Acorda Therapeutics Inc (ACOR) 2019 Q3 法說會逐字稿

Welcome to the Acorda Therapeutics third quarter 2019 updates. (Operator Instructions) Please be advised that this call is being taped at the company's request.

I will now introduce your host for today's call, Felicia Vonella, Vice President of Investor Relations at Acorda. Please go ahead.

Good afternoon, everyone. Before we begin, let me remind everyone our presentation will contain forward-looking statements. Detailed disclosures can be found in our SEC filings, which are public, and we encourage you to refer to those filings. I will now pass the call over to Ron Cohen, our CEO.

Good afternoon, everyone. Thanks, Felicia. This slide highlights the key events in the third quarter. As you all know, the initial stage of the launch of INBRIJA has been more gradual than expected. However, multiple inputs continue to support our conviction that INBRIJA will be a substantial product and indeed, a standard of care in the treatment of OFF periods in Parkinson's. These inputs include our own formal market research, independent market research, the numerous conversations with prescribers, patients and patient advocacy groups. We've learned a lot about the dynamics of this market since the drug became available in March, and we're going to share some key data and insights with you today.

We also implemented a corporate restructuring in October to extend the time that we'll need to establish a strong trajectory for the INBRIJA launch as well as to provide flexibility for us to address the company's convertible note that's due in June of 2021. I will discuss this further after Lauren takes us through updates on the INBRIJA launch. Lauren?

Thanks, Ron. Good afternoon, everyone. Through October, we received about 6,400 prescription request forms and around 3,100 patients have received their first prescription of INBRIJA. The total cartons dispensed were approximately 13,000, and more than 1,600 physicians have prescribed INBRIJA through October. We're pleased to see that total prescriptions increased by over 60% in the third quarter compared to the second quarter. To date, roughly 43% of segment A physicians have prescribed at least once and about 70% of these physicians have prescribed more than once. As a reminder, there are approximately 1,700 segment A physicians, and they are primarily movement disorders specialists and they treat the largest number of Parkinson's patients.

We continued to make good progress in the quarter in achieving formulary status, signing agreements with a number of significant payers. A notable agreement that we are able to disclose, which is Prime Therapeutics to be on their national net results formulary and on the formulary of a number of Prime Therapeutics downstream clients. As of the beginning of the fourth quarter, INBRIJA is now available to approximately 66% of the commercial covered lives and 25% of Med D lives without the need for medical exception.

We recently conducted our first post-launch awareness, trial and usage or ATU market research study among both general neurologists and movement disorder specialists. This survey was fielded to approximately 150 physicians in our target universe. Prior to the launch, aided awareness of INBRIJA was close to 36% and it's now around 92%. These data provide us with an understanding of current experiences in INBRIJA by early adopters and the likelihood for future prescribing. It also assessed the perceptions of physicians who have not yet prescribed and their likelihood to prescribe INBRIJA in the future.

For those physicians who are aware of INBRIJA, our data showed that 78% of these physicians expect to increase their prescribing. The majority of physicians agree that the efficacy of INBRIJA is clinically meaningful. It is different from an extra dose of oral carbidopa/levodopa and it can be self-administered. We asked the physicians about what percent of their previous 100 patients they had prescribed INBRIJA for and how much they intended to increase their prescribing in their next 100 patients. Among the 127 physicians who answered both questions, they estimated they had prescribed INBRIJA to about 7% of their last 100 patients.

We're encouraged to find that these physicians expect to more than double their prescribing of INBRIJA to about 16% of their next 100 patients experiencing OFF periods, indicating increasing adoption of the brand to become part of their standard of care. This aligns with previous market research that's indicated physicians expect to prescribe INBRIJA to approximately 25% of their patients with OFF periods over the long term.

Also in this survey, current prescribers of INBRIJA reported that an average of 15% of their patients have requested INBRIJA and 64% who requested a prescription received it. We believe that patient awareness and requests will be a key driver of the launch going forward, and we're focusing on increasing the percent of patients who do request INBRIJA.

