Acorda Therapeutics Inc (ACOR) 2015 Q4 法說會逐字稿

Welcome to the Acorda Therapeutics 2015 fourth-quarter and year-end update.

(Operator Instructions)

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, Felicia Vonella, Executive Director of Investor Relations at Acorda. Please go ahead.

Good morning. Before we begin, let me remind you that this presentation includes forward-looking statements. 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. For more information on these and other risks, please refer to our filings with the SEC.

With me today are Dr. Ron Cohen, our President and Chief Executive Officer; and Mike Rogers, our Chief Financial Officer. I will now turn over the call to Ron.

Thanks Felicia. Good morning everybody. Welcome. We will start with AMPYRA today. AMPYRA results continued to be strong in the fourth quarter as we continued outstanding performance by our commercial team, which insured that patients and their healthcare providers are educated about AMPYRA.

AMPYRA reported fourth-quarter net sales of $122 million, which was an11% increase over the fourth quarter 2014. And for the full year 2015, net sales were $437 million, which is up 19% over 2014. AMPYRA has now become a standard of care for MS-related walking difficulties. For 2016, we are guiding to AMPYRA net sales of $475 million to $485 million.

Regarding the ANDA litigation, we've now settled with four of our 10 ANDA filers for AMPYRA, most recently with Par Pharmaceuticals earlier this year. There is a Markman hearing scheduled for March 7, and that will be followed by a trial scheduled for September. We also expect in March the PTABs decision on whether or not to institute the four IPRs that were filed by a hedge fund at the end of last year, two of which were filings on the same two patents that were the subject of their previous IPRs that were not instituted.

Moving to our recent announcement of our acquisition of Biotie Therapies, we view this acquisition as a major step in our plan for driving shareholder value. Tozadenant or TOZ is an adenosine A2a receptor antagonist. A2a receptor antagonists have the potential to be the first new class of new drug for Parkinson's in over 20 years. TOZ adds a fourth Phase 3 asset to Acorda's pipeline for a total of eight clinical stage programs. If successful, we expect to file three NDAs by the end of 2018, representing an aggregate of more than $1 billion in US peak sales.

Our acquisition of Biotie also brings additional assets, most notably SYN120, which is a 5-HT6/5H2a antagonist. That is Phase 2 trials for Parkinson's disease dementia, and it is Phase 2 ready for Alzheimer's dementia. TOZ leverages our outstanding neurology commercial organization. We anticipate an incremental expansion of the sales force if CVT-301 is approved and no further expansion needed to accommodate TOZ. We expect the deal to close in the third quarter of 2016.

We have summarized here the key aspects of tozadenant that make us excited about the opportunity. The Phase 2b trial showed statistical significance and clinically meaningful reductions in OFF time in people with Parkinson's, and this is very important, who were already being treated with multiple other Parkinson's disease therapies. The drugs also showed improvements in secondary endpoints relative to placebo, and there were no concerning safety signals. The product is currently in Phase 3, and it's highly complementary to our other Phase 3 product for Parkinson's, CVT-301.

TOZ is aimed at improving chronic therapy and reducing overall OFF time. CT-301 is aimed at rapid improvement of OFF periods when they occur. Very nice complementarity, and the Phase 3 design for TOZ is similar to the Phase 2b. It's being conducted under a special protocol assessment or SPA, and we believe this trial together with the Phase 2b data will be provide sufficient efficacy data to file the NDA. We expect the NDA filing by the end of 2018. On the IP side, TOZ has patent protection through 2025 with a potential for patent term extension to 2030.

Regarding the safety data, some of the treatment emergent adverse events were generally dose-related. Notably, those were dyskinesia, GI effects and insomnia. The overall incidence of serious adverse events was generally low. There were six deaths reported within three of the four tozadenant groups. There were none in the 120 milligram group or the placebo. The causes included two cases of sepsis, a sudden death associated with Pickwickian Syndrome, multi-organ failure due to head trauma, a bowel perforation and a pulmonary embolism. The Drug Safety Monitoring Board or DSMB and also a second panel of experts who reviewed the data identified no relation between treatment with TOZ and serious adverse events or deaths.

With TOZ, we're in a strong position of having four late-stage clinical programs: CVT-301 and TOZ for Parkinson's, PLUMIAZ for seizure clusters and dalfampridine for post-stroke walking deficits. All of these target substantial unmet clinical needs as illustrated on this slide. We expect important clinical milestones in 2016 for three of these late-stage programs, including completion of pivotal trials for CVT-301 in Parkinson's and for PLUMIAZ in seizure clusters. If successful, we plan to file NDAs for both in 2017.

