMPYRA or from other research and development programs including diazepam nasal spray, or any other acquired or in-licensed programs; we may not be able to complete development of, obtain regulatory approval for, or successfully market 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 of, 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, 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 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 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, during Q&A we'd like to ask everybody to keep themselves to one question and one follow-up, and I'll turn over the call to our CEO, Ron Cohen.

Thanks, Tierney. Good morning, everyone. On today's call, I'll provide an update on AMPYRA's first quarter sales, and then discuss our product development programs and business development initiatives, and Dave will then provide the financials for the quarter, after which we'll open the call for your questions.

Starting with AMPYRA, net sales for the first quarter were $62.3 million, down from fourth quarter 2012 of $72.7 million. There are a number of important points to make about this. First, this was consistent with a trend we've seen in all three years since launch, in which AMPYRA sales are pressured in the first quarter compared to the rest of the year. Second, sales this quarter were in line with our internal projections. March sales rebounded strongly and continued to grow in April, also consistent with our internal projections and, very important, underlying patient demand remains strong. Therefore, we are confirming our 2013 net sales guidance of $285 million to $315 million.

Several factors contribute to the first quarter seasonality. These include people switching insurance plans or pharmacy benefit providers at the year end. Consequently, many patients have to reestablish eligibility during the first few months of the year. Also, when deductibles and the Medicare donut hole reset at the beginning of the year, it can affect timely refills for consumers who may have financial constraints. In addition, as in previous years, there was some inventory build in the fourth quarter that was de-stocked during the first quarter. These trends have been recorded for other specialty drugs as well.

Moving to our product development programs. We are very pleased with the recent progress of our pipeline, which we believe is one of the more interesting in the neurology space. We have five programs, including AMPYRA, that are in clinical stage development or preparing for FDA submission, as you see here.

In mid-April, we announced top line results from the dalfampridine extended release proof-of-concept studies in post-stroke deficits and cerebral palsy. In the post-stroke study, we saw [clearly] that there was a drug-related improvement in walking speed, and the safety profile was consistent with our previous experience in MS. We plan to advance the clinical program for this indication.

The post-stroke deficits trial was a crossover study with every patient treated with dalfampridine extended release in one period of the study and placebo in another. The order in which they received the two treatments was randomly assigned. The results you are looking at here compares the patients while they were on dalfampridine versus while they were on placebo irrespective of the sequence using the full crossover design. The improvement in walking speed while participants were on dalfampridine-ER was statistically significantly greater than the improvement while on placebo. We are in the process of fully analyzing the dataset and we plan to discuss these analyses with the FDA when they are complete. At this point, it's too early to provide comments on what the next trial design will look like.

The efficacy results of the cerebral palsy study suggested potential treatment activity on measures of walking and hand strength, but further analysis is needed to determine if they are sufficiently robust to warrant moving forward with development in this indication. Similar to the post-stroke deficit study, the safety data from this study were consistent with our experience in MS.

Moving to our product development in Other Products. We remain on track for filing an NDA for the Diazepam Nasal Spray in 2013. This is a potentially important contribution to the care of people with epilepsy who suffer from periodic clusters of seizures.

We also achieved several R&D milestones since our last earnings announcement. At the American College of Cardiology meeting in March, we presented three-month data from the first Phase 1 GGF2 trial in people with heart failure. These data were awarded a platform presentation and showed a dose-related improvement in ejection fraction in addition to safety findings. We discussed these results with the FDA and we had agreement on the design of the next study, which will primarily investigate further the safety profile of GGF2 across a range of doses, and we will continue to explore efficacy outcomes. As a reminder, the FDA has granted Fast-Track designation for GGF2 for treatment of heart failure.

In April, we enrolled the first participant in the first Phase 1 trial of rHIgM22, our remyelinating antibody for MS. This is a 60-patient study enrolling people with MS to evaluate safety and tolerability. Several exploratory efficacy measures are also included in the trial. And we are also preparing to initiate a Phase 2 trial of AC105 for neural protection in acute spinal cord injury.

