Acorda Therapeutics Inc (ACOR) 2013 Q3 法說會逐字稿

Welcome to the Acorda Therapeutics third-quarter 2013 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 Communications at Acorda Therapeutics. Please go ahead.

Thank you. Good morning everyone and welcome. With me today are Dr. Ron Cohen, our President and Chief Executive Officer, and Mike Rogers, who joined Acorda at the beginning of the month as our Chief Financial Officer.

Before we begin, let me remind you 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 the use of AMPYRA or other products at acceptable rates, or at all, and may impose restrictive prior-authorization requirements that block or limit prescription.

The risk of unfavorable results from future studies of AMPYRA or from our other research and development products, including Diazepam Nasal Spray or any other acquired and licensed programs, we may not be able to complete development of or obtain regulatory approval for or successfully market Diazepam Nasal Spray or other products under development, the occurrence of adverse safety events within our products, delays in obtaining or failure to obtain regulatory approval of or successfully market AMPYRA outside of the US and our dependence on our collaborator Biogen Idec and connection therewith, competition including the impact of generic competition on Zanaflex Capsules' revenue, failure to protect our intellectual property, to defend against intellectual property claims of others or to obtain third-party intellectual property licenses as 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 operation. These and other risks are described in greater detail in Acorda Therapeutics' filings with the SEC.

Acorda may not actually achieve the goals or plans described in these forward looking statements and investors should not place undue reliance on these statements. Forward-looking statements made in 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 developments occurring after the date of this presentation.

As a reminder, during the Q&A session please limit yourself to one question and one follow-up. Now, I will turn the call over to Dr. Ron Cohen.

Thanks, Jeff. Good morning everyone and happy Halloween.

Before we begin I would just like to say that in honor of the holiday and of Mark Schoenbaum, I am wearing a velociraptor mask over my hair. So if you can get that visual we will go from there.

As Jeff mentioned, we're welcoming our new CFO, Mike Rogers, to his first quarterly call with us. We're delighted to have Mike join our management team. He's an experienced biotechnology CFO. He most recently served as CFO of BG Medicine, and prior to that he was CFO of Indevus Pharmaceuticals until the company's sale to Endo.

Dave Lawrence has been appointed Chief of Business Operations. Dave will now be responsible for managing and building our business operations and infrastructure, which are critical to supporting our growth.

On today's call, I'll provide an update on AMPYRA and discuss our product development programs, and Mike will provide the financials for the quarter. After that, we will open the call for your questions.

Beginning with AMPYRA, for the third quarter net sales were $77.8 million, an 11.5% increase compared to the same quarter a year ago. Through the first three quarters of 2013, net sales have increased 13% over the same period in 2012. We are encouraged by sales in the fourth quarter to date, and we're narrowing our 2013 guidance to $295 million to $305 million.

Moving to our pipeline. You're looking here at a slide representation of the pipeline. I'm going to go into detail in a number of these programs on upcoming slides. I just want to point out, generally here, that in addition to our commercial products we now have six clinical stage programs versus just one in 2011. This progress reflects the Company's strategy of disciplined execution, advancing our in-house programs with trials that provide clear go/no go signals, as well as judicious acquisition of new product opportunities.

We're excited to be moving forward with a new once-daily formulation of dalfampridine for post-stroke walking deficits. There are approximately 7 million people in the US alone who are stroke survivors. Half of these have chronic walking issues, and there are no approved medical therapies to address this very important need.

We expect to start a multiple-dose PK study within the next few weeks to confirm the findings of an earlier single-dose study, I should say an earlier single-dose study, that showed that the QD formulation had the desired PK profile. We anticipate initiating a Phase 2b/3 clinical trial in the second quarter of 2014. Now, this will be pending results of the new PK study, and also coming to agreement with the FDA on the trial design.