We project these two therapies alone could generate combined peak sales of over $700 million. We also expect to perform an interim analysis on our Phase 3 trial of dalfampridine for post-stroke walking deficits as well as to have results from our development efforts on a once-daily formulation of dalfampridine. We expect to update you on the once-daily formulation by the end of this quarter.

Here is a snapshot of what the pipeline will look like assuming successful closure of the Biotie deal. Post transaction, we will have a robust well-balanced clinical pipeline of eight clinical stage products, four in Phase 3, two in Phase 2 and two in Phase 1. I will now turn the call over to Mike, who can review the financials with us.

Thanks Ron and good morning everyone. I want to take a couple minutes to walk you through some of the financial highlights of the quarter and full-year 2015.

AMPYRA net revenue for the fourth quarter of 2015 was $122 million, an 11% increase over the $109.9 million we recorded for the same quarter in 2014. For the full year 2015, AMPYRA revenue grew 19% to $436.9 million from $366.2 million for the full year 2014.

Overall revenue from Zanaflex for the full year was $35.1 million, including our own sales as well as product sales to Actavis and royalties received on Actavis sales of generic tizanidine. Net revenue for Zanaflex for the full year ended December 31, 2015 includes a one-time adjustment of $22.2 million representing the cumulative impact of the Company's conversion from the sell-through to the sell-in method of revenue recognition. FAMPYRA royalty revenue from sales outside of the US was $10.5 million for the full year 2015.

Moving over to the expense side, total operating expenses for the quarter ended December 31 were $127 million including $8.7 million in share-based compensation expense. This compares to $116.7 million for the same quarter in 2014, which included $8.8 million in share-based compensation expense.

Full-year operating expenses for 2015 were $458.7 million including $33.5 million in share-based compensation, and this compares to $365.1 million for the full year 2014, which includes $29.4 million in share-based compensation. The increase in operating expense this year over last year is primarily related to increased R&D costs to support our ongoing clinical development as well as the addition of cost associated with our facility and operations in Massachusetts acquired in the Civitas transaction in the fourth quarter last year.

Briefly on the tax line, for the full year 2015, our effective tax rate was 43% or an $8.3 million tax provision. However, cash taxes for the full year 2015 were $4.7 million. There are a number of factors that can cause significant differences between the effective tax rate shown in our financials and our actual cash tax position. As of year-end, we had available federal NOL carry forwards of approximately $194 million. For this reason, we do not currently pay substantial US federal income taxes. And we adjust for the non-cash taxes in our non-GAAP presentation.

Finally, our cash position remains strong. At year-end, we had $353 million in cash, cash equivalents and investments. Subsequent to year-end, we completed a $75 million equity offering. We also signed a commitment letter with JPMorgan on an asset-based credit facility for up to $60 million, which we expect to close by the end of March. In addition, at the time of the acquisition announcement, Biotie had approximately $80 million in cash on their balance sheet. Following the closing of the Biotie transaction, we expect our existing cash combined with the net proceeds from the private placement of common stock, the cash balance of Biotie, any cash flows from operations and the availability under our asset-based credit facility will be sufficient to fund our ongoing operations.

Moving to financial guidance, we provided our guidance for 2016 earlier this year at the JPMorgan conference, and please note this guidance does not include potential expenses related to the acquisition of Biotie Therapies. The Company expects AMPYRA 2016 full-year net revenue of $475 million to $485 million. R&D expenses for the full year 2016 are expected to be $165 million to $175 million excluding share-based compensation. SG&A expenses for the full year 2016 are expected to be $195 million to $205 million excluding share-based compensation. Let me now pass the call back over to Ron.

Thanks, Mike. 2016 will be rich in clinical milestones extending into 2017. We've listed the key milestones here. We look forward to updating you as we execute on these.

In closing, our key priorities for 2016 are first, advancing our pipeline. We see enormous potential value there, and we are focused on it as a top priority. We will also continue to focus intensively on growing AMPYRA and bringing it to appropriate patients who can benefit from it as well as vigorously defending our intellectual property. And we're going to work to close the Biotie deal as soon as feasible. We are still active on the business development front. We believe we can continue to build value by identifying assets that leverage Acorda's competencies in the CNS space.

I will now pass the call over to the operator, and we will take your questions for answers.

(Operator Instructions)

Michael Yee, RBC Capital Markets

Good morning Ron. I had two questions.

Mike, it's hard to hear you. Hold on.

Can you hear me okay?

That is better.