To optimize the impact of patient requests, it was important to first do 2 things: first, achieve a high level of awareness and education among physicians so they could be prepared to respond to patients wanting to try INBRIJA; and second, to achieve a reasonable level of formulary status to minimize the frustration in the prescribing process. As we enter the second phase of the launch, we will be maintaining these efforts while increasing the focus on patient awareness and education to drive demand by patients.

We are implementing a number of initiatives, some of which we have already begun and others that we will roll out in the coming weeks. These include patient-focused speaker programs, patient forums, patient ambassadors, patient videos, radio ads, community events, advocacy and social media campaigns, such as Facebook. I'll now pass the call to Dave to review the financials. Dave?

Thanks, Lauren. In October, we implemented a corporate restructuring to reduce costs and focus our resources on the launch of INBRIJA. This restructuring will enable Acorda to focus its resources on ensuring the success of INBRIJA or provide flexibility for the company to address its convertible note due in June of 2021. In connection with the restructuring, we reduced estimated 2019 operating expense guidance from $270 million to $290 million, down to $240 million to $250 million. It's important to note that we do not expect these reductions to detract at all from supporting the INBRIJA launch. Unfortunately, we had to make the difficult decision to cease all unfunded work on pipeline programs until we're in a better position to support them.

We expect to realize estimated annualized cost savings related to head count reduction of approximately $21 million beginning in 2020. We estimate that we will incur approximately $8 million of pretax charges for severance and other costs related to the restructuring through the first quarter of 2020. Total operating expenses in 2020 are estimated to be approximately $60 million less than in 2019.

Our revised 2019 and new 2020 financial guidance is as follows. In 2019, R&D expenses for the full year are expected to be $55 million to $60 million, reduced from $70 million to $80 million. SG&A expenses for the full year 2019 are expected to be $185 million to $190 million, reduced from $200 million to $210 million.

Looking ahead to 2020, R&D expenses for the full year are expected to be $20 million to $25 million and SG&A expenses for the full year 2020 are expected to be $160 million to $165 million. We expect our 2019 year-end cash balance to be greater than $225 million.

This table outlines key financials for the third quarter. We reviewed goodwill for the quarter ended September 30, 2019, as part of our normal reporting process and determined that a triggering event occurred due to a decline in the trading price of our common stock at the end of the quarter. Based on the analysis performed, we determined that goodwill was fully impaired and recorded a noncash impairment charge of $277.6 million.

With regard to our $345 million convertible note due in June of 2021, we have engaged an adviser to address this debt. We appreciate the impact the convert has on our stock price, and addressing this is a top priority for the company.

Our cash and cash equivalents at the end of the third quarter were $253 million. I'll now turn the presentation back over to Ron.

Thanks, Dave. In summary, despite the gradual uptake in the early stages of the launch, all of our data continues to indicate that INBRIJA will become a significant product and the standard of care for Parkinson's patients. We are now going to take your questions. Operator?

(Operator Instructions) Your first question is from Salveen Richter with Goldman Sachs.

Could you just walk us through just the path that you're taking to address the debt issue here; and then secondly, where you stand with the free drug and sampling program for INBRIJA?

Yes. Well, we can't go into great detail at this point, Salveen. We can tell you that we have a number of different pieces to address the debt. We are not looking for one-size-fits-all magic solution to address the debt but rather to address it using a number of different means including cash, and there are a number of ways for us to access cash and we are working on those different avenues. So beyond that, I can tell you, it's a top priority for us. Really the 2 top priorities are the INBRIJA launch and addressing the debt. By way of reminder for those on the call, the debt is due in June of 2021, but by no means are we interested in waiting to anywhere close to that, to address the debt. We are very actively engaged right now. And as I said, we're looking at -- or actually, we are actively engaged in considering a number of different ways, which, together, will enable us to address the debt in the optimal way for shareholders.