On the business development front, we have entered into an agreement with NeurogesX, Inc. to acquire rights to NGX-1998 and Qutenza in the US, Canada, Latin America, and certain other markets. NGX-1998 is a development stage product that we plan to evaluate for its potential to treat neuropathic pain, beginning with painful diabetic neuropathy. Qutenza is a marketed patch approved for the treatment of postherpetic neuralgia. The active ingredient in both NGX-1998 and Qutenza is capsaicin. This deal is subject to NeurogesX shareholder approval and other contingencies. The terms of the deal are consistent with our business development strategy to in-license late-stage and commercial products that leverage our neurology expertise and commercial infrastructure. Now I'll turn the call over to Dave for a review of the first quarter financials, following which I'll come back with a closing summary, and then we'll open the call for your questions. Dave?

Thanks, Ron. AMPYRA net revenue for the first quarter of 2013 was $62.3 million compared to $57.4 million for the same quarter in 2012. Combined first quarter net revenue from our ZANAFLEX franchise was $4.4 million. This included net revenue from ZANAFLEX capsules and tablets of $1.3 million, royalty revenue from Actavis for sales of authorized generic capsules of $2.6 million, and $0.5 million in sales of generic capsules to Actavis.

AMPYRA royalty revenue from sales outside of the US was $2.9 million for the first quarter of 2013, and included a favorable adjustment of $1 million from the establishment of pricing in Germany.

Total operating expenses including $4.9 in share-based compensation expense for the quarter ended March 31 were $74.4 million compared to $62.4 million including $4.2 million in share-based compensation expense for the same quarter in 2012.

We closed the first quarter of 2013 in a strong financial position with cash, cash equivalents, and investments totaling $324.9 million. I'll now turn the call back over to Ron.

Thanks, Dave. So, to summarize, underlying demand for AMPYRA remain strong and we are reiterating our 2013 AMPYRA guidance. Our pipeline is advancing, our proof-of-concept trial of AMPYRA in post-stroke deficits products a clear go signal, and we plan to continue development in this indication. Including the post-stroke program, we now have five clinical stage or NDA-ready programs. Diazepam Nasal Spray is on track for an NDA filing this year, and the pending acquisition of Qutenza and NGX-1998 further advances our business development strategy of acquiring later stage assets that leverage our development and commercial expertise. With that, we will open up the call for your questions. Operator?

Thank you very much. (Operator Instructions) Your first question comes from the line of Joel Sendek at Stifel. Please go ahead.

Thanks a lot. So, my question has to do with the intra-quarter demand that you described, Ron. Is there anything you're seeing toward transition out of the typical dislocation you see in January that is driving the sales to give you confidence to reiterate your guidance? Also, what I'm kind of getting at is, since the stroke data came out, I'm wondering if there is any reason to believe there might be any off-label use? Thanks.

Yes. Well, let me take the last part first so we can dispense with that. We can't comment at all on off-label use. That's not something that we can get involved with, obviously. With respect to the overall commercial picture, I think the most important thing to bear in mind is, when we originally gave our guidance in January for the year, we took into account our projections, internal projections quarter-by-quarter, the temporal or seasonable patterns that we see and that we believe we would see. And what we have seen is consistent with that. So, from our internal projection point of view, nothing has changed. The underlying demand is robust. It is absolutely solid.

What you're seeing in terms of the sales between the first quarter and the fourth quarter have entirely to do with the seasonal pattern, and that is patients shifting their insurance plans, the donut hole resetting, deductibles resetting, so there is a lag where people don't get their prescriptions as quickly in the first couple months of the year. And there was some inventory stocking ahead of the beginning of the year, which then got destocked in the first quarter. We saw that last year as well. So, all of that is peripheral to the strength of the underlying business, which is still strong and the projections for the year were originally based on our understanding of what those patterns looked like. There is nothing that has changed in that understanding. So, our guidance remains firm for the year.

Got it, understood. Thanks.

Thank you. Your next question comes from Mark Schoenebaum at ISI Group. Please go ahead. Your line is open.

