Acorda Therapeutics Inc (ACOR) 2016 Q2 法說會逐字稿

Welcome to the Acorda Therapeutics second-quarter 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. You may begin.

Thank you. 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. For more information on these and other risks, please refer to our filings with the SEC.

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

Thank you, Felicia.

To begin, AMPYRA revenues for the second quarter of 2016 were $122.1 million. That is up 16% from the second quarter of 2015. This represents the 13th consecutive quarter of double-digit year-over-year growth for AMPYRA, which we launched in 2010.

AMPYRA's continued growth is fueling our investment in our late-stage pipeline, most notably CVT-301 in Parkinson's and dalfampridine in post-stroke walking difficulties, or PSWD.

On the IP front, we are defending our patents vigorously. We're preparing for a trial in our ANDA litigation, which is scheduled for September. During the quarter, we reported that the US Court of Appeals denied a request by Mylan for a rehearing of the court's previous decision. That decision upheld a lower court ruling, which allowed our AMPYRA patent litigation against Mylan to continue in Delaware District Court. While the Mylan has indicated that it intends to file a petition for certiorari to the US Supreme Court, this was an important ruling in our favor, and our in-house legal team and external counsel did a superb job in securing this outcome.

Earlier this month, we submitted our responses to the four inter partes review, or IPR, petitions related to AMPYRA patents expiring between 2025 and 2027. We expect a decision from the PTAB on that in March 2017.

Turning to our clinical pipeline, with our acquisition of Biotie Therapies, we obtained global rights to several compounds. Two of these are clinical-stage compounds in development for treating Parkinson's disease, tozadenant, or toz, and SYN-120. Together with CVT-301, these products provide Acorda with the opportunity to become a major force in the treatment of Parkinson's disease.

Post-transaction, we will have a robust, well-balanced pipeline of seven clinical-stage products for indications, including Parkinson's disease, stroke, migraine, and multiple sclerosis.

During the quarter, we announced that PLUMIAZ did not meet the required PK characteristics needed to file an NDA and that we will not be continuing this program. This was disappointing to all of us at Acorda, especially as we had come to know many people affected by seizure clusters who might have benefited. This event underscores the value of having a deep and diversified pipeline, which we have successfully built over the past few years.

Execution is also key to a successful pipeline, and during the quarter we announced that Dr. Burkhard Blank joined Acorda as Chief Medical Officer, after having served as Interim CMO since January of this year. Burkhard has an impressive record of successful drug development across multiple indications. As CMO of Boehringer Ingelheim, he oversaw the submission of five new drug applications, or NDAs, all of which received FDA approval, and we are delighted that he is now part of Acorda's leadership team.

Moving to our late-stage pipeline, we now have three late-stage clinical programs -- CVT-301 and toz for Parkinson's disease and dalfampridine for PSWD, post-stroke walking difficulties. All of these target substantial unmet clinical needs.

With regard to CVT-301, we expect the last patient out of the Phase III efficacy study by the end of this year and data in the first quarter of 2017. Our goal is to file an NDA by the end of the first quarter of 2017, which is an aggressive timeline that is dependent on the timing of the last patient out of the study. More to come on this as the year progresses.

Our clinical trial of BID dalfampridine for PSWD, which is also known as the MILESTONE study, will be clinically complete in the third quarter, and in the fourth quarter we'll provide data from the unblinded analysis of this trial, as well as data from a multidose PK study of our once-daily, or QD, formulation. If the data are positive, we plan to move forward with two concurrent pivotal Phase III trials in mid-2017 using the QD formulation.

Regarding Biotie, we have acquired more than 97% of Biotie's outstanding shares in the tender offer and expect to complete the purchase of the remaining shares in the second half of this year. We look forward to discussing the tozadenant program in more detail once the deal closes. The Phase III toz study is currently enrolling, and if approved, toz has the potential to be the first new class of Parkinson's drug in more than 20 years.

Moving to CVT-427, this is our second pipeline product that is based on our ARCUS inhaled drug delivery platform. This is an inhaled form of zolmitriptan. It is in development for acute treatment of migraine.