With regard to the free drug program, we are continuing to sample, and where samples are allowed, the doctors are distributing samples fairly liberally. We also have our 1 box or first box free program for those covered under commercial insurance, and that is on the prescription request form that we provide for the specialty pharmacies that go into our hub. So when the prescriber writes the prescription, there's a box that they check, and the vast majority of the time, they do check that box so that the first box is shipped almost immediately, within a day or 2, to the patient so they don't have to wait while their benefits investigation is ongoing.

And then eventually, hopefully, the drug is shipped to a specialty pharmacy and dispensed. That process right now has come down quite dramatically from the early part of the launch, where it was taking 35 days or more on average. Now we're under 2 weeks, around 13 days, I believe, on average. And meanwhile, the patient gets a full box, which is 30 doses that they can use.

Your next question is from Paul Matteis with Stifel.

This is Nate on for Paul. I was hoping -- can you guys get a little more detailed on reimbursement? What channels are you seeing most scripts being reimbursed from? And then what's your plan for expanding Part D reimbursement specifically?

Right. So recall that, as we mentioned, about 66% of commercial lives are now covered on formulary. So there's no need for a medical exception. In general, we've been pleased that the prior authorizations have been quite reasonable across the board. So we're not seeing the offices have to jump through hoops to get through that.

Medicare Part D, we have about 25% of covered lives now on formulary, where that is also the case where it just -- it goes through without the need for a medical exception. Now where there is a need for medical exception where the patient's plan is not yet covering it on formulary, what we're finding is that the majority of those are actually getting through with a simple medical exception form, so -- whereas earlier in the launch, it was more difficult than that because very frequently, the medical exception form would go in and that would get denied and then you'd be in a morass, where you'd have to call them and have a peer-to-peer call and so on and so forth.

So it really was quite taxing. We're at a point now where, again, the great majority of the commercial lives are covered without medical exception. The ones that -- the majority of the ones that are not, you can get through -- if the office just simply submits a medical exception form, and that's true on Medicare Part D as well. We're continuing to negotiate with various plans that -- where we don't yet have official formulary status, and we anticipate that over time, those official formulary statuses will cover more and more -- a larger and larger percentage of the population.

But where we are now is actually pretty good for being 7 months into the launch. And given the environment for reimbursement that we're living in right now, it's pretty good. And the physicians have routinely been giving us feedback that they notice it, that their offices notice that it's much easier now to get through than it was in the first several months of the launch.

Got you. That's helpful. And could you update us -- maybe just provide some description on where refill rates are today?

Lauren?

Yes. At this point in time, given that this is a PRN medication, it's really difficult to understand what the refill rates are until patients have been on drug for quite some time. As we've mentioned earlier, the initial prescription is generally for 2 boxes, and those patients with commercial insurance have already received a box of 60 prior to getting their prescription, and we don't have an idea right now -- obviously, it's hard to know from the samples that are in the physician's office, how many of that -- how much of that drug patients have available to them.

So at this point in time, it's really too early to know. But we know that utilization rates are consistent across low, medium and high users. We shared that with you in Q2, meaning that there is a group of patients that get on drug that consistently refill several times a month, and those are those high-utilizer patients. Then you have a medium group and a low group, but to really be able to understand exactly what those refill rates will be over time, we still need more time for the launch to work itself through.

Yes. And if I could jump in, maybe I'll just illustrate it with some specificity. If you just think about it, it really depends on the patient. If the patient is using it, on average, once a day, twice a day, a couple of times a week, and so a box will last a variable amount of time depending on the usage pattern of the individual patient, and right now, it's not possible for us to tease that out because we have no way of knowing for a given patient if they got 2 boxes a couple of months ago and they haven't refilled yet, is that because they're not going to refill or they just haven't gotten through their 2 boxes yet. So we do need -- and that's why we need more time and critical mass to really get a better feel for those numbers.

Your next question is from Cory Kasimov with JPMorgan.

