Acorda Therapeutics Inc (ACOR) 2016 Q4 法說會逐字稿

Welcome to the Acorda Therapeutics' fourth-quarter update.

(Operator Instructions)

Please be advised that this call is being taped at the Company's request.

Let me pass the call over to the host of the call, Felicia Vonella, Executive Director of Investor Relations. Please go ahead.

Thank you, good morning. With me today on the call is Ron Cohen, our President and CEO; Dave Lawrence, our Chief of Business Operations and Principal Accounting Officer; and Rick Batycky, our Chief Technology 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. For more information on these and other risks please refer to our filings with the SEC. I will now pass the call over to Ron Cohen.

Thanks, Felicia. Good morning, everybody. We reported full-year Ampyra net sales of $493 million. That's a 13% increase over 2015 and that reflects the continued unmet medical need among people with MS for treatment to improve walking. Our guidance for 2017 Ampyra net sales is $535 million to $545 million. You can see here the a nice uptake curve since launch.

Regarding our IP defense, we are awaiting a decision on the ANDA challenge and last week we settled with one of the four remaining litigants. We have now settled with seven of the 10 filers and three remain. We expect a decision on the IPR on or before March 11.

Moving on to CVT-301. We announced Phase 3 data last week. The trial hit its primary outcome measure of improvement in motor function as measured by the UPDRS Part 3 in people with Parkinson's Disease who are experiencing off periods. The primary endpoint was measured at 30 minutes post treatment for the 84 milligram dose at the 12-week visit. And the UPDRS change was negative 9.83 compared to negative 5.91 for placebo. The P value on that was 0.009.

The magnitude of CVT-301's benefit versus baseline was consistent with our Phase 2b data and represents a moderate-to-large clinically important difference. The placebo-adjusted difference was lower in the Phase 3 than in the Phase 2 but it still represented a clinically important difference, and again, was significant at P 0.009. We plan to submit data from both the primary and secondary outcomes for presentation at the MDS meeting in June.

Overall, the safety profile of CVT-301 in this study was consistent with that observed in the Phase 2b trial. Spirometry and DLCO, which is the diffusing capacity of the lung for carbon monoxide, showed no notable pulmonary safety signals.

The adverse events reported in any study arm at greater than 5% were cough, upper respiratory infection, throat irritation, nausea and sputum discoloration. When cough was reported it was typically mild and it was reported only once per participant during the entire course of treatment. Three of the 227 participants receiving CVT-301 discontinued the study due to cough.

The reports of serious adverse events were three or 2.7% in the placebo arm, six or 5.3% in the 60-milligram arm, and two or 1.8% in the 84-milligram arm. There was one death in the study. It was a suicide in the 60-milligram group that was judged by the investigator not to be related to drug.

We are also conducting two studies to assess the long-term safety profile of CVT-301. Data from those studies are expected in the next few weeks.

So our guidance for net sales for Ampyra in 2017, again, is $535 million to $545 million. Our R&D guidance is $185 million to $195 million. That is a decrease from last year, as several of our trials have wound down and a large portion of R&D represents pre-commercialization activities, including manufacturing for CVT-301.

SG&A guidance for 2017 is $195 million to $205 million and that is flat from 2016. I will now turn it over to Dave who will review the financials.

Thanks, Ron, and good morning, everyone. I will now review some financial highlights for the fourth quarter and full year ended December 2016. Beginning with revenue. Ampyra net revenue for the fourth quarter of 2016 was $132.3 million, an 8.4% increase over the $122 million we recorded for the same quarter in 2015.

For the full-year 2016 Ampyra net revenue grew 12.8% to $492.8 million, up from $436.9 million for the same period in 2015. Ampyra royalty revenue from sales outside of the US were $2.7 million for the fourth quarter and $10.6 million for the full-year 2016.

Moving to expenses. Research and development expense for the fourth quarter of 2016 was $53.8 million, including $3 million in share-based compensation, up from $44 million, including $2.2 million in share-based comp for the same quarter in 2015. R&D expenses for the full-year 2016 were $203.4 million, including $10.6 million in share-based comp, up from $149.2 million, including $8.5 million in share-based compensation for the full-year 2015.