Hello. Hello, can you hear me?

Yes.

Hey, Ron, how are you? This is Saleem on behalf of Mark.

Hi, there.

Hey. On the inventory, could you quantify exactly how many weeks were in Q4 '12 and how many weeks are in Q1 '13?

I'm not going to quantify exactly, but I will tell you that overall during the year we average about two weeks of inventory, and that hasn't changed. That's been very stable on an average basis across the year. The thing to realize is that even a few days of inventory stocking is several million dollars. And so if you stock several million dollars and then you destock several million dollars, you're actually doubling the impact of whatever that inventory hold was on our quarterly net sales number.

So, in relative terms, it's not a huge inventory build. But, again, even several days' worth, which is -- we're talking about that ballpark -- is several million dollars, and then you double that, and so the impact is what you see. Plus, obviously, it's not just that, it's plus the fact that you get the seasonal shifts in patient insurance and delays in getting refills and so forth.

Okay, thanks. And just a quick follow-up, if you don't mind. On Diazepam -- sorry, on Diastat, do you know what the average annual price was before it went generic?

Yes, I'm trying to remember now. It was about $360 for two --

Not the per-unit but the annual, average annual price?

Yes, I don't have that. I don't have that for you.

Okay, all right. Thank you so much.

Thank you. Your next question comes from Michael Yee at RBC Capital Markets. Go ahead, please.

Are you there?

Yes. Hi, Michael.

Okay. Hey, guys. Thanks for taking my question. Do you guys have a meeting set up with the FDA to talk about post-stroke data down on the calendar? When would that be? When could you give us an update? And the follow-up is, although I know it's early, which is what I think you're going to say, what are the different things you're thinking about in terms of a Phase 3, or how confident are you about going into Phase 3?

Okay, I'm probably not going to be able to answer any of those questions. I think, as you know, we never comment on FDA matters unless we have a material, written correspondence with FDA. So, we will meet with them when we have finished our analyses and have a plan that we want to propose to them, and obviously we're working on that as quickly as possible. This is a very high priority program, needless to say, for us. With respect to what we're thinking about, again, I don't want to speculate on that until we've actually put a plan together, gotten in front of the FDA and then have something to say about it.

Okay. Thank you.

Thank you, Michael.

I think it is -- I'm sorry, it is worth reiterating that we are excited about the data. We think that it was a very strong go signal from this trial, which was meant to be a proof-of-concept, go/no-go trial, and what we got was a highly encouraging result. So, clearly anything we do going forward will be based, at least in part, on that result.

Well, let me ask it this way, if I'm still on an open line. The size of the study is smaller than what you had in Phase 2 for MS, so how do you know, or how confident are you that you have enough information to go into a Phase 3?

Well, I think it's important to say that we have not said that we're going directly into a Phase 3. That remains to be seen, depending on what the rest of the analyses show in the discussion with the FDA. So, that's again something that we'll address later when we have more information. In terms of the study itself, it actually was a well-powered study because, remember, it was a crossover design, and in a crossover you get significantly more power for a given number of patients to find the differences that you're looking for. So, given what we saw, it's a highly encouraging result.

And, by the way, if you look back at the history of our MS studies, when we were doing Phase 2 in MS, we saw signals in even smaller studies in MS. We had a 36-patient Phase 2 study at one point way back when. I think that was the 102 study, if I'm not mistaken, and we saw strong signals in that trial. So, it is possible.

Okay.

Thank you. Your next question comes from the line of Chris Raymond at Robert Baird.

Just curious on the quarter, how much of the January, just in general terms -- how much of the January price increase made it into the net price? And maybe can you compare that ratio to the increase you guys had at 2012?

I can't give it to you exact, I don't know exactly. It's going to be most of the price increase that makes it in, and that would have been true last year as well. It is important to realize, though, that in the beginning of the year, the first quarter is going to be our highest hit on D&A, because that's when you get the donut hole impact in full force. That wanes during the year as patients make it through the donut hole, so there is a higher impact in the first quarter on the D&A, and that's going to hit in that sales as well.

