Acorda Therapeutics Inc (ACOR) 2020 Q2 法說會逐字稿

Welcome to Acorda Therapeutics' Second Quarter 2020 Financial and Business Update. (Operator Instructions). Please be advised that this call is being taped at the company's request. I would now introduce your host for today's call, Tierney Saccavino, Executive Vice President, Corporate Communications at Acorda. Please go ahead.

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

Thanks, Tierney. Good afternoon, everyone. Starting with AMPYRA. AMPYRA net revenue for the second quarter was $26.1 million. And these, as well as July sales, were consistent with our internal projections. Physicians and patients are continuing to express brand loyalty, and Acorda continues to offer to pay co-pay mitigation as well as free trials to those patients who are eligible.

Moving to INBRIJA. As a reminder, INBRIJA is inhaled levodopa. Levodopa is the gold-standard therapy for improving symptoms of Parkinson's, and INBRIJA is indicated to address the return of symptoms, also known as OFF periods as needed. COVID-19 impacted INBRIJA's sales for the quarter. Visits to neurologists' offices decreased by about 80% beginning in the middle of March, and INBRIJA new prescription request forms, or PRFs, dropped significantly beginning in the second half of March. Our teams adapted rapidly to virtual platforms and communications with prescribers and patients and INBRIJA PRFs began to rebound in late April and have increased progressively every month since then. In addition, despite these challenges, Q2 INBRIJA sales -- net sales increased 7% over Q1 to $4.7 million. That was a 57% increase over Q2 2019. We were also encouraged to see total paid prescriptions grow 6% in Q2 over Q1. We incurred higher-than-expected Medicare rebates in the first half of the year, which impacted net sales. We believe that Medicare rebates, the rest of this year are likely to be lower. The highest impact of rebates occurs in the doughnut hole period, which tends to be most marked earlier in the calendar year. We believe that the various new programs we implemented beginning in the first quarter have begun to yield results. Several additional metrics also improved in the quarter, again, despite the challenges imposed by COVID-19. The number of cartons of INBRIJA dispensed to patients increased by about 13% over Q1 and by 87% compared to Q2 2019. Dispensed cartons are an indicator of true demand since prescriptions can vary in size. Because INBRIJA is used as needed up to 5 times a day, a month's prescription can range from 1 carton up to 5, depending on the patient. The average INBRIJA prescription is now about 2.5 cartons, up from closer to 2 cartons last year.

I mentioned that prescriptions began to rebound from the initial effect of COVID in late April and have progressively increased in each month since then, including July. In addition, July dispensed cartons increased by 8% over June to the highest level since launch.

The conversion rate of prescription requests to filled prescriptions also increased in the second quarter to 75%, and that was a material improvement from an average 57% in Q1 and 48% during 2019. We also had 6% growth in prescribers in the second quarter and now have over 2,200 physicians who have prescribed INBRIJA since launch. We were pleased to see high persistency among patients who use INBRIJA at least every other day on average, with about 70% of those patients still on therapy at 12 months. Feedback from physicians and other health care providers has been indicating that the additional inhaler training we've been providing has improved outcomes and patient willingness to use INBRIJA.

So in 2020, we've been focusing on 3 areas to accelerate the growth of INBRIJA, and they are: to drive patients to talk with their doctors about INBRIJA; to expand access; and to optimize the prescriber and patient experience. We'll discuss these in more detail in the coming slides and I'll also provide more color as to how we've been adapting to the challenges presented by COVID-19.

So first, with regard to COVID-19, our teams quickly adapted to the virtual environment. They moved planned in-person educational events to virtual programs, and they also communicated with providers' offices virtually. In the second quarter, we held 56 digital programs with top movement disorder physicians speaking to other neurologists. About 200 physicians attended these programs. We also ran 34 programs, reaching almost 1,000 people with Parkinson's. A number of these programs were developed in partnership with national advocacy groups. More recently, our sales team has returned to making in person office visits on a limited basis. All field personnel are following rigorous guidelines for social distancing, wearing personal protective equipment.