The increase in R&D expenses in the fourth-quarter and full-year 2016 is attributable to R&D expenses for Biotie, and increased investments in our late-stage development programs. The final steps in closing the Biotie acquisition were completed February 9 of this year.

Sales, general and administrative expenses for the fourth quarter of 2016 were $59 million, including $6 million of share-based compensation compared to $53 million, including $6.5 million of share-based comp for the same quarter in 2015. SG&A expenses for the full-year 2016 were $235.4 million, including $25.8 million in share-based comp, up from $205.6 million, including $25 million in share-based compensation for the full-year 2015. These fourth-quarter and full-year SG&A expenses for 2016 include transaction expenses related to the Biotie acquisition which is shown separately on the press release income statement.

For the fourth quarter of 2016, we recorded a net tax provision of $1 million. However, cash taxes in the fourth quarter were $0.7 million. There are number of factors that can cause significant differences between the effective tax rate shown on our financials and our actual cash tax position. We have available federal NOL carry-forwards of approximately $268 million as of year-end 2016 which are available to offset future taxable income subject to certain limitations. For this reason, we currently do not pay substantial US federal income taxes.

I will conclude with a brief note on our balance sheet. Our cash position remains strong. At year-end 2016, our cash and cash equivalents balance was approximately $159 million. I will now turn the call back over to Ron.

Thanks, Dave. This slide summarizes key upcoming events over the next year. These represent multiple opportunities for creating shareholder value. Our major focus in the near term is going to be on submitting the NDA for CVT-301 in the second quarter, pending positive long-term safety data.

With that, I will wish you all a Happy Valentine's Day and pass the call to the operator for Q&A.

(Operator Instructions)

Mark Schoenebaum, Evercore ISI.

Hey, Ron and team. First off, thanks a lot, Felicia, Jeff and everybody, for all the help while I was out. You really helped the team, really appreciate it.

Ron, I thought I would -- I'd love to hear you talk about the political environment we're in around, specifically, drug pricing. I know you were real involved in Bio, so I don't know on this call if you can wear your Bio hat or you can wear you Acorda hat or just wear your Ron Cohen hat. But I would love to hear you talk about where we are, what you think is going to happen, if anything. And what do you think should happen? I think you're probably closer to this than 95% of the CEOs that have done calls in the last -- of their companies in the last month. Thanks a lot, Ron.

Thanks, Mark, and welcome back. We missed you.

No, you didn't, but that's okay.

(laughter) I'm limited on a call like this in what I can say. My overall take is look, no secret here, the industry is under a huge amount of pressure, has been for the last couple years now, on pricing and access issues. This is one of those issues that is systemic. Although the industry does have responsibilities here, without question, it is also the case that there is an ecosystem in which we operate that includes quite a few third parties that play a very significant role. And that includes the PBMs, the insurers, the pharmacies, distributors, hospitals and so forth.

So we have been making that case and actually looking to find common ground as much as possible with the other parties. Because I think what we have seen is that we started out over the last couple years with a lot of finger-pointing across the different pieces of the system. That doesn't help anyone and it just gives external parties much more fuel for attacking everybody.

The reality is that our industry provides something extremely vital. The US is still producing almost 60% of all innovative drugs. If you think about it, that's 50% more than the rest of the world combined. So I can tell you that our political leaders, on balance, understand that and don't want to hurt that; they want to make sure that the US remains the leader in those areas. That is a very good thing and that gives us a foundation for having constructive discussions.

So we have been reaching out to other parties in the ecosystem to talk about not finger-pointing but how can we present reasonable proposals that will benefit everybody? And also, frankly, keep the prime directive in mind which is in addition to the fact that we are all, or most of us, are companies that need to show a profit eventually. We are working on behalf of people who are sick, and those people could be our own family members, let alone everyone else in society.

So the prime directive is for us all in this ecosystem to keep in mind that our responsibility is that once we innovate these drugs, making sure that people have access to them. So I'm actually not pessimistic. I would say I'm more optimistic now than I was a year ago about our prospects for getting to a place that preserves our ability to innovate, to make a fair profit off that kind of contribution and value and at the same time, improve the system so that we get more trust from the public and the government back in the industry.