On the Biotie deal real quick, could you give a little bit of context as to the timing and why now, strategically how you're thinking about this because your Civitas data doesn't come till the end of the year. I just want to understand why now given the overall market conditions and everything else going on? Why now and what do you add to this deal by doing it now as opposed to waiting?

The second question was on 427, which you maybe hit on a little bit that there's data coming. Can you describe exactly what you're looking at here and what you're going to report out and what would drive a decision to go to Phase 2? It says update this quarter, but maybe just describe that a little bit. Thanks.

Sure. Why now? I guess that is always a challenging question. The reality is, at least in our experience, you never can predict when the right deal is going to come along. I don't think of it in terms of why now because you can look for a year or two years and not find the right deal. And in fact, that has been the case for us.

We sift through dozens and dozens of opportunities, many of them we take deep dives into in the course of a year. So when something pops up that we think is a great fit and can really synergize with the other pieces of the Company and really potentially take shareholder value to another level down the road, that's the time to do the deal. If you don't do the deal when you find it, you don't know when you will find it again. As is probably obvious, we were working on this deal before the recent market [ructions]. It was just a matter of coincidence that we wound up closing it as things were getting more swirly in the market.

But the reality is, I think if you look at the market to determine when you do deals, you're going to lose time and time again. You have to do deals based on the logic of the deal, on the availability of the deal and on your conviction that over time, because the markets come and go and they go up and go down, but that over time you're going to have a major value proposition. That is what our belief is about Biotie, and that's why we did the deal.

Was it competitive? Or can you add something to it between now and ADA that makes sense to why you should do it now?

Without getting into details about competitive or not competitive, I don't think it's a question -- first of all, we can add to it because we bring another set of tremendous development expertise and eyes to this and infrastructure that Biotie did not have. And maybe more than anything, one of the best commercial organizations I think in all of specialty in our industry. That adds a lot of value to preparing to make it as big a product and as important product as it can be.

That is really -- the other point is again, it's not a question of what do we add to it now in my mind. It's a question of we are looking to add value to the Company. When we find something that does that, we jump on it because if you wait a month or three months or six months, by the time you come back, likely as not, it will not be there anymore. That's really the logic.

In terms of 427, we're just starting out with that program. It's potentially quite exciting because are looking at getting -- one hopes with ARCUS inhaled technology a much faster absorption and PK curve than you can get through any means other than injection for relief of acute migraine pain.

We are doing a single dose PK study right now. We've done a single dose PK study, we are analyzing the data. We expect by the end of the quarter to be able to say something about that analysis. Again, we won't be saying a lot. I think on balance, what we're looking for is do we see enough that is encouraging that we're going to continue to the next phase?

Thank you.

Mark Schoenebaum, Evercore ISI.

Hi guys, thanks for taking my call and for the good quarter. A couple of questions. Number one -- sorry, this is Mike DiFiore in for Mark Schoenebaum. A couple of questions.

Can you clarify how much the tozadenant Phase 3 trial will cost and if this will be sufficient for EU approval? And the second is, could you comment on -- I know you said guidance for 2016 does not reflect the anticipated expenses for the Biotie deal and when we could expect any updates or more color on that for the remainder of the year.

Okay, Mike. I will address the tozadenant for EU approval, and then I will turn the financial question over to Mike. We're still assessing the EU requirements on TOZ and what will be needed for that.

What we know is that we have an SPA, and our strong belief is that the Phase 3 under the SPA will be sufficient together with the existing Phase 2b data to file the NDA in the US. We have more to do before we can comment on the EU, but I will tell you that we are very interested in worldwide activity with TOZ in addition to the US.

Mike, on the question about the costs for tozadenant or Biotie's operation, I would say that without being specific, we believe it's roughly in line with Biotie's public disclosures that they have sufficient cash to complete the Phase 3 program and invest in their other pipeline programs. As far as an update on guidance, that is likely to be post the closing of the transaction because we don't know exactly when the transaction is going to close. It's a tender offer, but once we close the transaction, then certainly we would update guidance.

Okay great. Thank you.

Cory Kasimov, JPMorgan.

Good morning guys. Thanks for taking the question. Two of them for you.

First of all with regard to the AMPYRA Markman hearings next month, can you help us shape expectations as far as the news flow we should anticipate out of these events? How much incremental information should we expect in March relative to the pending trial in September? And I have one other question.

Cory, I'm sorry, we're not able to comment at all on things that have to do with the case other than to tell you what will happen. Obviously there's going to be a Markman hearing, which is essentially claims construction. An people will figure out what they want to from that hearing.

We also have the institution decision by the PTAB on the IPRs, on the four IPRs. Beyond that, we're limited in anything we can say publicly because as I know you appreciate, we're in litigation and we want to make sure we keep every advantage possible.