So we discussed last quarter that driving patient demand would be a major focus of the launch going forward. By the end of 2019, we had achieved about 92% awareness of INBRIJA by health care professionals. Our research indicated that patients who ask their doctors about INBRIJA were likely to receive a prescription, about 2/3 of the time. So we launched a sophisticated digital campaign in Q1 based on artificial intelligence machine learning engines. In Q2, we delivered approximately 103 million impressions through multiple channels. These included 59 million impressions through display banner ads and almost 36 million video impressions on YouTube and programmatic videos. And of those, 70% of viewers watched the entire video.

Now bear in mind that these impressions were specifically to people with a known interest in Parkinson's disease. These programs resulted in 238,000 visits to the INBRIJA consumer website with over 20,000 high-value actions taken, such as downloading the doctor discussion guide, viewing patient videos or registering to receive more information. And we believe that this contributed to the increased prescriptions in the quarter and in July, even against the background of COVID-19.

So as we also noted in our Q1 call, in 2019, we learned that patients needed better training on inhalation and the use of INBRIJA. And we developed a helpful hints brochure and modified the instructional video that we provide to address these findings. We've been providing these in all patient starter kits. And as one marker of the impact of these new materials, we e-mailed a letter with a helpful hints guide to patients who had previously had a prescription for INBRIJA and discontinued it. And to date, about 140 of those who just received the mailing have come back on the medication.

We have also provided nurse educators to proactively reach out to train patients who have received a prescription. And in the middle of the second quarter, we added video chat capability to that to enhance the training further. Ensuring a good initial experience is a key success factor, and we're now hearing from physicians that as a result of these programs, more of their patients are having positive experiences, both with samples and their initial prescribed boxes. We're also hearing from prescribers that the process for getting a patient onto therapy has become progressively easier and is much easier now than it was last year. During Q2, we increased our covered commercial lives without medical exception to 80% from 75%. And we've also seen a softening of the enforcement of prior authorization criteria across both commercial and Medicare plans in the last few months. Some of this may be COVID related. We don't have any indication that these prior auths will become more restrictive in the future.

We continue to have 25% of covered lives in Medicare that have access to INBRIJA without medical exception. However, there's been a significant decrease in the number of Medicare lives that are blocked from access to the medication and in most cases now, when physicians are willing to take the next -- the necessary steps to get a patient on INBRIJA, they can gain access. And our hub and reimbursement teams are supporting their efforts, of course, in a compliant fashion.

We've been pleased to see progressively improved conversion rates from PRF, the prescription request forms, to actual filled prescriptions. As I mentioned, in Q2, the average conversion rate of PRFs to a filled prescription was 75% compared to 57% in Q1 and 48% in 2019.

So moving to our second quarter 2020 financial performance. This slide outlines key financials for the year, which you'll find addressed in detail in our press release. We ended the second quarter with cash, cash equivalents, investments and restricted cash of $103.8 million. As we previously reported, in July, we received a $12.7 million tax refund under the CARES Act, which allowed us to carry back 2019 NOLs to prior tax years and resulted in the refund. This amount, this $12.7 million amount, is not included in our quarter-end cash balance that we're reporting today.

So in summary, our teams adapted to the challenges imposed by COVID-19 and we saw significant progress for INBRIJA across multiple fronts and metrics in Q2, which have continued through July. Our top priorities for 2020 are to accelerate INBRIJA's growth using all of the strategies we've just reviewed and to continue to support AMPYRA as it continues to generate valuable cash and is still an important medication for the MS community, and to drive long-term value for shareholders, managing our cost structure and strengthening our balance sheet.

And in that regard, one of our key initiatives in this -- now is to monetize the excess capacity of our Chelsea manufacturing facility, which could offset expenses further and reduce our cost of goods. We're actively working on that now. I'll now open the call for questions.

(Operator Instructions) Your first question comes from Michael Yee with Jefferies.

Two questions. One is, how you are observing sort of the dynamics kind of coming out of the COVID environment? And how you're thinking about steady increases in demand and step-ups in Q3 and Q4, presumably, you're going to show growth in each of those.