It's not going to happen overnight, it's going to take a while. But I see forces coalescing now that are beginning to put us on the right road. And if you look, most recently today, obviously the most active story in this space in the last few days has been deflazacort and I was very pleased to see that the Marathon management took a pause today, responded to the concerns that they were hearing. And we're looking forward to hearing from them.

But that is the sort of response that is helpful, right? Because it says that our industry is in fact interested in doing the right thing and putting patients first.

Thanks so much, Ron, I appreciate it. Looking forward to this year, to watching Acorda this year. Take care.

Phil Nadeau, Cowan and Company.

Good morning, thanks for taking my questions. First question is on the timing of the AND District Court decision. I think in January your guidance was for that decision to come Q1. Now it looks like from the slides, it's more like H1. How much visibility do have on the timing of that decision? And what, if anything, led to the change?

Yes, Phil, we have no visibility at all; it is entirely the prerogative of the judge. I think what you may have been referring to is something that the judge said in the trial back in September, where he himself said that he was thinking of accelerating his usual pace for this particular trial and was aiming for December. That was something he said. But other than that, obviously it's no longer December, but other than that, this is entirely the judge's prerogative and we have no insight into it at all.

Okay, great. Second question, just on the CVT-301 data from last week, it seemed like the most controversial part was what you referenced, the smaller placebo-adjusted benefit in the primary endpoint. What do you attribute that change to? It seemed like the placebo arm had a bigger benefit than what we have seen in the past. Why do you speculate that could be in this trial?

In practice, and I've been doing this for 30 years, you almost never get to the bottom of something like that when it comes to a larger placebo effect. And furthermore, it is aggravated in Parkinson's disease because the field is notorious for this exact sort of thing, where you do one trial, you get a certain placebo effect, you do another trial, you get a very different placebo effect. Parkinson's disease, in particular, is very prone to placebo effects. And there are actually biological reasons why that is, which I won't go into at the moment, but that is just the fact.

It's also, if you want to speculate, you can say by the time we got to this trial, the clinicians and presumably many of the patients knew that we had a successful phase 2 trial, so right away that already sets up a higher expectation when you get into the trial. And that's a well-known effect across many different trials, where the first one was a success and you can move into a higher placebo response the second time. In this trial people knew that they had the opportunity to go into a long-term open-label study afterwards. That also sets up more of an incentive and more of an expectation.

This is all speculation. We don't know. The fundamental parts of the study were really the same, other than the fact that it was a 4-week study the first time and a 12-week study the second time but that does not seem to have accounted for it. So there you are.

On the bright side, a very bright side, our team actually not only was aware of this possibility because of the history in Parkinson's, we compensated for it by powering the study at a very high level, knowing that people have seen this sort of thing happen. And that turned out to be prescient because we wound up with a terrific p value even with the higher placebo effect.

Got it. One last question for me. In the past you've said even if Ampyra goes generic, your current cash balance would be sufficient to fund operations back to profitability. Is that still your expectation?

Yes, so with contingency plan that we've put in place, we believe we would have the ability to do that, yes.

Great, thanks for taking my questions.

Cory Kasimov, JPMorgan.

Hey, good morning guys, thanks for taking the question. I had a couple on the 301 data as well. First of all, should we be reading anything into the fact that results for either the lower dose or the secondary endpoints weren't mentioned in the press release last week?

No, you should not.

Okay. And then can you talk a little -- I guess this is a little bit following up on Phil's question, but can you talk about the clinical meaningfulness of these top-line results? Maybe the early feedback you've gotten from KOLs? What does a 10-point reduction really mean? And is it even really remotely apples to apples to compare this to competing products out there that have shown 20-plus point reductions?

Okay. So let me get the first part of that first. This is a very meaningful clinical result. We have spoken so far to a handful of leading KOLs in the field who independently have said essentially the same thing, that they are excited by these data. They think it's going to be an important addition to their armamentarium, if hopefully it's approved, and they intend to use it on a lot of their patients. So this is what we have heard.