We've also advanced several of our other pipeline programs. The Diazepam Nasal Spray NDA filing is on track for this year with a potential commercial launch in 2014. Our second GGF2 trial in people with heart failure, that's chronic heart failure, is assessing the safety and tolerability of a narrower dose range, compared to the first Phase 1 trial, and it also includes several exploratory efficacy measures. Now recall, in the first GGF2 trial there was a clear dose response on cardiac ejection fraction improvement that appeared durable for over one month following a single dose.

In April, we initiated a Phase 1 trial for rHIgM22, our remyelinating antibody for MS. Remyelination is emerging as one of the most promising potential treatments in MS, and we are excited about being at the forefront of this new treatment approach.

We also enrolled the first participant in a Phase 2 trial of AC105 in September. AC105 is our proprietary magnesium formulation for the treatment of acute spinal cord injury.

In preclinical studies, AC105 showed the ability to improve long-term function when it was administered within several hours after an injury. This trial is evaluating the safety and tolerability of the drug, and it also incorporates several exploratory efficacy measures. We expect data readouts from all of these studies in 2014 and 2015.

NP-1998 is a new liquid formulation of capsaicin which we acquired earlier this year together with the QUTENZA capsaicin patch. Astellas, which has the rights to QUTENZA and NP-1998 in certain other markets outside the US, is currently conducting a Phase 3 clinical trial of the patch to assess its use in the treatment of pain associated with diabetic neuropathy. This is a huge medical problem and a huge unmet need.

Results of the Astellas trial are expected in early 2014. These results will help inform our next steps into how we develop NP-1998.

After a thorough analysis of the dalfampridine-Extended Release proof-of-concept study in cerebral palsy, we concluded that although there were some signs of biologic activity, the data were not strong enough to justify additional clinical development, and we will not be proceeding with additional CP trials. This underscores our strategy of disciplined investment, in which we base our investments on clear go/no go signals.

We're disappointed that we will not be able to continue the program on behalf of people with CP. However, we must focus on advancing those programs where the data indicate a clear potential for benefiting patients; for example, in the post-stroke studies.

I'll now turn the call over to Mike for a review of the financials.

Thanks, Ron, and good morning everyone. AMPYRA net revenue for the third quarter of 2013 was $77.8 million, up 11.5% from $69.8 million for the same quarter in 2012. For the nine months ended September 30, AMPYRA revenue grew approximately 13% to $217.9 million from $193.4 million in the corresponding period in 2012.

The AMPYRA royalty revenue from sales outside of the United States was $2 million for the third quarter of 2013. Overall revenue from Zanaflex for the quarter was $2.7 million, including our own sales as well as product sales to Actavis, and royalties received on Actavis's sales of generic tizanidine.

Total operating expenses, including $6.5 million in share-based compensation expense for the quarter ended September 30, 2013, were $73.5 million compared to $67.1 million, including $5.6 million in share-based compensation expense for the same quarter in 2012. The increase in operating expenses is related to the overall growth of the organization to support AMPYRA and the dalfampridine franchise, the expected launch of Diazepam Nasal Spray, and the development of our pipeline products.

We are lowering SG&A guidance by $5 million in 2013 to $165 million to $175 million based primarily on timing issues. And, as a result of the decision to not move the CP program forward and some other adjustments to R&D programs, we have lowered our 2013 R&D expense guidance from $60 million to $70 million down to $45 million to $55 million. It's worth noting that we expect R&D and SG&A to increase in 2014 as our clinical programs advance and we move closer to the potential launch of Diazepam Nasal Spray.

Our financial position remains strong with cash/cash equivalents in investments totaling $349.4 million, an increase of $17 million versus last quarter. I'll now turn the call back over to Ron.

Thanks, Mike. So to summarize, AMPYRA sales are in line with our projections and we are narrowing our 2013 AMPYRA guidance to $295 million to $305 million.

Our pipeline is advancing. We're planning to initiate a Phase 2b/3 clinical trial of dalfampridine-QD, or once a day, in post-stroke walking deficits in the second quarter of 2014 using a once-daily formulation. In addition, we continue to plan for a potential launch of Diazepam Nasal Spray in 2014 and GGF2, rHIgM22, and AC105 are all in active clinical trials.

