Acorda Therapeutics Inc (ACOR) 2017 Q1 法說會逐字稿

Welcome to the Acorda Therapeutics First Quarter 2017 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 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, refer to our filings with the SEC. I will now pass the call over to Ron Cohen.

Thanks, Felicia. Good morning, everyone. We're focused on 3 key objectives in 2017. First, we plan to advance our late-stage Parkinson's program, CVT-301, also called INBRIJA, which is the proposed brand name and tozadenant. These programs, if successful, will serve as the foundation for Acorda's future value. Over the next 12 months, we plan to submit the NDA for INBRIJA to the FDA in the second quarter of 2017 and to submit the MAA to the EMA in Europe by the end of 2017.

We're also continuing our preparations for launch of INBRIJA in the United States, and we expect to have top line results from our Phase III efficacy and safety trial for tozadenant in the first quarter of 2018. Second, we'll continue to drive growth of AMPYRA, at least through July 2018. On March 31, 2017, we announced that the U.S. District Court invalidated certain patents related to AMPYRA. We disagree with this ruling, and we are appealing it. We expect the appeals process to take approximately 12 to 18 months.

And third, we're pursuing monetization of existing royalty streams for FAMPYRA and Selincro, as well as exploring partnering and out-licensing opportunities for some of our early stage programs. We had prepared detailed contingency plans in the event of a negative ANDA ruling, and within days following the court's decision, we implemented these plans, reducing expenses and restructuring the company, together with reduced program and other nonpersonnel expenses, we expect to achieve 2017 cost reductions of approximately $50 million. We will incur approximately $8 million in one-time pretax charges for severance and other costs related to the restructuring.

These decisions were necessary to ensure that the company can fund its operations through approval and commercialization of INBRIJA and achieve positive cash flow. Moving to our late-stage Parkinson's pipeline, Parkinson's affects more than 1 million Americans and between 7 million to 10 million people worldwide. We plan to submit an NDA to the FDA for INBRIJA by the end of the second quarter of this year. And, if approved, we believe it will become a key therapeutic option for people with Parkinson's, who experience OFF periods, which are highly disruptive to their daily lives. About 350,000 Americans taking L-dopa for their Parkinson's disease experience OFF periods. Pending FDA review and approval, we're planning for a commercial launch of this product in 2018. We believe INBRIJA can achieve more than $500 million in annual net sales in the U.S.

Tozadenant is an oral adenosine A2a receptor antagonist. It represents a potential first-in-class treatment for Parkinson's disease in the U.S., and in a Phase IIb trial, tozadenant reduced average daily OFF time by more than an hour relative to placebo and that was even in people already treated with several other concurrent Parkinson's medications. We expect results from our pivotal Phase III clinical trial in the first quarter of 2018. And as part of the Phase III program, we also initiated an open-label, long-term safety study in the second quarter of this year. We believe that tozadenant, if approved, represents a commercial opportunity in the U.S. that is greater than that of INBRIJA. And importantly, we've kept our commercial team intact. Our sales force and commercial organization have proved highly effective in the commercialization of AMPYRA, and pending FDA approvals, we expect them to be major assets in commercializing INBRIJA and tozadenant. Also worth noting that we have worldwide rights to both products. Dave will now review our revised operating expense guidance and select financials for the first quarter. Dave?

Thanks, Ron. As a result of our restructuring, we've reduced operating expenses in R&D and SG&A by a total of approximately $50 million. We've reduced our full year 2017 R&D and SG&A operating expense guidance from $380 million to $400 million to $330 million to $350 million. R&D expenses for the full year 2017 are reduced to $160 million to $170 million. The majority of R&D expenses for the remainder of 2017 are primarily related to our 2 late-stage programs. INBRIJA program costs include extension study and safety study costs, as well as manufacturing expenses. Tozadenant program costs include Phase III study costs, as well as CMC-related expenses.

SG&A expenses for the full year 2017 are reduced to $170 million to $180 million. The majority of SG&A expenses for the remainder of 2017 are to support AMPYRA and our 2 late-stage Parkinson's programs and G&A for the rest of the organization. These are non-GAAP guidance projections and exclude share-based compensation, restructuring costs and other non-GAAP items.