If you look just at the numbers and a paper that has been published, talking about the clinical meaningfulness of these numbers, a 10-point change is right on the border of a large clinically important difference; the border between moderate and large clinically important difference and that was the mean difference, right? So there were a lot of patients who were above that. So we are excited by that. We think that is a substantial difference.

Now comparing it to other products, you have to compare apples to apples, right? So the only other data of which I'm aware on that more recently is for the sublingual apomorphine film and I think that is what you were referring to. So far, the only data we have seen is from an open-label study, I think it was in about 19 patients. So it's impossible to know what that means. And we don't know how the baseline characteristics of the patients lines up with ours. Very small study, open label, no placebo. So we really have to wait for the phase 3 data.

And then it's worth noting that even when you get that, even when you get two phase 3 trials and you try to compare across them, it can be treacherous because the only data that really give you an insight is when you do a direct head-to-head trial. And in this case that's not going to happen. But having said that, at this point it's very difficult to know what to make of that until we see placebo-controlled data in a large enough sample.

Okay, that's helpful. And then one question for me on the Ampyra IP developments here. If you have no visibility, like you had just commented on, can you talk a little bit about the sense of urgency or maybe the difficulty to negotiate these settlements like the one you just did with Apotex? Technically, the judge's decision could come any day.

No, I really can't. I can tell you that our team feels that we put in a strong case and we are open to negotiation, a reasonable negotiation. Obviously we just did a settlement last week, so I think that demonstrates that we are open to it. And we also think we put in a strong case, so we are waiting for the verdict. And if we can arrive at reasonable settlements, we would do that too.

Okay. Thanks a lot, Ron, I appreciate it.

Paul Matteis, Leerink.

Great, thanks so much for taking my questions. My first one is on the data you announced this morning for CVT-427. You talked about some subjects in either asthmatics or smokers showing acute reversible bronchoconstriction. I think an asthmatic and smoker study are requirements for CVT-301. Ron, have you announced data from those studies? And have you seen a similar level of lung function changes in those more compromised populations?

We have not announced that, Paul. As far as I know, the team is still in the process of evaluating those results.

Okay. And how important it is a study like that for the ultimate labeling for one of these inhaled products for a non-pulmonary indication? My broader question here is if you did see something similar for 301 it's been clean in healthier Parkinson's patients. But would you expect there to be some sort of pulmonary function test requirement on the label? What is your base case there for how the label and these kinds of requirements would look when you think about the market opportunity of the drug?

You know, Paul, I don't want to get ahead of my skis on this one. I don't know the answer to your question. That is something our regulatory team would be involved with and I just don't have a ready answer for you on that.

Okay, that's fair enough. Separately, I would be curious, Ron, what your legal team thinks about when they look at IPR in District Court, does your legal team look at these as totally separate events? Or if, say the IPR went one direction, does your legal team think okay, this could change our odds of success and how Judge Stark thinks about his decision in District Court? If the IPR did come first?

Paul, I would not for one second try to assume the mantle of Judge Stark. He is the judge and it is his decision so I'm certainly not going to speculate on anything of that kind.

Okay, fair enough. Can I ask just one more quick one to Phil's question? You alluded to this contingency plan. Can you expound a little bit upon that? Does that involve divesting some of the earlier-stage assets? Or does it just involve cutting R&D spend?

I can't comment on any of it, but I can say that if in the event that we need the contingency plan, we will certainly come back to everyone and adjust our guidance publicly accordingly, so that you'll have insight into that.

Okay. All right, thanks, Ron, I will see you this week. I appreciate it.

Thanks, Paul.

Michael Yee, RBC Capital Markets.

Hi, good morning. Thanks, Ron. Following up on some of the CVT-301 color, I think you said that it was not safe to assume anything on not commenting on the low dose or the secondary endpoint, so is it safe to say that the low dose worked? And I think that's what one would have expected from the initial phase 2 data, is that correct? How should we about that?

Hey, Mike, let me see if I can interpret the question. (laughter) So when we say we are not commenting on any of the secondary outcomes but you shouldn't read anything into that, does that mean that we are commenting on the secondary outcomes? Did I get that?