Maybe just talk about how the shape of that's looking as we're going into August? And then second question is a balance sheet question. Can you just kind of frame the key points as to exactly how much debt is due in 2021? What are the options and then with the current outstanding convertible, I guess, is the question? And then how to think about that versus what other options you have? Can you just talk a little bit about that, that would be great.

Okay. Thanks, Mike. So first, with regard to the dynamics out of COVID. So it's a bit difficult to characterize given that although the parts of the country that started out with major issues back in March, April, have, generally speaking, gotten much more control. Other parts of the country, at the same time, have been flaring up. So fortunately, those trends just now seem to be stabilizing. So hopefully, we're going to reach the terminal phase in the not-too-distant future. But what we have seen is that the physician's offices, the big shock was in March, March/April. And that was really a stunning development, 80% decline, at least in the neurologists' offices that we track.

They've adapted to that. And what we've seen is a progressive opening up of offices, seeing people in person, a lot more telemedicine. And so generally, we're seeing that both the patients and the physicians have adapted to the conditions. Could there be some setback slightly in the next couple of months as different parts of the country just have bigger issues. I'd only be speculating. What I can say is that at least through July, we were really pleased because as I mentioned on a few metrics, July actually was excellent compared even to June, with an 8% increase in dispensed cartons, which is, as I said, the real measure for true demand, and that was just month-over-month. So we're certainly cautiously optimistic, we cannot predict where that's going to go. But as far as we can see right now, the entire medical establishment that we track and the patient population has largely adapted to the conditions and are getting back, certainly not to normal as we knew it 6 months or a year ago, but something much closer to normal.

With regard to the convertible debt, just by way of reminder for everyone, we exchanged our convert that was due -- all of which was due at the end of June of 2021, we exchanged 80% of that for new debt that is now due at the end of 2024.

The remaining debt or stub, if you will, is $69 million worth that is still due at the end of June. We are working with our advisers, our external advisers, on ways of addressing that. I can't give you any detail right now but I can tell you it is certainly top of mind, and we are working on various options.

But to be clear, Ron, just because I think it's important, you could either refinance that stub, $69 million, you could pay it in cash, which I don't think is probably likely, but -- or you can exchange it for stock? Can you just explain that because I think it does matter versus the current cash position?

Yes. So well, just broadly speaking, and this would be generic to convertible debt, right? And what you just outlined are 3 of the main ways that you address it, right? One is you pay it in stock, another one is you pay it in cash, and another one is you do an exchange on new terms for a longer period. So those are all ways that people can address convertible debt that's coming due.

Your next question comes from Laura Chico with Wedbush Securities.

This is Kenneth Shields on for Laura Chico. So Ron, we've been interested in any commentary around how you see the introduction of another adjunct treatment to INBRIJA's uptake, specifically, Neurocrine indicates they'll be launching Ongentys starting this quarter. And I have a follow-up.

You're speaking specifically about Neurocrine's drug?

Yes.

Okay. So as far as I'm aware, right now there are only 2 drugs on the market for on-demand treatment of OFF periods. One of them has been around a long time. It's APOKYN, which is a needle form of apomorphine. That has various issues, not least of which is that it's a needle. And then there's INBRIJA, which is levodopa. The treatments you're talking about broadly come under a different umbrella, which is chronic medication that is added to the current chronic medication regimen of the patient. That is intended to reduce the overall amount of time that the patient spends off during the day versus on. That is not specifically competitive to what we're doing. And in fact, INBRIJA is intended as an adjunct to pretty much any chronic medication regimen. You have to be -- you have to be taking levodopa carbidopa as part of it, which 70% of Parkinson's patients do take, but many Parkinson's patients require more than one drug. Some of them are taking 2, 3 or 4 drugs with different mechanisms in an effort to alleviate their Parkinson's symptoms during the day. INBRIJA is meant for those times during the day or night, when whatever the regimen is, whatever the daily chronic regimen is, it fails the patient. It stops working or it works. Its symptoms reemerge before your next scheduled time that you're supposed to take your drug. And that has to do with the fact that the gut absorbs medication poorly in many people with Parkinson's. It's actually highly variable. We've shown that in our own PK studies, whereas an inhaled form, we have shown to be a reliable way of absorbing the drug. The onset of action occurs as soon as 10 minutes with INBRIJA.