This is Neena on for Cory. So I have 2 questions. The first one is about the repeat prescribers. Can you talk a little bit more about who you are seeing repeat prescribing? And for those who aren't, what's kind of -- what's holding them back from being repeat prescribers at this point? Is there a specific period of time that you're seeing docs wait before they prescribe to a second patient? And then I have a follow-up.

Yes. So again, when you talk about a physician, what you expect out of a physician, for changing behavior, the very first thing you want to see happen is that they write the first prescription. And then, of course, what you want to see is that they write a second prescription. So that they start to change their behavior and start utilizing the medication. As we mentioned in those top prescribers, 70% of them that have prescribed more than once. In the overall prescribing base, 50% of those physicians have prescribed more than once. It really depends on the physician in terms of what that cadence looks like. Many physicians want to wait until that patient has had enough time to trial the medication, gets back to the physician in terms of how they've done. They're waiting for that feedback loop oftentimes before they will prescribe again.

Another issue that we've run into in the early part of the launch, as we've discussed, is that the amount of time it takes for each patient to get on drug and the amount of time required by the office to make that happen stops the physician from overprescribing because there's just too much of a burden on the office. As we can reduce that burden with more formulary wins and more process improvements and actually just having the offices become better at actually getting through the process, we anticipate that will help. So right now, it is dependent on each individual physician and they really want to get the feedback from the patient, and that usually is what drives the continued prescribing.

Additionally, as I said later -- in my comments, if a patient comes in and asks for the medication, often 64% of the time, the physician will fulfill that request. So that's the other piece of it. If someone's coming in and asking the doctor for the drug, chances of them repeating a prescription are greater.

Okay, great. And then just the second question is actually about AMPYRA. I know earlier this year, you talked about how you made a big inventory purchase that was expected to kind of cover all of 2019. And I think last quarter, you said that you were going through that inventory a little faster than anticipated. So should we expect to see another major purchase of inventory either this quarter or first quarter for the 2020 supply?

No. Not a major purchase this year. I mean, at some point next year, we will have to purchase inventory, but it wouldn't be anything to the degree that we had that adjustment or that purchase in the first quarter of this year.

Your next question comes from Michael Yee with Jefferies.

I had 2 questions. One was on the U.S., when we look at scripts, both NRx and TRx, even though you've gotten significantly improved reimbursement, the NRx and TRx are generally sort of steady, I would say, over the past 3 to 6 months. I was wondering if you could just comment as to does your data continue to show upticks every week generally or is there some disconnect as to either it's not that accurate or it's going to take some time? So I just wanted to understand that.

And then second, my question was actually on Europe. I'm not sure if it was addressed. Obviously, you got approval. Are you actually expecting sales in Europe? Are you putting money to invest there? Maybe just comment about what's actually going on in Europe a little bit.

Lauren, do you want to?

Yes. So in terms of the new Rx, TRx line, at this point in time, again, we started getting some of these managed care wins in the last couple of months, and that takes time for that to pull through. And also, remember something, with the national plan for each individual physician, it's kind of an inch deep and a mile wide, right? So it doesn't impact all of the patients in their practice. And so therefore, even though you may have a couple of major wins, they have a lot of other plans, and so therefore, there may still be hurdles.

So we anticipate that the new Rx line is going to start to take an upward trajectory. Exactly when that's going to happen, it's hard to know. But as we've mentioned, all the qualitative feedback that we are getting is very positive in that regard. We have seen some increase despite the fact that the new Rx’s haven't been going higher in the TRx numbers. So there is a slight increase in TRXs over the course of time.

Okay. Ron, do you want to talk about the EU?

Yes. So on the EU, Michael, can you just repeat your question on that?

Yes, sure. In Europe you just got approval for INBRIJA. Correct me if I'm wrong. So maybe you could comment about whether you're actually putting money to market it and invest there a bit? Are you actually expecting sales in the quarters to come or obviously, partnership and out-licensing or various scenarios to address your first question, which is related to paying down debt? So maybe just talk to what you'd like to do and what's happening there a bit so we can think about that opportunity.