Our financial position remains strong with approximately $350 million on the balance sheet, and we have sufficient assets and revenue to invest in our promising pipeline and, potentially, to acquire additional products that we believe will increase shareholder value. We'll open up the call for questions at this point. Operator.

Thank you. (Operator Instructions) Marko Kozul, Leerink Swann.

Good morning. Thanks for taking the question, and looking forward to your continued progress.

Ron, wanted to quickly ask you a question about endpoints for the upcoming Phase 2b/3 post-stroke deficit study. Could you talk a little bit about the Walk-12 test and what it is, and how it compares to the MS Walk-12 and, potentially, any historical or general discussions you've had with regulatory authorities over this as a potential endpoint?

Thanks, Marko. I can't get into details of the trial design until we come to agreement with FDA, because we'd rather not speculate on where the agreement's going to come out. But I can tell you on, in terms of the Walk-12, so for those of you who followed us in the MS trials, which were successful and got us the approval for the MS indication, one of the key outcome measures was the MSWS-12.

That is a 12-item MS Walking Scale that is a patient-reported outcome, but it's very specific to activities that rely on walking and each one is rated on a five-point scale. That scale came out of academia in the UK. It has been widely published and has actually been used in several different conditions that are characterized by poor ambulation or walking disability, and it has been quite robust.

So it's a valid scale, and it shows very nicely from one condition to another. So at this point that scale is called the, I believe, it's called the Walk-12. So it's been taken out of any specific disease therapy because enough work has been done where there's confidence to say that this is a very solid all-purpose walking scale that can be applied to pretty much any condition that is characterized by walking impairment.

And that's a scale that we like a lot. Obviously, it was successful for us in the MS trials, and that's something we'll be discussing with FDA in the context of this study, as well.

And Ron, just one quick follow-up. Your subsequent potential study for post-stroke deficit, assuming your regulatory discussions pan out as you plan, can you give us any broad strokes on how long of a study that subsequent trial might be or any details? That would be helpful. Thanks.

It's hard. I would love to be helpful in that regard; unfortunately, I'm hampered because until we have a final agreement and a final design, it's very hard to say how long it will take.

This is not necessarily prologue. If you look back at our Phase 3s in MS, they took each about, I think it was about a year and a half. You can go back and look. I think it was about a year and a half to do each of those trials.

I can't say with assurance that that's going to be the case here. We expect roughly, and again depending on the FDA, we expect roughly that this trial will have about 150 patients per arm, and that there will be three arms, so it would be about 450.

Again, subject to revision when we get final agreement. But that's the scope or the scale that we're considering.

Appreciate you taking the questions. I'll jump back in queue, thanks.

Mark Schoenbaum, ISI group.

Could you just, perhaps, give us, and if you mentioned this in prepared remarks I apologize I hopped on like three minutes late, but is it possible to give us the volume versus price dynamics for the AMPYRA in the quarter either on a sequential basis or year-on-year if you happen to have it? And just when do you guys expect a Paragraph IV filing for AMPYRA?

These things are routine, but I just want to better understand a timeline for that. And then, just briefly, can you compare your remyelinating antibody to the anti-LINGO approach at Biogen, perhaps? Thank you.

Boy, that's amazing. You mutated three questions into one. That's tremendous. It's like magic; you should have a warlock costume today.

So let me tackle those. I'm not entirely sure what you're asking with regard to price and volume. What I can say about this is I think it's a good opportunity to remind everyone that our quarter-over-quarters tend to be uneven because, regardless of a given level of TRxs, we can have fluctuations of several million dollars from one quarter to the next that simply rely on ordering and shipping patterns from the specialty pharmacies, and that is not directly related to the overall TRx level.