So what it does is, it gives the patient the opportunity to intervene on their own when they feel that they are going into a wearing off of their existing drugs or an OFF period. It gives them the opportunity on the spot as needed to take an intervention that is going to bring them back and address those symptoms until, hopefully, their next scheduled doses of regular daily drug kick in. So we don't see that as competitive. It's a different category.

Now I'll offer that there is, we believe, another drug that is for as-needed use, coming on to the market we expect in September. It is apomorphine, and it is delivered in a film under the tongue that takes -- it's absorbed in 2 or 3 minutes, I understand, under the tongue. That is intended for as-needed use. And what we've said for a long time about that is that we actually believe it's likely to be a net positive. Because you will now have 2 companies, 2 marketing teams, 2 sales forces out there, really impressing doctors and patients and educating them with the need to talk about OFF periods and address them. And that would be a case of a rising tide raising all boats, we believe.

Okay. That's very helpful. And then I guess 1 question on cash runway. You had indicated cash equivalents of about $104 million, which includes the roughly $40 million in restricted cash. Given the current INBRIJA and AMPYRA revenue trajectories, how should we think about cash runway at this stage?

Yes. I'll hasten to add that those numbers do not include the $12.7 million that -- of tax rebate that we just mentioned. I can't comment specifically on that. I can tell you that -- what we already have said publicly, which is that we have -- we're projecting $170 million to $180 million of expenses on the year. And that we are working right now to reduce expenses further. And the goal would be that as soon as possible, we would like to have that crossover point where revenue is -- or cash is -- excuse me, that the product sales are cash neutral to expenses and then go to cash flow positive. So we are working on that right now in real time, and I mentioned one of the initiatives that we're very actively working on in terms of monetizing additional capacity for manufacturing, spray drying at our INBRIJA manufacturing plant.

Your next question comes from Ram Selvaraju with H.C. Wainwright.

I just wanted to know, Ron, if you could provide us with additional color on the relaxation of prior auth requirements. And if you're seeing any evidence that what is driving that is not just simply related to the COVID-19 pandemic. Is there anything...

I'm sorry, Ram, it cut out just briefly in your first sentence. So could you -- I'm sorry to ask you to repeat it. Could you repeat that again?

Sure. So what I was asking was about the prior auth. So you mentioned that you're seeing some relaxation of prior auths. And I was just wondering if you're seeing any factors that are not COVID-19 related that is driving that development?

It's very hard to say. And we can only speculate. So we don't know for sure. What we do see is that there really appears to be relaxation because we're hearing repeatedly from physicians around the country that they have been -- it's been easier to get access. It's been easier to get through the prior auths, easier to get Medicare patients. And in fact, one of the silver linings of the higher-than-expected Medicare rebates that we talked about in the first half of the year is that it indicates that more patients than we expected on Medicare were actually paying the out-of-pocket costs, which we think indicates the value that they're placing on the therapy.

Okay. And then with respect to the face-to-face promotional activity that you indicated has been resumed. Do you think that there's any risk in the upcoming months, given the way the COVID-19 crisis has evolved over the past several weeks, U.S., that restrictions might be reimposed on those activities? Or do you think that, that basically now become the status quo?

We have seen no indication. That's all we can say, right? I mean we've seen no indication and we have not heard through the grape vine that there are any imminent plans to tighten those up again. Now of course, you don't know. Is that going to be the same story, 6 months from now? We don't know. But what we can say is that the wide -- in our circles, the widespread and strong impression is that the Medicare relaxation has mostly been due to COVID. But now that it has been relaxed and sort of everyone's getting used to the new normal, it's not clear that they're going to have an easy path back to tightening up again. It could happen, but we just don't have an indication of that.