We don't have current plans to market ourselves in Europe. We just don't have the financial bandwidth or capacity to do that. So we have to focus everything here in the U.S., and we are engaged in discussions with potential partners right now. The approval certainly has helped those conversations and are continuing to carry those through. And when we have -- if and when we have news, we're going to share it with everyone.

Okay. That's helpful, and I appreciate that. I think that's potentially an asset of value to help you out on the first part.

Your next question is from Kenneth Atkins with Cowen.

You've mentioned previously that younger patients who might still be in the workforce could receive a lot of benefit from an on-demand therapy for OFF episodes. Could you speak a bit about the adoption of INBRIJA in that market in particular?

Yes. I mean we don't have a good way of tracking that per se. So necessarily, it's going to be anecdotal when we talk to the physicians about who they're prescribing for. We get patient stories back and so on. But I think that, that's tough to segment out. If a given patient is someone who is working, who was using it for OFF episodes at work...

I can add. Obviously, it's not an absolute, to Ron's point, but about 40% of our first dispenses are for commercial patients. So that doesn't necessarily mean that they're in the workforce. They could have a spouse that's in the workforce, et cetera, et cetera. They could be a Medicare age patients. So it isn't an absolute, but it gives us some indication that younger patients are very interested in this medication, and we are doing a lot of our digital promotion towards that patient population because that patient population can be co-pay mitigated so they don't have the expense out of pocket that they had in the Medicare population.

Right. And let me expand that a little bit because it's not just people who are working. What we're really talking about is people who are relatively earlier in their diagnoses versus those who are further out. And typically, if you're -- if you've had a diagnosis of Parkinson's for 5 years or more, you are almost certainly having OFF periods of some kind. Those increase over time as the disease progresses and you get less and less optimal control with the daily regimens. And of course, the treatment algorithms are to increase dose, increase frequency of levodopa carbidopa, then add another mechanism, maybe add a third mechanism.

Sometimes you'll add a fourth mechanism, and eventually, some people get referred to deep brain stimulation and so forth. So what we're really talking about is people who are -- generally, if you're earlier on, and if you're on commercial stage -- you're probably a commercial payer, for the most part, you're probably early or a mid, it's people who are in their 40s and 50s and 60s, generally, who are quite vigorous, active. Maybe even if they're not working, they have other things they do in their lives. They have hobbies. They have sports. They take care of their kids or their grandkids. They get together for family get-togethers. They go to weddings. And someone has an unexpected OFF period in the middle of their daughter's wedding, you can imagine how devastating that can be. You can imagine if you're going to a restaurant with friends and family and you suddenly get hit with an OFF, and that is a serious issue for these people.

So you can imagine any number of reasons why people would like to have more control over their OFF periods and especially on demand when -- as good as their daily regimen is, it just -- for various reasons, there are always going to be moments where it fails them. And the main reason is that the gut is involved intimately on several levels with the disease in Parkinson's disease. There are absorption issues. There's small bacterial -- excuse me, small intestine bacterial overgrowth that actually metabolizes levodopa in many cases in the gut. There the effects of food and protein on reducing absorption of levodopa. So you get erratic. And again, as you get more severe and need higher and higher doses, it gets more and more erratic.

But very important to realize, and this is something we discuss with the prescribers as well, that even people who are generally well controlled, but every now and then, maybe it's once a week, maybe it's once every 2 weeks or a couple of times a week, not necessarily every day or multiple times a day, but when they have an episode and they're active, it can be really distressing and troubling for these patients. And so they also benefit by having INBRIJA in their pocket, in their pocketbook, in their glove compartment where they can get ready access to it. And that's a message that we continue to discuss because, again, to some people, it seems most obvious when someone's having 2 or 3 or more OFFs a day. And in fact, it's just as obvious from the patient point of view when they're having a few a week that are really bothering them.

And this does conclude the Q&A period. I'll now turn it back over to Ron for any closing remarks.

Okay. Well, thank you for joining us, everyone, and have a good evening, and we'll look forward to reporting our progress in the next quarter.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.