We ended the first quarter with cash and cash equivalents of $133.6 million. As a result of the restructuring, we expect to be cash flow positive for 2017, with the year-end projected cash balance greater than $200 million.

Looking ahead to 2018, the company expects a similar year-end 2018 cash balance based on its current internal assumptions for 2018 AMPYRA revenue projections. In the first quarter of 2017, we reported AMPYRA net revenue of $112 million. Historically, AMPYRA revenue in the first quarter has been lower than the fourth quarter, and more variable than other quarters. This is related, among other factors, to insurance switching at the beginning of the year and doughnut hole costs. An additional factor in this quarter was specialty pharmacies dropping inventories in anticipation of potential generic availability. Overall, we saw reductions of inventory of about a week.

We have seen inventory levels normalize since the beginning of the second quarter. And we are reiterating our AMPYRA net sales guidance for the year. I'll now turn the call back over to Ron.

Thanks, Dave. So summarizing, despite recent IP setback, which we are appealing, our priorities and path forward are clear and exciting. We have an NDA for an important therapy to be filed shortly with the FDA and Phase III results for a second important therapy early next year. We've implemented a plan to ensure that we can execute these on a strong financial footing, and we're confident in the value that we're going to be able to create for shareholders.

Thank you. And we'll now turn this over to -- for your questions.

(Operator Instructions) And our first question comes from the line of Tom Shrader with Stifel.

Can you -- I'm not sure you want to answer this, but I'm curious. Can you tell us about all your settlements? Are they all void now or are some of them active? Can you give us a sense of how many generics we're worried about? Can you answer that?

I'm not quite sure how to answer it on the fly, Tom. I don't want to give you the wrong information on that. The bottom line is that we're appealing the verdict, and we expect that appeal to go on for the next 12 to 18 months. Until that -- until then, there is really -- there is no significance to the 7 settlements, until we see where we are with that. The details of the settlements are confidential. So we can't go into that. So that's all I can say at this time. Yes, sorry.

I'm not surprised. And then just quickly for 427, the delay, is that -- does that have to be the payload? Is it exactly the same essentially particle that you fly with a different thing in it? So does the bronchoconstriction have to be the triptan? Is that a safe assumption?

Well, it's a different formulation. So even though broadly speaking, we're using the ARCUS technology, the formulation itself is quite different and not only with respect to the fact that it's obviously a different API or active pharmaceutical ingredient. So the answer is that we don't know at this time why we're seeing that effect with this particular formulation, and we have to investigate that. So that's the -- that's where we are with the program. Let me just say, it does not have any readthrough at all into INBRIJA or CVT-301. It's a completely different set of circumstance, different excipients and so forth.

And our next question comes from the line of Cory Kasimov with JPMorgan.

This is Shawn Fu on for Cory Kasimov. I'm going to add my condolences as well for how all this turned out. Two questions, so regarding your CVT-427, inhaled triptan, it's unfortunate that the program will no longer initiate in the second half of this year, but can you maybe provide us a bit more color regarding the possible outcomes for this asset? Is it being put on hold indefinitely or is this simply a delay? If it is a delay, what are some potential time lines you are considering? And then, I have a follow-up.

Yes. We're still excited about the potential for an inhaled migraine drug using this technology. Given the unknowns and the initial results that we talked about on the bronchoconstriction in the special pop study, we need to do more work before we can move to Phase II. That's coupled with the fact that now that we've had a need to restructure and reprioritize where our spending is going in the near term, we're forced to deprioritize earlier stage programs. So for now, the predominant emphasis has to be on CVT-301 and tozadenant. But in no way should that be taken as less enthusiasm for the migraine applications.

Okay, got you. And then you kind of touched on this, but with the understanding that any new development programs for earlier stage assets might be delayed, are there any potential candidates that are coming out of the ARCUS platform that might be brought forth when the time becomes right?