We presented data from a Phase I study at the American Headache Society last month and the data showed substantially increased bioavailability and faster absorption, compared to oral and nasal administration of zolmitriptan, in 21 healthy adults. There were no serious adverse events, dose limiting toxicities, or study discontinuations due to adverse events after administration of CVT-427. The most commonly reported treatment-emergent AEs for CVT-427 were cough, chest discomfort, headache, and feeling hot. Apart from cough, single-dose CVT-427 tolerability was generally consistent with the known safety profile of zolmitriptan.

The data showed that median Tmax, or the time to maximum concentration, was about 12 minutes for all CVT-427 doses, and that was compared to 1.5 hours for the oral tablet and three hours for the nasal spray. Although early, we are excited by these data. Migraines are intensely painful and debilitating. People who suffer from them want relief as soon as possible. Triptans are considered the gold standard therapy, and we plan to initiate a special population study in smokers and asthmatics later this year and to advance the program into Phase II in 2017.

I will now ask Mike Rogers to review our financials for the quarter. Mike?

Okay, thanks, Ron, and good morning, everyone. I would like to take a couple of minutes to walk you through some of the financial highlights of the second quarter.

AMPYRA net revenue for the second quarter of 2016 was $122.1 million, a 16% increase over the $105.5 million we recorded for the same quarter in 2015. For the year to date, AMPYRA net revenue grew 17% to $232 million from $198 million for the same period in 2015.

Second-quarter revenue from ZANAFLEX, which includes our own sales, as well as product sales to Actavis and royalties received on Actavis' sale of generic tizanidine, was a negative $700,000. This is the result of a $3 million charge we took based on a change in estimate for future returns.

FAMPYRA royalty revenue from sales outside of the United States was $2.7 million for the second quarter of 2016.

Revenues for the second quarter of 2016, as well as our year-to-date figure, also includes $760,000 of royalty revenue related to sales of Selincro by Lundbeck. As you may recall, Selincro was acquired in the Biotie transaction.

Moving to the expense side, research and development expense for the second quarter was $50.3 million, including $2.6 million in share-based compensation, up from $31.2 million, including $2.2 million in share-based compensation, in the corresponding period last year. This year's second quarter includes Biotie expenses from April 18, the date of acquisition.

The higher expense level in the 2016 period is also attributable to increased investment in our late-stage development programs.

Sales, general, and administrative expenses for the quarter ended June 30, 2016, were $53.1 million, including $6.7 million of share-based compensation, compared to $52.8 million, including $6.5 million of share-based compensation, for the same quarter in 2015. This year's second-quarter SG&A expenses exclude transaction expenses related to the Biotie acquisition. They are shown separately on the press release income statement, and also it includes Biotie expenses from the date of acquisition.

On the tax line, for the six months ended June 30, 2016, our effective tax rate was approximately 35%, which translates to a benefit of $10.7 million for this period. Actual cash taxes paid in the second quarter of 2016 were $2.4 million.

There are a number of factors that could cause significant differences between the effective tax rate shown in our financials and our actual cash tax position. As of year-end 2015, we had available federal NOL carryforwards of approximately $195 million. For this reason, we do not currently pay substantial US federal income taxes, and we adjust for non-cash taxes in our non-GAAP presentation.

In our press release, we provided updated guidance as follows. AMPYRA 2016 net sales guidance remains unchanged at $475 million to $485 million.

Non-GAAP R&D guidance is revised from a range of $165 million to $175 million to a range of $195 million to $205 million. This guidance excludes share-based compensation. The increase in R&D expense guidance is primarily attributable to the addition of Biotie expenses from April 18 through year-end.

Non-GAAP SG&A guidance is unchanged at $195 million to $205 million. This guidance excludes share-based compensation, as well as transaction expenses related to the Biotie acquisition. SG&A guidance reflects the addition of the Biotie operations, offset by reductions in current and projected SG&A expenses.

Finally, we expect to be approximately cash flow neutral for the second half of 2016.