No, it means does that mean that therefore it worked if you did not comment? If you do not say anything, people are thinking that it didn't work.

Right, I'm sorry, I can't help what people are thinking. I cannot discuss any of the secondary outcomes. All I have said on this call repeated is that people should not read into the lack of secondary outcomes here that the low dose didn't work. They shouldn't read that into it. Neither should they read anything into it. We will be presenting a full raft of data at the appropriate forum which is going to be hopefully be the MDS. We're going to certainly apply to the MDS.

Okay, then let me ask something related. Would you want the low dose to work and would you file on that? Then on the secondary endpoints of on time without troublesome dyskinesia, what type of difference even matters? Obviously in the best case you show nothing there, but how should we interpret any of that and how important is that?

Well obviously we tested two doses. It's only necessary for any drug to have one dose that works. The two doses both worked in the phase 2B, which I can point to, that is public information.

I can't tell you, even if the 60-milligram -- let's say it worked, would we then commit to putting both on the market? Well, it depends. It depends on how it worked relative to the other. Is there enough separation between the two? All those sorts of questions.

There is no absolute answer to that in the situation where both of them hit a p value that was good. So I can't respond on that question. What was your second part again?

How to think about the on time without troublesome dyskinesia and how important it is, and whether obviously it's optimal to see none. But how should we think about that information as well?

I think it's fair to say that we prefer not to see troublesome dyskinesia or to see a significant amount of it. In the phase 2B we did not see evidence of troublesome dyskinesia with the on time. And I don't remember what we said in these data.

What's that? Hold on, I'm checking my information source so I don't tell you the wrong thing. Okay. So I'm being told we didn't say anything, so I can't say anything with regard to that. But I will say that -- let me just leave it at that. We will provide full data later on it. I can point you to the phase 2B in which we saw no evidence of troublesome dyskinesia and that is public information.

Okay. Then last question, Europe. I don't recall what the plans are there or timing, can you talk a little bit about that strategy as well? Thanks so much.

The requirements in Europe, as far as we know, are somewhat different from the US. We have additional analyses we have to do on the data sets before we have a completely confident sense of timing and where we are with that.

The team is going to be doing that over the next several weeks and then we'll have an update at a later time. Right now our plan is to file the MAA by the end of 2017, pending those additional analyses.

Okay, thanks.

Tom Schrader, Stifel.

Good morning. I had a question on cough. Patients cough, what are they instructed to do? Do they take another dose? What I'm really getting at, is cough a big deal in the triptan study where maybe another dose is not so good?

Wait, I'm mixed up a little bit. I thought we were talking about CVT-301 --

I am in general. In that trial, when patients cough, are they told to take another dose or are they told they've had their dose?

I don't believe they're told to take another dose. Rick, do you know?

No. If they do have a cough or pause their inhalation, as Ron said, and a few of them did it maybe once, they are instructed to just take a breath again and then inhale again on the same capsule.

And is that the same thing you would expect for the triptan? Do you expect the cough is payload independent?

Well, we will wait and see. But the whole cough is as Ron had characterized in the 301, these are inhalation-naive subjects. The majority of them coughed once at the course of the study that reported it as an AE. So it's much more to do with somebody who for the first time inhales a dry powder, it can be a different sensation. So they may pause or cough a little bit on their inhalation and then they're instructed to continue and finish that dose.

Okay, useful. And then a quick question. Can you remind us what kind of data you need to file for first thing morning offs? Do you just need safety data? Do you need to have any effort to define if the drug works there? Just remind us what the agreement is.

You're talking about CVT-301?

Yes, yes.

I'm sorry, could you ask the question again?

The question is, do you need to define how well the drug works in first thing morning offs in these patients?

No, we don't.

Do you need just safety data in those patients?

There's no requirement either way. We have chosen to do a morning off safety study, only safety, because we wanted to make sure that there was nothing untoward in taking the first dose of the day. Because we didn't want to have any issue with the labeling where it said hey, you haven't looked at safety early morning. We don't know if you can use it early morning, and so on. So we have done an early morning off safety study. I don't have those data yet but we will have them.