Okay, completely understood. Regarding the pending QD dalfampridine update, how many different formulations would you ideally like to take forward? Or is it trying to focus on one?

Ideally we would like one that works really well. What we're doing is we are doing belt and suspenders because we don't know which one if any is going to be -- have the ideal characteristics. We took three of the formulations that we had developed with three different collaborators -- they look good enough in the in vitro testing to take into single dose PK.

What we have said is that by the end of the quarter, we will have an update on the single dose PK for those three formulations. And what we will be able to tell at that point is whether one or more of them is adequate to then go into the more or less final stage of testing, which would be the multi-dose stable dose testing phase. But of course, the -- absolutely critical is to get the right PK curve and right food fasting effect in the single-dose studies. That's what we will be able to report by the end of the quarter.

Okay, thanks a lot, Ron.

I should remind everyone that all of the formulations have already passed muster on the alcohol dumping, which was the issue we had with the previous formulation. We are confident at this point that none of them will have an alcohol problem.

Tom Shrader, Stifel.

Good morning. A little bit of a change of language, I thought, in your prepared remarks. Ron, is the dalfampridine look, is that back to an interim look, or do you still expect to really unblind that trial and start a new trial? Have thoughts changed, or is it just the same?

Yes, Tom. I guess it's important to separate it out here. What we have said all along is that the plan from the beginning was we designed this Phase 3 to be an adaptive design with a built-in interim analysis. That is the original plan, and that's the plan that we have taken forward.

We have said in more recent months is that we could, depending on a number of factors importantly including the availability of QD, that we could make a decision different from the original plan, which would be to unblind the study, and there are various reasons why that could make better sense. That is all still on the table.

But when we put in our formal remarks, rather than get into the complexity, we would just stick with what we've said all along, which is the original plan for the study. But that is still very much on the table and is still going to depend on where we are at the time of the interim analysis.

Okay. Can we read -- will you continue with patients in either way so you would get more safety data, longer safety data with these new patients?

Yes, well, no. The plan would be either way, if you have those patients on drugs, you take advantage of it by keeping them on drug. Of course, there is also an ethical obligation that if people have volunteered for studies and they want to stay on the drug, that you supply that for them.

Okay. On 427, what do you need to see to convince yourself that it's better than nasal triptans, and what level -- when do you expect to see that? Would you learn that in Phase I?

We will certainly get good indications from the PK. If what we see is identical to nasal formulations, that's not as encouraging as if we see something faster and better.

So really the key is better than nasal? Or faster than nasal?

I want to say, it's not a black and white here. It's a question of relative. There are still potential advantages to having a rapidly, easily inhaled drug device combination versus the problems that people have with the nasal preparation.

There are actually issues with the nasal. For example, they tend to drip in the back of the throat and have horrible bitter taste. For people who already have a lot of nausea and vomiting, it's not very well accepted. Even if it were identical on a commercial basis, we would be analyzing that to see whether it still made sense as a product because there still could be advantages in the marketplace for that.

Okay. And one quick financial question. Post closing of Biotie, should we expect cash of around $200 million? Is that a fair question?

Obviously it's going to depend on when the closing is of the transaction. The math is pretty simple. We have $353 million, add $75 million. We have access to $60 million. Biotie had $80 million, and when you add it up and subtract the purchase price, you can come up with a pretty good number.

Time is relevant because right now they are obviously a development stage company and they are spending money. When it's finally completed will be the determinant. We can't go much beyond that. If we had a date certain, we could give you more certainty, but we will see how the tender offer plays out.

Thanks a lot for the answers.

Phil Nadeau, Cowen and Company.

Good morning, thanks for taking my questions. First on AMPYRA guidance, if I simply annualize the Q4 AMPYRA number, you get above the top end of the guidance. Are you assuming a big disruption in Q1 like we've seen in prior years? Or is there some other factor that we should consider as we model 2016?

No other factors, Phil. As usual we expect the traditional drop-off in the first quarter. So that is baked into our projections.

The other thing about our projections is it's important to also understand on the 11% price increase, we keep about 60% of that after D&A and so on. So let's say that's really 6% or 6.5%, something like that, so you have to bake that in. When you do that, you see that our range calls for low to mid- actual organic TRx growth, low to mid-single digits.

Got it, okay. Second question on forward guidance, I appreciate that you're not in a position to give guidance post the Biotie close today. On the numbers that you suggested for the Phase 3 cost, it seems like R&D would have to go up pretty significantly in 2017 and 2018. Is that fair? Or am I being overly aggressive?