The R&D team within ARCUS is constantly working on new ideas for other drugs that could be meaningfully delivered through this route. So I think you can all assume that and as with CVT-427 and even more so, at least for the near term, until we get more clarity and get more progress on the INBRIJA NDA and approval and tozadenant, we're not able to invest heavily in those. And I'm sure you appreciate that. Let me also say just that thank you to both of the analysts who have expressed sympathy for our situation. I just want to say this is the way our industry goes. These are the risks that everybody deals with. We talk about them a lot out there, and to this day, I think the public and the media at large don't have a sufficient appreciation of what we mean when we say this is a risky business. The way you manage risk is by creating diversity in your portfolio and creating multiple ways to come back and win. We're very pleased that even in this situation, we've been able to create a portfolio that has yielded an NDA coming up in the next couple of months here and a very significant additional product with Phase III data coming in the first quarter of next year. So given the entire picture, we're glad to be where we are, if we had to have that patent verdict versus not having these assets and then having that patent verdict.

And our next question comes from the line of Paul Matteis with Leerink.

This is Jeff on for Paul. So it's a two-part question. So what -- for CVT-301, what are the currently rate-limiting steps for the filing of the NDA in the second quarter? Are there -- is there like human factor studies, et cetera? And then, following that is how important -- could you give us some color on how important are the secondary endpoints such as ON/OFF times for the FDA and peers as you think about commercialization?

Well, so with regard to the first one, we have all the data in hand that we need for the NDA. Human factor studies have been done, all the things you referenced. And now it's really a matter of putting together the NDA, which is -- I'm sure you all know, is a monumental document with many, many, many moving parts. So we have teams working on it, quite literally, 24/7 at this point to ensure that we get the best possible NDA in. So that -- the limiting factor is just person power to get all of this stuff in shape and to have an NDA that we feel passes muster. But the data, we believe, already passed muster, it's just a question of presenting them in the best possible way in the NDA. With respect to secondary outcomes, our -- I don't want to go too far out and speculate here, but our position all along has been on this that the key outcome is the primary outcome, which is the one -- that's why it was the primary outcome measure, which is the reduction in motor symptoms on the UPDRS Part III. And we hit that in the Phase III with a P value of 0.009. And I think we talked about some of the secondary outcomes. We'll present a full accounting of all of those outcomes at the MDS meeting in June. So I don't want to front-run any of that. But remember, this is an -- this is a -- this is not a maintenance therapy. It is meant as an adjunct or a complement to daily maintenance therapy. So you have people with Parkinson's who are taking 1, 2, 3, sometimes more drugs to try to maintain a physical state as close to normal as they can get as their Parkinson's progresses. And so typically they'll start with an L-dopa formulation, add a MAO inhibitor or COMT, maybe a dopamine agonist and at some point, you run out of options. Invariably -- almost invariably, people with Parkinson's, as they progress, will break through those daily regimens and have OFF periods, no matter what you do. And this drug is intended to treat those OFF periods as they occur. It's not intended to be yet another daily maintenance therapy, that's tozadenant. And tozadenant is exciting, because it's the first new mechanism potentially that would be introduced in the field in the U.S. for over 20 years. So that's a different animal. And for those drugs, the total daily OFF time and so forth, that makes more sense to measure, because you're looking at daily maintenance and chronic therapy. For the episodic, you want to know if they're having an OFF episode and they take the treatment with CVT-301 or INBRIJA, what does that do for them? Does it -- how quickly does it work, how much does it work, and so forth. So that's really what the clinical trial was driving at and that's what we were able to show.

And our next question comes from the line of Salveen Richter with Goldman Sachs.

With regard to the restructuring, can you just walk us through what the -- the reduction in cost of $50 million, how that's split between R&D and SG&A expense? And do you think that we should expect or should we expect further cost reductions over time? Or is this kind of, you're done at this point?

So the reductions of $50 million, so if you go back to our press release at the beginning of March, we mentioned $21 million in annualized personnel reductions -- beginning in April, I'm sorry. We mentioned $21 million in personnel reduction annualized costs. So out of the $50 million, approximately $16 million are 2017 personnel-related reduction. So the remaining $34 million are cost cuts and reductions on programs that are not priority. So if it was in AMPYRA, INBRIJA or toz, it's included in the $34 million cut and that -- if you look at our revised guidance, that's roughly split 50-50 between R&D and SG&A.