Okay, perfect. Thanks a lot.

Salveen Richter, Goldman Sachs.

Thanks for taking my questions. Firstly, in regard to your 2017 revenue guidance, could you break out price versus volume for your 10% year-over-year growth guidance?

Who has that? Dave? Hold on just a second, Salveen, we'll get this.

It includes a 9.5% price increase.

That winds up being about -- we keep about mid single-digit of that 9.5%. So we keep about 60% of that 9.5% increase. So you can do the math -- back out the math from there.

Perfect. And then in regard to the IPR and ANDA rulings, it would seem that if it doesn't go your way, you have to have some contingency plan and that will have an impact on -- you'll have a restructuring strategy and it'll have an impact on your pipeline and some financial implications. So maybe you could help us on the pipeline front with what you are prioritizing there in terms of your programs going forward?

Well, it is clear that CVT-301 is the very top priority. And tozadenant is also a top priority because we are expecting key pivotal data by the first quarter of next year. So those would be the two main priorities by far.

Okay. Thanks, Ron. Then one last question on CVT-301, should we expect a European partnership or ex-US partnership for the asset?

We have not discussed that and certainly have not committed to that. We are exploring various ways of leveraging CVT-301 with up to, and including, introducing it ourselves in Europe and using that as a lever to get into Europe. But there's no final decision on that.

Perfect, thank you so much.

Brennan Long, Janney.

Hey, guys, thanks for the question. I was hoping for an update on tozadenant. Specifically I was curious how enrollment is going and how that might compare to your experience with CVT-301?

We never comment on enrollment of ongoing studies, so I'm afraid I can't respond to that.

Okay. Can you give an update on perhaps the competitive landscape? I know that Kyowa recently presented data that, I think, was not what they were hoping for in their recent earnings. They suggested that they may still be pursuing approval in the US and have also initiated a new trial for what they consider to be a more selective A2A antagonist, perhaps as a monotherapy?

Yes, and so what is your question in there?

How do you think about the program, first in light of their negative data? And second, in general around the landscape of this target. I think that [lump back] actually has the rights to this other A2A program in the US but I don't know that program is moving forward.

Right. We were very aware of the istradefylline program before we bought Biotie so this was an extensive part of our diligence at the time. I can tell you, nothing has changed in our assessment based on the failures in the clinical studies for istradefylline. There had already been failures for istradefylline prior to that, so we were aware of that and had access to that information when we made the decision to buy this.

Two molecules are quite different, they're different chemical classes. The istradefylline, for example, is a xanthine derivative, whereas toz is a non-xanthine derivative. It's actually an adenosine analog. There are differences in things, important considerations, for example, receptor affinity issues and duration of effect with a given dose. All of which, in our view, when we made the decision to make the acquisition, favor tozadenant.

So there's nothing in the recent news that is fundamentally different from our calculus when we made the acquisition. I wouldn't go so far as to say we expected it, but we certainly took into account these differences that we're talking about and the fact that istradefylline had already had some failures in advanced trials.

And is your thesis around the potential success for toz also related to [phase flex notice events] data on geographical variances and efficacy?

First of all, the toz data that we had on the phase 2B was we felt the most robust that we had seen for any of the A2A drugs that had been in trials. So we were very impressed with the trial data and the fact that virtually all the outcome measures hit very strongly and many of them with a dose response. So it checked all the boxes for a robust drug-related benefit that we saw in that trial. So that was the first thing.

The A2A antagonists that have failed in phase 3 have failed for various reasons. Sometimes it is the placebo effect, sometimes it is the geographical choices that are made. So we have done our very best to learn from the collective experience of these other trials and not to repeat the issues that were felt to have contributed to the failure of those trials.

So from both angles you have a more robust phase 2, so right away we have more confidence in this molecule. And then we have a trial design and execution plan that is learning from what some others have done and what might have tripped up some others. Obviously there are no guarantees here, but we clearly like the risk-benefit.

Okay, great. Thank you so much.

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

Okay, thanks for joining us, everyone. We will look forward to seeing you next time. Have a great week.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone, have a great day.