Let me conclude with a brief note on our balance sheet. Our cash position remains strong. At June 30, 2016, our cash and cash equivalents balance was approximately $137.4 million. In addition, in June we completed our asset-based credit facility agreement with JPMorgan. The $60 million asset-based facility is a line of credit based on our receivables, inventory, and machinery and equipment that we can draw on at our discretion, subject to customary conditions.

We have not drawn on this facility to date. We believe our current cash balance, coupled with this new credit facility, provides us sufficient capital to fund our operating plan. And as I mentioned, we expect to be approximately cash flow neutral for the second half of the year.

I will now turn the call back over to Ron.

Thank you, Mike.

So to summarize, we're going to -- we are continuing to grow AMPYRA successfully and we are defending our intellectual property vigorously. Beyond AMPYRA, Acorda now has several late-stage pipeline products for substantial unmet needs in neurology. We are also advancing several additional clinical programs, including a second development program based on our ARCUS platform technology for inhaled drug delivery. The coming 18 months will be pivotal, with multiple data inflection points.

Our key strategic priorities continue to be advancing the clinical pipeline, growing AMPYRA and bringing it to appropriate patients who can benefit from it, as well as defending our intellectual property, and closing the Biotie deal in the second half of this year and continuing to identify assets that diversify our pipeline and leverage our development and commercial competencies in the CNS space.

I will now pass the call over to the operator for Q&A.

(Operator Instructions). Tom Shrader, Stifel.

I -- mostly just modeling questions.

Tom, it's hard to hear you.

Mostly just remedial modeling questions. If you're -- when you unblind the stroke trial and it looks about like Phase II, do you have a sense of how big MILESTONE would be, patients per trial? Is 500 close or can you give us any guidance there?

When you say MILESTONE, Tom, that's the name of the current study. Oh, you're talking about the Phase III trials, right?

Yes, I am talking about the next MILESTONE.

Right. You know what, I don't have those estimates for you right now. We'll have to get the clinical team on that and, obviously, they're going to wait to see the data, and based on that, they will be able to calculate the powering and the numbers. But I just don't have it right now.

So it's highly dependent on what you see at the end of the year.

Oh, yes, it highly depends on what we see, and also, remember, in the MILESTONE study we are looking at two different doses as well. So depending on how those look, we might have two doses in the next trial; we might have one. So that obviously will also impact significantly on the size of the study.

All right, perfect. And then, similarly for CVT-301 as you roll that out, what are your thoughts of a sales force? One of your competitors is guiding to 125 people. Do you think that's close?

Yes, that's close. It's consistent with what we have been telling people for us as well. So remember, we have about 90 sales people in the field right now, and we have told people that we were not going to be close to doubling it, but we would have some increase, and that would wind you up in the ballpark that you are talking about.

All right, so that's total, 125 total?

Yes.

All right, perfect. Thanks a lot.

Salveen Richter, Goldman Sachs.

Thanks for taking my questions. I was just wondering, given your acquisition of Biotie is almost closed, what are your priorities here for the pipeline? Maybe you could just give us a sense of timelines for the toza pivotal program and then clinical development for SYN-120 and 1023, and I do have a follow-up.

Okay. Well, there isn't a whole lot I can tell you about on that, other than what we have said. We have not -- well, with respect to toz, Biotie has publicly available numbers where they have said that they expect the Phase III to be done by the end of 2017.

The caveat there is that until we close, by hopefully the end of the year, we are not -- we are not 100% in control of the company, so it is a bit of a hybrid. So we want to reserve the right after we close to be able to adopt our own numbers, based on our own analysis. But right now, those are the numbers that we are operating with, which are Biotie's numbers, for finishing the trial by the end of 2017.

And then, there is also a safety study or a rollover safety study that goes along with that that we believe would continue beyond the Phase III trial. So we have to take a very close look at that before we can give you guidance that we are comfortable with on things like NDA filing, for example. And hopefully by the end of the year when we close the deal, we will be able to give you more detail on that.