So if you're following an outside tracking service and you see certain levels of TRxs and then you can't quite line it up with the revenue, that's why. Inventories are staying stable, so that's in good shape. But even so, just to put a fine point on it, there are certain days that are high-order days for the specialty pharmacies and certain days where there might not be any orders at all.

If one of the high-order days falls on the very last day of the quarter, for example, you could see a shift of several million dollars into one quarter versus the next quarter because of one day on the calendar. So, I think, that accounts for a good bit of the issues that you might be having out there.

We're quite happy with the growth; they're within our projections. Our organic growth continues to be in the mid-single digits in terms of TRxs, so I hope that helps with respect to your question.

On the Paragraph IV filers, yes, it is routine. We expect it as of January 22, I believe, is when the Paragraph IV filers can begin to file. Something just to prepare people in advance, the way the system works, the FDA, as I understand it, has up to 60 days to accept those filings and then we become informed that there's a filing.

So you and we may not hear anything specifically on January 22 or 23, but somewhere within that 60 day period we would expect to hear about the filings. Just as a reminder, we have patents, we have several patents. Of the issued ones, the one that runs longest right now goes to 2027.

We have others filed. We like our patent position and, of course, we intend to defend it.

And then, finally, you asked about rHIgM22. The mechanism is different, as far as we know, from all of the published literature.

For example, the anti-LINGO antibody that Biogen is developing. Anti-LINGO is thought to work by blocking an inhibitor in the nervous system that prevents myelination and, therefore, produces an environment that is more permissive for myelination.

The rHIgM22 antibody, which came out of the work of Moses Rodriguez and his team at the Mayo Clinic, is very different. It's an IgM antibody, and it targets receptors on the oligodendrocytes, which are the myelinating cells.

So it is highly specific for the cell surfaces of oligodendrocytes, and when it does so it generates calcium-mediated signals into the nucleus, up regulates several different factors, some of which we've identified which are known to be proliferative factors, probably some anti-apoptotic factors in there, as well. The net effect of which is to directly induce or stimulate those cells to myelinate again.

One of the issues that has come up in the literature on MS is that when you look at the CNS tissues of people with, for example, progressive disease or later stage disease, where they don't appear to have a natural remyelinating response anymore, which most people with MS do earlier in the disease, but at some point they lose the ability to remyelinate. And it turns out that the oligodendrocytes are still there, but for whatever reason they're dormant and they don't turn on.

So we like this strategy a lot, at least from the scientific point of view, because the notion that you can stimulate them, wake them up and get them to remyelinate again offers the potential that you might be able to turn back the clock, as it were, in the disease state. So all of that is speculative.

It's based on animal studies and in vitro studies. We're doing the first human study in people with MS with the antibody, and we'll see how we do.

Thank you.

Michael Yee, RBC Capital Markets.

Couple things, and they are two as well just wrapped into one question about AMPYRA, which is do you actually have an FDA meeting scheduled on the calendar and what would actually define whether FDA would allow one pivotal study or two? What is actually behind that decision? What drives that decision to do one or two?

As you know, we, historically, have never commented on when meetings occur, what day they occur. What we do comment on is when we have written confirmations of material matters with the FDA.

What we've said is that we expect to meet this, before the end of the year with FDA, and so I'll stick with that. And with regard to what will determine that -- I would like to level set everyone on this -- we believe that, as a matter of course in similar types of situations, that we would need two trials for a registration.

Now, there are always exceptions and that's something that depends on specific discussion with the FDA and whether they are open to it or not. We will obviously make that case as part of our discussions, but I would not guide to expecting that as an outcome.

I think the history shows that typically you need two. We do have a strategy in mind that potentially could shorten the time it takes to do those two trials, but I can't go into more detail than that until we get agreement with FDA on that strategy.

Okay. And then on the QD versus BID, what did you actually do to the formula of AMPYRA to actually get to a QD formation, and do you have issued patents around that? (multiple speakers)

We have -- people should take as a matter of course that we file patents on anything new that we do. The QD is novel. It's a novel formulation.