Okay. And can you tell us when you might potentially be in a position to resume giving INBRIJA revenue guidance? Like what set of parameters, what conditions would need to be there in order for you to do that?

Well, I don't want to front run our decision on that. We need to feel that there's enough stability in the marketplace. And with regard to all the variables that were -- particularly, the variables that were introduced by COVID, that they are unlikely to backslide and that we can make projections with some confidence going forward. So yes, I do think we need a little more time here. We're -- as I mentioned, we're quite encouraged by what we've been able to accomplish over the last few months. We're very encouraged by the trend, but we also -- it's new. It's only a few months old. We need to see as we come out of the COVID crisis, we need to get a sense of what the metrics are likely to be and what the trend lines are likely to be once those variables are out of the picture. So I don't know. The bottom line is, I don't know when we will be able to do that, but we need some more time and more data coming in over the next few months, I would think.

(Operator Instructions) Your next question comes from Cory Kasimov with JPMorgan.

This is Turner on for Cory. Just a couple of quick ones. I was just curious, how much of the Medicare block lives decrease from softening prior auth criteria? Or do you do the key outreach? And then I was just curious, what's the current mix of commercial versus Medicare insurance?

I'm sorry, how much does -- how much do the blocks do what?

How much did the reduction in Medicare block lives come from softening of prior auth criteria or some of your key outreach and work with payers and providers? Or -- and then just what was the mix versus -- commercial versus Medicare insurance?

Yes. Look, it is an art more than a science to be able to decipher what was most responsible. What we can say is that we know for sure that there were policy changes. So although I think I might have used -- I don't know if I used the term "softening", but there were actual policy changes at the insurers that made the burden of the prior auths -- that reduced the burden of prior auths. So they would need to go back and -- in order to change that, they would need to go back and reinstate old policies. So right now we don't see a move toward that, but this was primarily the reason. Was that we had policy changes in place. And then with respect to Medicare versus commercial, we're about 60-40, somewhere between 65-35, 60-40, Medicare to commercial.

And there are no further questions at this time.

Okay. And let me just -- let me be more precise about the question, or the response to the question on policy changes and softening of PAs because they can be a little bit dense. So specifically, we saw a reduction in people being blocked from getting access on Medicare Part D, and that was a policy change. Those were policy changes at the insurers. We also did see a lowering of enforcement of prior auths. So it's a little bit different. One is a complete block, where you just can't get the drug. Those were lower due to policy changes. The softening of the PAs was just the insurance companies not enforcing the PAs to the degree that they had previously. So that also reduced the burden on the physician who wants to give the patient access and prescribe the drug. So it's really two parts of the same coin in a way. And you said there are no more questions, operator?

We do have another question in the queue. It is from Kenneth Atkins with Cowen and Company.

You indicated that there were higher-than-expected Medicare rebates during H1. Were those mostly felt in Q1 or Q2? And would you be willing to quantify the magnitude of that impact on sales, just so we have a better idea of how much of the tailwind might be to -- for H2?

Yes. The -- I can tell you that it was several hundred thousand dollars. And that, again, we work with a very highly regarded external group on this. But as I said, it's very, very challenging, especially in the first year of a launch, where you haven't even gotten through an entire year of experience, because we launched the beginning of March, end of February last year. So it's very challenging, particularly with Med Part D, when everyone's resetting their insurance and resetting their initial coverage period and doughnut hole for the year in January. So we estimated a charge for the first quarter. It came in, in the second quarter. When we actually got the actual charge from the government, it was much higher, or significantly higher than what we had allocated for the first quarter. So we took the additional charge in the second quarter. Again, as we gain more experience over time, which is what happened when we launched AMPYRA, we expect that we will get closer and closer and then get much more finely tuned on being able to project those accurately.

And there are no further -- (Operator Instructions) . And those are all the questions we have at this time.

Okay. Well, thank you, and thank you all for tuning in. We look forward to updating you in the next quarter. Have a great rest of your week.

This concludes today's conference call. You may now disconnect.