With respect to SYN-120, the team is looking at that right now, and the Biotie team has put out guidance that they expect to see topline data in the second half of 2017 from the ongoing study, and for others on the call, just recall that SYN-120 is a 5-HT2A/5-HT6 dual antagonist, and as such, based on mechanism and based on other products that are being developed with either of those two targets, it has the potential to be targeted to both the affective aspects of degenerative brain diseases, like Parkinson's, for example, as well as cognitive aspects, so, for example, as in Alzheimer's or even cognitive or dementia symptoms of Parkinson's disease.

So, it has the potential to be a dual target for both the psychosis types of symptoms and the cognitive type of symptoms. So in any event, we have a trial -- or Biotie has a trial that is ongoing now. They say or they believe that they will have topline data by the second half of 2017, and once we see those data, we will be able to comment in more detail about where we're going with that program.

In terms of prioritization, clearly for us the key priorities and the ones that we are paying particular attention to, although that's not to say we are ignoring the rest of the pipeline, but the ones that are clearly the priorities are CVT-301, the dalfampridine for PSWD, and tozadenant, those being the later-stage programs. And we are particularly interested in CVT-427 based on the PK data, which we think has the potential to be a very strong readthrough into the desired product profile, which is to say 12 minutes to get to Cmax, median Cmax, versus 1.5 hours for the pill and three hours for the nasal spray. You are talking about the potential for a paradigm shift in how you treat acute migraine if the rest of the program is successful, obviously.

So it is early days, but we are quite excited by what we have seen so far and we are prioritizing that.

Thanks, Ron, that was helpful. And just in terms of PSWD, so you do have a few prototypes there in terms of formulations with QD and BID. What do you need to see to make a go-forward decision? And the BID and QD data coming in Q4, will you present that, and will you present the AMPYRA Phase III data here as well?

I am just -- I think -- I just want to make sure I'm getting all those points. So you are asking about the AMPYRA data. AMPYRA data, you mean the BID dalfampridine data for PSWD? Is that what you're talking about?

Yes.

Okay. So on the QD, we already have single-dose QD PK studies that look very good and we are doing multidose studies now, steady-state studies, to confirm what we saw in the QD. And as long as that is confirmed, then we believe we will have a viable QD formulation that we can take forward for the PSWD program, and that would be the intention.

With regard to the data, remember this is a -- we are stopping the study in the middle and doing the analysis to inform what we hope will be two parallel QD studies, Phase III studies, which will be the registration studies. So the data from -- that we will get in the fourth quarter we expect to inform those studies, but not to be intended to stand alone.

And there are various reasons why we would prefer to -- let's see, how should I put this? There are various reasons why we may not go into tremendous detail on the data, but certainly our intention is to provide enough information on the data so that if we are moving forward, everyone understands why we're moving forward.

Helpful. Thank you.

Michael Yee, RBC Capital Markets.

This is [Andrew Ty] for Michael Yee. Thanks for my question. Can you help us think about the importance of the court cases in relation to the IPRs? Should the PTAB decision in March 2017 bear more importance, because it will determine whether your patent is valid, or should we be thinking that the base case scenario entails you winning both the court case and the IPR in order for you to go beyond 2018? Thanks.

So let me state at the outset that our intention is to win both and we're certainly vigorously defending the patents in both venues.

I really don't -- Andrew, I can't comment or speculate on any aspects of either set of cases, just because of the nature that we are in litigation now and we really can't make any public statements with regard to what one is going to do relative to the other and so forth. All we can tell you is that obviously we are prosecuting both procedures or both processes vigorously and our intention is to defend them successfully in both.

Okay, I understand. Thank you.

Phil Nadeau, Cowen and Company.

First, on the BID dalfampridine post-stroke data that will be released in the fourth quarter, given that's analysis midway through the trial, what type of powering will you have to show a benefit based on the expected effect size? Could you show us a p-value or do you think the trend is more likely, given where the trial is being stopped?

So Phil, I don't know yet what we are going to publicly disclose on that trial, and again, there are various considerations that are in everyone's best interest here with respect to what we discuss and don't discuss.