Great. Thank you.

Thank you. Your next question comes from Yaron Werber at Citi. Please go ahead.

How are you doing? Quick question. Two things, one, just kind of a follow-up but it sounds like you've answered this question already. Just in the Phase 2 stroke study, how consistent was the data across endpoints? I mean, was it very, very consistent all across-the-board, or was there some typical variability you would expect from a stroke study in small numbers of patients? Then I have a follow-up, too.

You're talking about across all endpoints that we looked at or across the walking?

Well, the walking in general, but then also between primary and secondary, arm strength, etc.

Well, first of all, there was no primary or secondary, because the primary was safety in the study. This was a signaling study, or proof-of-concept study, so you're looking for signals. And what we had said all along is, we would have been happy with a good strong trend on any of the outcome measures. The fact that we got statistical significance particularly on the walking measure was gravy, if you will, but even stronger. Clearly, some measures we looked at were better than others. The walking measures were better than some of the others we looked at. We're still analyzing all of the other measures, so we'll have more that we can talk about after we've done all that. And I will say that other measures directionally were the same as what we saw with walking.

Okay. And then, secondly, rHIgM22, the remyelinating antibody, how is this different in LINGO and what are you thinking about Phase 2 trial design? Thank you.

Well, it's different, it's a quite different pathway, as far as we know. We don't know about a final common pathway, it's way early to say that. But the LINGO antibody blocks a protein or a receptor called LINGO, which is itself an inhibitory protein. So, if you block it, you are potentiating the myelinating cells to go ahead and myelinate. The rHIgM22 antibody is a direct effect on the myelinating cells, so LINGO is an indirect effect, as far as we know. This is a direct effect where it targets the myelinating cells, the oligodendrocytes. It targets receptors on the surface of those cells. It then potentiates an intranuclear signal and that in turn, we have shown, up-regulates a number of proliferative and growth and other factors, the net effect of which is that the cells turn on. You can show that it causes them to proliferate and mix culture. In vivo they begin to myelinate again, and you see clear evidence of remyelination. So, the mechanisms appear at this point to be different.

We don't know, if both of them turn out to be effective, right -- and it's early to know any of that. But if both of them turn out to be effective, we don't know if there might be a synergistic effect or not. That is something for in the future to speculate about. With respect to Phase 2 design, too early to say. What we're looking for in this study, obviously the very first thing you look at is dose and safety, or safety relative to dose, which is what we're doing in this trial. And we're also exploring a number of efficacy measures, including MRI evidence of remyelination. As we progress and see what we get in this trial, we can, I think, talk more specifically about what a Phase 2 would look like and what outcomes we would look at.

Okay, great. Thank you.

Thank you. Your next question comes from Marko Kozul at Leerink Swann.

Good morning. I'll take another stab at an AMPYRA post-stroke question. Can you remind us what the secondary endpoints were for the Phase 2 proof-of-concept study, and your view on the importance of quality of life or patient reported outcome measures? And any thoughts that you might have, even in general, on pursuing quality of life or patient reported outcome measures in subsequent Phase 2 or Phase 3 trial designs as primary or secondary endpoints? Thanks.

Okay. Again, very important points. There were no primary or secondary endpoints on efficacy. The primary endpoint was safety. So, it's a proof-of-concept trial, so there was no primary endpoint. Now, that said, we said in advance that the endpoint that was of most interest to us was walking, particularly since it's very important functionally and we have experience with it, so we were very pleased to see that come out. But that was one of a number of efficacy endpoints that included upper extremity endpoints. That included something called the block-and-box, which measures how many boxes they can move across a table in a certain amount of time. So, there's hand strength as well, grip strength. We looked at a number of global measures, which included the functional independence measure, which as we reported originally also showed some positive impact in the trial. It's too early to say now what sort of subjective measures we might include in the next trial. Again, proof-of-concept trial. So, what you're looking for is indication that there is anything to go for here, that the drug actually benefits patients at all. Otherwise, there is no reason to continue. We have ample evidence in this trial that there is potential benefit for post-stroke deficits, and so we're going to take it from there.