We worked on it with an outside collaborator who specializes in these types of formulations and they did a great job in coming up with one that met our specifications. So that's really all I can say for proprietary reasons.

But I guess the essence of it is this was done by a group that does this for a living, and the initial PK study, which was a single dose, met the specifications precisely. So we're optimistic about the multidose. Barring some real surprise, we expect to see what our projections show for the formulation.

Okay, and then just one last thing on the Paragraph IV. Do you know if anyone has filed a DMF? Do you know anything in the channel out there? That would probably give us some insight.

I have no information on a DMF at this time.

Okay. Thanks.

David Amsellem, Piper Jaffray.

Hi, this is Traver Davis on for David Amsellem. Thanks for taking the questions. Would you need a sales force headcount expansion to support the rollout of Diazepam Nasal Spray, and how should we think about promotional spend on that product?

We do not -- one of the nice things about the product and what was attractive to us about bringing it in is that it leverages beautifully our current sales infrastructure. So no, we will not need to expand that infrastructure.

This will go right in the bag next to AMPYRA for the sales force and ultimately QUTENZA as well. We do need to prepare for a potential launch next year given our guidance about an NDA filing this year, and people should expect significant investments in the pre-commercial spend in order to make sure that we have as good a launch as possible.

Great, thanks. And just a second, switching gears, do you have any method IP applications pending on AMPYRA post-stroke, and do you also have IP pending on the once-daily formulation? I think you kind of hinted at that but just wanted to double check.

We have filed on both the post-stroke indication and the QD formulation, and we expect to continue to file as new material comes available.

Great. Thanks.

Joel Sendek, Stifel.

Ron, I have to say your answer to Mark's question on rHIgM22 is the best description of MS disease morphology I've ever heard from a velociraptor.

Thank you.

I almost don't have, and I'll limit myself to one question as a result. I want to go back to the stroke data as it was presented. Do you guys have any reason why in period 2 that AMPYRA did much better than it did in period 1 and whether that matters? Or is the most important thing to look at the overall, both periods combined?

The answer is detailed enough, Joel, that my recommendation here is that we save that for the R&D day, which we're having next week, where we can go into more detail and we'll have some stroke experts there as well. An overall answer would be that the single most important data point in the study, from our perspective, is the one that we prospectively were most interested in.

And that was the overall result of the study with respect to walking, which as you saw was statistically significant, taking all comers on dalfampridine versus placebo regardless of which period they were assigned to. So that is the most valid way to interpret a crossover study. Now, having said that, we saw that the drug did better than placebo on both sides of that, and we'll go into more detail next week.

Okay. Thank you.

Yaron Werber, Citi.

I've got to tell you, Ron, I'm wearing my Red Sox hat right now and I'm pretty happy today.

That's very unfortunate, Yaron. Aren't you based in New York? Do you not fear for your safety?

No, no one can see me. I'm hiding.

Well, listen, congratulations and we'll be back next year. That's all I can say.

I also have my Mark Schoenbaum costume ready for tonight. Quick question for you guys. Diazepam Nasal Spray; I know you've kind of been hesitant to talk much about the market opportunity, but as we get closer and it sounds like you're going to file pretty soon, what can you share with us in terms of competitive landscape, market opportunity, and kind of how do we think about it for you guys?

Yes. We will provide more color as we get closer. What we are able to say now is there are a number of other potential entrants that are out there.

One of them is Upsher-Smith. They have an intranasal midazolam that they are working on. As far as we know, they are still in their Phase 3 clinical trials.

We are filing on a 505b2 because we're piggybacking onto the reference product. In this case, Diastat rectal gel of diazepam. But, of course, with diazepam it's a different molecule, so they're not able to do that.

So they're still working on that, as far as we know. We are currently ahead, in that regard, since we will have filed an NDA this year.

Pfizer is working on an intramuscular self-administered form of diazepam and that can be injected by needle. They announced earlier this year that they were going to file an NDA.