The trial as a Phase III trial, when we originally designed it, was robustly powered, right, and even at the halfway mark, we think we're going to get very strong information from it that will guide us as to whether or not we can proceed into Phase III. But beyond that, I can't go into more detail than that right now, and we are still discussing internally with the entire team, including, obviously, the clinical and regulatory team, the legal team, and others, and commercial team, what would make the most sense for us to disclose publicly from the study.

Okay, that makes sense. And can you remind me? Are you stopping at the formal interim or was the timing somewhat different than the formal interim?

I am sorry. Say it again?

Are you actually stopping the trial at the interim analysis or did you stop it before the interim was triggered?

No, we are stopping it at the interim analysis (multiple speakers) actually, just because -- you know how the process works. From the time you stop, there is always a bit of a lag, so in fact we are over the midline at this point.

Got it, okay. Then second, on the QD multidose PK testing studies, what is the risk to those studies? Is it that the drug accumulates or is there some other prominent reason that a multidose PK study would look different than a single dose?

I am not a pharmacokineticist, so -- take it for what it's worth. My understanding is that by and large most of what you need to know, you get from the QD study, and that it would be unusual, although not impossible, that in a multidose you might see a surprise.

And just to your point in terms of unexpected accumulations or some other effect that you didn't pick up in the QD once you get to steady state, in general in these sorts of things, my understanding is that the modeling is pretty good. So from based on what you see in the QD, usually you have a pretty good idea of what you're going to see in the multidose.

But having said that, if it were 100% true, then you would never have to do the multidose. So we are doing it to be sure. And it would be considered unusual if we saw something different from what the modeling predicts. But if we do see it, then we will have to figure out why.

Yes, okay, makes sense. On the district court case in the AMPYRA IP litigation, the court case is in September. Can you give us some sense of when we could actually hear a verdict? In cases like this, does the judge typically rule from the bench or does the verdict follow weeks to months later?

Yes, my understanding from having talked to our legal team is that they do not rule from the bench. That would be very unusual. And that it is more likely -- typically, these things actually take a few months from the time of the trial in order to get a verdict.

Now, it varies. It depends on the judge. It depends on the judge's schedule and so on, but as a rule, just historically, my understanding is that you're looking at a matter of months, most likely, after the trial.

And then, one last question, the closing of the Biotie acquisition and your ability to provide more guidance on that trial. Based on the disclosure in the press release that you've had 97% of the shares tendered, is it fair to say that you basically own 97% of the company now and so there is virtually no risk of you taking control? Or is there some sort of (multiple speakers) stuff that has to happen?

So it is fair to say -- we do own over 97% of the company, and because we are dealing with Finnish law, which has quite a few quirks or features that are a bit unusual from an American securities point of view, even though we have 97%, we cannot treat it as though we actually 100% own it. We have to finish the process in order to be free and clear on that.

So, we are certainly allowed to have close interactions and we do, obviously. So, we are very close to acting as though we own it, but until we finish the acquisition to 100%, we cannot represent that we actually own it.

Got it. Okay, that makes sense. Thanks for taking my questions.

Mark Schoenebaum, Evercore ISI.

This is Mike DiFiore in for Mark Schoenebaum. Thanks for taking my question and congrats on continued success with AMPYRA. A couple questions, just number one, you said at a previous broker conference that as time goes on it is increasingly harder to get more patient adds with AMPYRA. So the first part of the question is, what are the plans to ensure a continued or sustained AMPYRA growth? And if you could maybe provide some insight into Q1 to Q2 inventory movements, as well as any gross to net changes, and I do have a follow-up.

Okay, great, so let me maybe take the last point first and work my way back. So inventories are -- no change. We have always said it is approximately two weeks and it is still approximately two weeks. At this point, I would say we have very good tight control over inventories and that's stable.

With respect to the growth, I have to say that our commercial team is hitting it out of the park here, because we are in our seventh year post launch and we are still showing nice organic growth in terms of actual prescription growth, in addition to any impact of price. So, they are being very creative about how they reach these patients, and what I have said that you alluded to remains true. It does become much more challenging over time to find those people who have not, for whatever reason, either heard your message or acted on your message.