Hey, Ron, thank you. Just a follow-up here. Beyond the timed 25-foot walking test that you clearly showed benefit in, I guess my question is, can you talk a little bit about how important patient reported outcome measures might be to future designs or to the ultimate addressable population? Thanks.

It's hard to qualify that. I mean, it's always good to have patient reported outcomes in addition to the objective outcomes. But having said that, we've already had extensive experience in demonstrating that the objective outcomes correlate very highly with the subjective outcomes in the MS studies. At this point, in the stroke studies, it's too early to say.

Great. Thanks for taking the questions.

Thank you. Your next question is from the line of David Amsellem at Piper Jaffray.

Hi. It's Rebecca Forest for David. I just had a quick question on the NeurogesX acquisition.

I'm sorry, we're having trouble hearing.

Okay, can you hear me now?

Yes.

Okay, great. So, I had a question on the NeurogesX acquisition. To date, Qutenza has had a difficult time gaining any traction, so what are your thoughts on what you can do differently there?

Well, assuming the deal closes as we anticipate, then we would put this in the bag for our sales force. Maybe before I get into that I should focus everyone on the priorities in this field. The main priority for us was NGX-1998. Qutenza, we're pleased to have that as well for a variety of reasons, but really it's the NGX-1998, which is the follow-on product that's in development. And what we want to evaluate there is its potential for application to wider audiences and wider needs, particularly things like painful diabetic neuropathy, which is a huge unmet need out there, or poorly unmet need out there.

As you know, Qutenza is indicated in a much narrower population, at least at the moment. That's for post-herpetic neuralgia. It is not currently being promoted. It hasn't been promoted for a while. We certainly would put it in the hands of our sales force, which is an extremely accomplished sales force. We will not be adding any sales force, so it will go right in the bag. We'll be reallocating some of the call points, obviously, to account for it.

So, we think Qutenza itself is a good thing to have primarily because it's going to give us experience in the pain market and in the pain ports-of-call in talking to the doctors who specialize in pain. So, if NGX-1998 turns out to be commercial and we can get it to market for a good indication, by that time we'll have accumulated enough experience that we can just smoothly transition into selling that product as well.

Okay, thank you.

Thank you. The next question is from Phil Nadeau at Cowen & Co.

Good morning, Ron. Thanks for taking my question. Just another one on the Q1 results. I know you said that a lot of the decrease quarter-over-quarter was due to seasonality, but it does look like the decrease in the first quarter 2013 was much bigger than the one in the first quarter of 2012. So, can you give us some idea of what -- this year was more severely impacted than the years past; was it the insurance stuff or was there more destocking because of the March price increase? Give us some sense of -- I appreciate their seasonality, but why was this year so much more severely impacted than the ones in the past?

Yes, I don't know that I would say much more severely, but, yes, it was in absolute terms a larger decrease, even when you account for the difference in the price increase that we took. And that is related to the amount of stocking primarily. We saw similar shifts, I'm sure, in the insurance changing around and so on. We still have to get data on that, but our assumption would be that it was similar. But we also have evidence that the stocking and destocking was somewhat higher in this year than it was the previous year, and that's related to the fact that, if you think about it, the overall level of sales in the fourth quarter of 2012 was substantially higher than it was in the fourth quarter of 2011. So, when you have the specialty pharmacies looking at that and trying to determine how much they're going to order, they're ordering off a bigger number to begin with. So, consequently, the absolute stocking that they're doing is going to be higher as well, and then the destocking is going to be higher. So, in a sense you're a victim of your own success, because that phenomenon gets bigger the more sales you have.

That makes sense. Great. Thanks for taking my question.

Thank you. There are no further questions for you now, so I would like to turn the call back over to Dr. Cohen for closing remarks.

My closing remarks are, everyone have a great week and we'll look forward to seeing you out there next quarter. Thanks.

Thank you for participating in today's conference. This concludes the presentation. You may now disconnect. Good day.