Great, helpful. And then with regard to the sales force, do you see yourselves adding new people on board as you look to launch CVT-301 or INBRIJA?

That will depend on the outcome of the appeal. So if we reverse the verdict on appeal and we still have AMPYRA into the next several years, we would add to the sales force. And that's been the plan all along, not committing to it, but let's say in the range of 35% or so. If we're only putting CVT-301 or INBRIJA in their hands, the numbers that we currently have are optimized for a single product, and we would not need to add to the sales force.

Okay. And then just finally, you mentioned with AMPYRA in the first quarter, there were some inventory pullback that is normalized at this point. Do you expect any more fluctuations on the inventory front here just ahead of possible generics entry?

We don't expect it. I mean, there is no reason to expect it.

And our next question comes from the line of Chris Raymond with Raymond James.

This is Katherine Doll on the line for Chris Raymond. I just have a question. So looking at your later stage assets, not obviously, your prioritized Parkinson's disease assets. So looking at your late-stage pipeline, is out-licensing an option?

Yes, it's an option, as we said, we're exploring various routes for the rest of the pipeline. No decisions have been made on that, but we are having exploratory conversations and considering all that. Clearly, and I can't emphasize this enough, the organization as a whole is laser-focused on INBRIJA and tozadenant, and of course, AMPYRA at this point. So we are reviewing the rest of the pipeline and making decisions about where to go with it. But we're not feeling pressure to do so, to do anything acutely. The one area that we do want to prioritize with -- in regard to that is see if we can monetize our royalty streams, because clearly, it would be advantageous to us to have that condensed into a lump sum now, when we have a bigger need for it than to stretch out the royalty stream over years.

And our next question comes the line of Phil Nadeau with Cowen.

First just a follow-on to the last question. Your loose guidance for 2018, cash of approximately greater than $200 million, does that include assumptions for any business development transactions whether that's a monetization of the royalty streams or out-licensing? Or is that guidance achievable simply on the cost cuts and your expectations from AMPYRA sales?

Thanks, Phil. That is entirely related to net revenue and OpEx with -- net revenue assumptions and OpEx reductions. It is -- it does not take into account any assumptions about monetization of royalties or business development transactions. So to the extent we did anything in that domain, that would be incremental to the greater than $200 million that we cited.

Great, and second question, on INBRIJA. I had a question specifically on the special population safety studies. In the asthmatic population, you disclosed that 10 of the 25 subjects had some bronchoconstriction. What do you think is the significance of that finding? Is it likely that asthmatics will be contraindicated? Will they need pulmonary function tests if they go on a drug, how do you put that into the overall product profile?

Yes. So it's quite typical that for any inhaled therapy that you wind up seeing some proportion of asthmatics having bronchoconstriction in effect, it's just a -- in many cases, it's just a physical effect of having something tickling the bronchi in the lungs and they have hyperreactive bronchi. So that's what you get. So that's entirely expected. The very encouraging news for us is that in the nonasthmatic population, even in the 1-year open-label study, we've seen no difference between placebo and the drug group overall, which is actually better than the data for most of the inhaled therapies that are on the market. So that's very encouraging. Also encouraging is that, we have looked and done an analysis of the overlap in Parkinson's and asthma and it's less than 5%. So we'll start with that. With respect to how the FDA is likely to treat this in the label, the truth is we don't know. And this is going to be a matter of discussion. My recollection is that the bronchoconstriction that we've seen in the asthmatics was not clinically apparent. It was seen on the PFTs, but you didn't have people going into distress as a result. So I think there is room for discussion about how we would treat that, and if you have someone with asthma who also has Parkinson's and might benefit, is that going to be contraindicated, will it be a warning, will it be just something to take into account, we don't know at this point.

You must be -- as you're preparing the NDA, there must be suggestion being made as you prepare a proposed label. How ideally would you like to see the situation handled?