I think it's fair to say in 2017 that R&D because of the Biotie transaction will be incrementally higher. I don't know if that answers your question. We're not being more specific than that on certainly for future guidance.

Not to put too fine a point on it, but we're adding a significant Phase 3 program plus a Phase 2 program. Yes, expenses will go up commensurately. And by way of reminder, Biotie comes with its own balance sheet that they have publicly indicated is sufficient to complete the Phase 3 program and continue to invest in the other programs.

Great. My last question on the recruitment into the PLUMIAZ and CVT-301 Phase 3 trials. Any specific update on how that recruitment is going? It sounds like you've reiterated the time lines, but do you think you are ahead of schedule or on schedule?

As you know, Phil, we never comment on recruitment on an interim basis. We just give our targets and update them as needed or not. As you correctly indicated, we kept our targets.

Okay, fair enough. Thanks for taking my questions.

Bill Tanner, Guggenheim Securities.

Thanks for taking the question. Ron, had one question or a line of questioning I guess on the [PD] activity. You're obviously building out a pretty robust PD franchise, but if I look at TOZ in your slide deck, 2025 is when exclusivity ends, patent restoration possible. But let's say 2025, so relatively modest horizon after the drug is launched.

I don't know if you could remind us on CVT-301. I know in your SEC filings there is a comment about patents going out to 2032 I think the latest. What's a reasonable timeline? Point being, are there other assets that you see out there on the PD front that would be complementary to how your building out the PD franchise, either thinking about it from different aspects of the disease spectrum or secondly trying to extend the average market exclusivity of the franchise? Or would there be opportunities for you to acquire assets to let you forward integrate into that market?

Thanks Bill. A couple of points. First of all on the TOZ exclusivity timeline, the current composition to matter patent goes out to 2025. We believe that we are likely to get the five years -- full five years of patent term extension which would take it to 2030.

Obviously you can never guarantee, but there are formulas, there is historical precedent and based on available information, we have a reasonably high degree of confidence that we will qualify for the full five years. That is the first point to factor in.

With regard to CVT-301, yes, the patents I think we said go out to the early 2030s. You said 2032, but I would have to go back and double check. I think that is right.

What's also important to realize with that is there is some built-in significant hurdles for others to enter the market over and above the patents. The whole drug device combination and in particular the nature of the ARCUS technology is such that it requires enormous investment not only of money but of time and experience and very specific manufacturing plant configurations and equipment to get it right. We think those hurdles are enormous and highly likely to give us exclusivity beyond and maybe well beyond anything you could see in a patent. We have a lot of confidence in that one.

To your third part of your question, yes, we do see other products that could help us consolidate a growing position as what we like to consider a powerhouse in the Parkinson's space. We're continuing to evaluate those.

And Mike, those then include things that are either in market or near-term market? And if you could speak specifically to that, it seems like that might make some more sense versus --

Yes. We have said strategically that in terms of business development activity, our highest priority is actually to see if we can find an in-market product that we can put in the bag for our sales force. They are terrific, right now they have one product. They easily have capacity for more while we're waiting for the pipeline to hopefully successfully declare itself.

We're looking for that. Those are harder to come by, full stop, but we are continuing to look for those opportunities. And we're continuing to look for Civitas or Biotie-like opportunities, late stage products where we can still add a lot of value and hopefully get them for a reasonable or even unreasonably low price.

And then I hasten to add that even though we are now consolidating a really interesting position in Parkinson's, we remain a neurology company. We're not only interested in Parkinson's. Obviously we have a dominant franchise in improving walking in MS. We're very interested in other areas of neurology as well so that our scope is wide enough that we can entertain a lot of opportunities out there.

Great, okay, thanks.

Chris Raymond, Raymond James.

Good morning. This is Laura Chico in for Chris Raymond today. Thanks for taking my question.

I wonder if we could circle back to PLUMIAZ. I noticed the dose proportionality study is now listed and recruiting on clin trials. I would if you could talk a little bit about the communication strategy. The timing for the NDA filing looks to be on track for 1Q 2017. I know you don't want to elaborate on recruitment or anything like that, but what should we be thinking about in terms of data release for the top-line data? Thanks.

You know what? I don't want to tell you the wrong thing. I don't know, and I don't have in my head a timeline or specifics on that. We're going to have to -- I will have to defer the question.

We are on track for our Q1 2017 NDA filing. And historically when we have data analyzed and ready from a trial, we release the top-line data. That is the best I can tell you right now.

Thanks very much.

I'm showing no further questions at this time. I'd like to turn the call back to management for closing remarks.

Thanks very much, everyone, for joining us. We look forward to updating you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.