We have no further information on that. It is an injectable so it is something with a needle that you put into your thigh as opposed to an intranasal formulation.

The market itself, we think, is attractive. All we've been able to say so far, and hopefully we'll be able to give you more color later on, is that Diastat gel itself was at about $100 million at peak before it went generic. The problem with Diastat gel is that it only has been addressing a certain fraction of the addressable population, primarily children and small children at that. Because, if you think about it, who's going to use a rectal gel?

This is the parents or the caregiver with a small child. Obviously it's easier, although not necessarily palatable, to do that.

But once you get to older kids and adults, it's really very challenging to use, and what people do is they default and go to the emergency room instead. So we see the value proposition here as one that not only allows a much larger swath of the population actually to have access to the therapy, but also one that potentially could keep people out of the emergency room and have them treat at home or wherever they happen to be.

That's something that we have not shown. It's purely speculative, but it is something that at a minimum you can say it is a more convenient, much more palatable route of administration for this type of rescue for people with cluster seizures.

So our view is that the $100 million that Diastat achieved would be a minimum for what the potential market is for this. And we think it could be significantly more, but we are going to fill that in for you as we complete more of our market research, more of our work, and get further into next year.

Thank you.

Geoff Meacham, JPMorgan.

Hi, this is Carter on for Geoff. Hi Ron. My question relates to the reimbursement dynamics you're seeing in the field. In the past, you've given color on the renewing of your tiering status and highlighted the rollback of PA requirements in some cases. Can you give an update on your progress on these aspects and some color on where you stand today?

Yes, the reimbursement profile, overall, is I would say night and day from what it was a couple of years ago, which was maybe nine months after we launched. And when payers began to impose their prior offs and their formulary regimes and so on.

You may recall that at that time we had some hard sledding for a while. It has been quite stable over the last year and the situation markedly improved in the intervening time. So when we go and we poll doctors or independent groups have polled physicians and they ask about it, the answers are night and day from what we got a couple of years ago.

A couple years ago, a majority were complaining about how difficult it was to get the drug approved. Now, a sizable majority say that it's fine, that access is fine, and that's been our experience out there.

We continue to do our work, by the way. We're still talking to payers; we still are in front of them. There are still a few out there who have harder regimes that we don't believe are constructive or justified. And we have continued to have some success in rolling some of those back.

Overall, I would say that at this point we are in a very stable position with managed care, and that it is not inhibiting patient access to the drug except in isolated cases. Are you still there, Carter?

Great. Thank you.

Raghuram Selvaraju, Aegis Capital.

Thank you for taking my question. Happy Halloween, by the way. Couple of just financial-related things and then one sales-related item.

I just wanted to make sure that you weren't expecting any revenue contribution this year from the products that you brought in from the NeurogesX portfolio. Or if that's indeed not exact the case, do you expect any revenue from those products this year?

Yes, so the only product that is approved and on the market of the ones we brought in is QUTENZA, which is the capsaicin patch, and that still is on the market. We're going to come up to speed on that and get our sales force in good shape to detail that by the early part of the, I'd say by the first quarter, but it's still being sold.

It's de minimus. I don't think people should expect to see anything material this year, but there is some revenue coming in.

Okay. And then the second question was with respect to the effective tax rates, this may be more of a question for your CFO, but I just wanted to know what the effective tax rate was this quarter and what we should expect it to be going forward.

I don't know that off the top of my head, but I'm very happy to get back to you specifically with the answer. Just catching up to speed on the tax piece of this.

No, I think that's an important assumption that we have to make, so we just want to be in the right ballpark.

Okay, I'll follow-up with you after this call.

Thank you so much.

I would now like to turn the call over to Jeff Macdonald for closing remarks.

Thanks. I'll turn it over to Ron for some closing remarks.

Wow, it's a flea flicker play on the field, ladies and gentlemen. Thanks for joining us, happy Halloween, and we'll see you next time.

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