We certainly are going to make our suggestions known to FDA in the NDA, and we certainly are not going to front run those now. We -- I think it's much more prudent to let the FDA be the first ones to see the suggestion.

And our next question comes from the line of Ken Trbovich with Janney.

I guess, I wanted to circle back to Phil's question around the sort of loose guidance for 2018. Understanding that your models might be different from ours, could you give us a sense as to whether or not you're including any sort of life cycle management strategy with regard to AMPYRA?

Those numbers do not include assumptions on life cycle management strategy. But do not take from that, that we're not thinking through those particular contingencies or options, but the financial guidance does not embed any assumptions about that.

Okay. And then just with regard to potential life cycle management and the appeal, can you give us a sense as to the confidence, because clearly there is a time window here that's quite narrow, I guess, one of the questions, is just the relative likelihood that you can actually get a decision from an appellate court before launch in July next year?

The typical timing for an appellate decision is between -- or process, I should say, is between 1 and 1.5 years. So if you sort of play it forward, that would mean that we would be well over a year by July of next year. There might be a couple of months left in that. And by the way, this is a -- it's not hard and fast, but it's historical, it's typically 1 to 1.5 years. If we were to get to the end of July, and not have a verdict yet, there are recourses that we would certainly take into account and explore, including, for example, seeking an injunction on generic launch.

Got it. And then last question, just with regard to the commercial prospects, potentially at launch and the setbacks with regard to some of the competitors. How important do you see being first to market in this [oft risky] indication given synovium setbacks? Do you see that as meaningful to the commercial plans or not?

So it may be worth reminding everyone that our projections of greater than $500 million peak sales potential for INBRIJA were embedded in that projection was an assumption that the -- you're referring to the apomorphine film. And we embedded in that assumption that both products get to market within some reasonable time of each other, certainly let's say a year or so of each other. And that both products are competing in that space, our assumption in that case for various reasons was that INBRIJA would take a majority share. But not, not an overwhelming majority share, that the other product would certainly have currency and have a significant minority share. To the extent that only 1 product is on the market for a longer period of time, that would shift the calculus, but we can't speculate as to what actually is going to happen, because we don't know what is going on with them, we only know what's going on with us and that we're filing our NDA now. So we're very comfortable with the greater than $500 million projection with the assumption that both products do make it to market within approximately a year of each other.

And our next question comes from the line of Robert LeBoyer with Aegis Capital.

I had a question on the appeal. And while I don't expect you to comment on the specific case or your legal strategy, one of the things that I see is that you have a decision by the PTAB and then a conflicting decision by the District Court. And while these courts have differences in the burden of proof and some of the things that they've interpreted prior statutes to be. What is the record of the Federal Circuit in reconciling the differences between these two courts?

Well, the short answer is, I don't know and...

Is there any recent experience or...

I would imagine that there -- at the end, there is not a very large end, because the whole IPR process has only been around for 5 years. And it's only really picked up steam in the last 3 years or so. So it's very difficult to say. I mean, we can say that there have been some cases that didn't reconcile, where the court found differently from the PTAB. But it's been a relatively small number. So it's hard to generalize from that experience.

Okay. But have there been any precedence or cases in the pharmaceutical industry that you would point to as here is something where the court found in a specific way undermine 1 verdict over the other or anything like that?

Yes, again, I think trying to parse out previous -- the small number of previous cases like that and to generalize to this one is difficult. I'm told by our General Counsel that in one case, they let both verdicts stand, is that right? Yes, so they let -- but the reality, I mean, let's calm down, the reality is each case is individual and is based on the merits and the specific or particulars of that case. So we will be going in on appeal, arguing from the standpoint of our disagreements with the verdict in the particulars of our case.

And I'm showing no further questions at this time. I would now like to turn the call back to Dr. Cohen for any closing remarks.

Thank you, operator. Well, thank you, everyone, for joining us. We are looking forward to reporting on our progress, getting the NDA in, and with that, have a great rest of your week, and we'll talk to you again soon.

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.