And so, you have to keep finding ways of reaching into the community to make them aware that they have this option and also to motivate them to try it, if they're are appropriate for the drug.

So our commercial team, between marketing and sales and, by the way, the supportive functions in managed markets and medical and medical education and so on, have collaborated with each other very closely and they keep finding ways to do that, including a very strong digital marketing presence. So we're making use of the most advanced technical tools that we can to reach people on a cost-effective basis, as well as good old-fashioned elbow grease on the sales force, where they are just finding more and more ways of creatively getting in front of the prescribers, getting in front of the patients, and making an impact in terms of alerting them that AMPYRA is an option that they may want to consider.

So, so far, so good, and we are continuing to do that. We are not resting on any laurels. The team is continually coming up with new ways of leveraging the technologies that we have available to us to come up with new and better ways of getting the message out.

Okay, thanks for that. And my follow-up is that in the past you have consistently said that -- and this is in regards to CVT-301 and how we should think about modeling it. In the past, you have consistently said that Cynapsus' drug is incorporated into your peak sales assumptions and that it has a -- you assume significant minority share, and because of this that you claim that perhaps the market could be substantially larger than the $500 million in peak sales. Could you provide any color on what your ballpark assumptions may be for Cynapsus' pricing and/or market share?

No, I cannot. (laughter). We are not -- we don't speculate publicly about what other companies are going to be doing in the marketplace and so on. We certainly have our own internal assumptions and what we give you is our part of that.

So when we say we are comfortable telling you greater than $500 million in peak sales, that's for CVT-301. And, sure, we have internal assumptions about the whole market and what share a competitor might get, but we're not really comfortable speaking for a competitor publicly. That should be left to them.

I understand. Okay. Thank you very much. I appreciate your time.

Robert LeBoyer, Aegis Capital.

Thanks for taking my question and congratulations to the team on the results for the quarter.

My question has to do with AMPYRA and the competitive environment. You have already discussed the IP defense and some of the things going on at the District Court with the inter partes review. Are there any other products that you see as potentially competitive or anything that would be used in collaboration with AMPYRA? Specifically, there was a trial in MS walking disability that used amantadine in which all drugs were -- just about all drugs were allowed, with the exception of AMPYRA.

So, could you just comment on that and the possibilities for the competitive environment going forward?

Sure. Other than the product that you are referring to, we are not aware of any other competitive products that are on -- that are any realistic time horizon for improving walking in MS. The product you are referring to, which is an amantadine-based product, had a Phase II study with some intriguing results on timed walk.

Having been here before and having taken 15 years to get AMPYRA through its program and approved, I can tell you that getting compelling data for the walking outcome and the clinical meaningfulness of the walking outcome is -- it requires a robust Phase III clinical program. And it remains to be seen how that is going to play out.

Meanwhile, AMPYRA has become the standard of care with neurologists for improving walking. They have a great deal of experience with it now. They're comfortable with the profile and its impact, so at this point I think it is safe to say that any new product in the market is going to have to not only demonstrate on its own that it is providing a clinically meaningful benefit, but it will also in the marketplace have to convince people and prescribers about why they should switch or whether they should add it or how it interacts with the standard, the gold standard of care, which is AMPYRA.

Okay, thank you very much.

I am showing no further questions at this time. I would now like to turn the call back over to Dr. Ron Cohen for closing remarks.

Thanks very much, Operator. Thank you all for joining us for the quarter. As I mentioned, the coming 18 months are filled with significant milestones and inflection points as we redirect the Company and look at creating a very valuable company regardless, really, of -- apart from the AMPYRA situation.

As I have said, our intent is to go in and come out with AMPYRA intact and our intellectual property intact, and we have built a robust pipeline now with multiple shots on goal for a very significant product. So, looking forward to this ride with you over the next 18 months as we roll out these data sets, and we will see you on the next call. Have a great weekend.

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.