Acorda Therapeutics, Inc.
Q2 2018 Earnings Call Transcript

Published: 2 Aug 2018

[Operator:]

Welcome to the Acorda Therapeutics Second Quarter 2018 Update. At this time, all participants are in a listen-only mode. There will be a question-and-answer-session to follow. 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, Executive Director of Investor Relations at Acorda. Please go ahead.

[Felicia Vonella:]

Thank you. Before we begin, let me remind everyone this presentation will contain forward-looking statements. Our more detailed disclosures are found in our SEC filings, which are public, and we encourage you to refer to those filings. Let me now pass the call over to CEO, Ron Cohen. Ron?

[Ron Cohen:]

Thanks Felicia. And Good morning, everyone. Moving right in. INBRIJA is our investigational inhaled levodopa treatment for symptoms of OFF periods and people with Parkinson's disease who are taking carbidopa/levodopa regimen. Our MDA remains under review with the FDA, and we're looking forward to our PDUFA date of October 5, 2018. During the quarter, we received validation by the European Medicines Agency, or EMA, for the INBRIJA marketing authorization application that we submitted at the end of March. We await the next steps in that process. On the commercial side of the business, we reported AMPYRA revenue of $150.3 million in the second quarter. July sales were also strong, and we're reiterating our net sales guidance for the full year of $330 million, $350 million. On June 7, we had the oral argument for our AMPYRA patents before the U.S. Court of Appeals for the Federal Circuit, and we are awaiting that decision. Our request for a preliminary injunction to prevent generics from launching at risk was denied by the court. Thus, as of July 31, generics could potentially launch at risk prior to the court's verdict. As of today, we are not aware of any such launches. Moving to INBRIJA. The FDA is reviewing that NDA and our Acorda team is preparing for launch. This includes discussions with payers, pharmacy benefit managers, increasing disease state awareness among a range of audiences and expanding our social media and online presences. And that includes our many faces of off Facebook page and our Live Well. Do Tell campaign, which we recently launched for the Parkinson's disease community, and you can check that out at livewelldotell.org. We are also training our sales force mapping territories, preparing a wide range of launch materials and programs. Our market research also continues and reinforces our conviction that OFF periods represent a large unmet need in the Parkinson's community. And that both physicians and patients have a high receptivity to INBRIJA. We conducted a survey among 226 neurologists, 175 primary care physicians and 150 people with Parkinson's disease. The survey showed that physicians are frustrated by the lack of options, specifically indicated to address OFF periods, and despite their best efforts to optimize daily drug regimens, their patients still experience OFF periods. 71% agree that OFF periods are the greatest unmet need in Parkinson's disease and 81% agree that therapies are needed specifically for OFF periods. 100% of the surveyed people with Parkinson's agreed that nearly half of OFF periods were " very bothersome." In the same quantitative market research study, we did a case study simulation of Parkinson's disease patients experiencing OFF periods. In this survey, 89% of physicians stated that they would include inhaled levodopa in their treatment regimen for their patients and 79% of people with Parkinson's stated that they would ask their doctors to prescribe inhaled levodopa. Based on this and extensive additional work to date, we believe that there would be strong demand and market receptivity to INBRIJA. Approximately 350,000 people with Parkinson's in the U.S. who are taking levodopa still experience OFF periods. Based on our market research, we believe that PQS sales for INBRIJA would be greater than $800 million. We have a patent portfolio that goes into the early 2030s. In addition, we have a large body of trade secrets and know-how, which, we believe, gives a particularly long tail to the exclusivity on this technology, and we are in the process of assessing the market opportunity for INBRIJA ex-U. S. This table outlines key financials for the second quarter. I will highlight that we ended the quarter with $392 million in cash and are well capitalized for anticipated launch of INBRIJA. In closing, we're in a position to create substantial near and long-term value with the potential of approval of INBRIJA in the U.S. We expect to build further value with the potential approval of INBRIJA in Europe, and we plan to develop additional therapeutics that harness the power of the ARCUS pulmonary drug delivery technology. The company's strong execution year-to-date is fueling our ability to launch INBRIJA to invest in the pipeline and to remain well capitalized throughout the INBRIJA launch. Our strategic priorities for the remainder of 2018 into 2019 are

[Operator:]

[Operator Instructions] first question comes from line of Michael Yee from Jefferies. Your line is now open.

[Kelechi Chikere:]

Hello, good morning Kelechi on for Micheal. Just a couple of questions from my end. First how do we know – or I guess, what do we – what do you know about generics launching at risk now? What would you need to be – what would need to be announced and what do you know in the channel in preparing for? And I have another question after that.

[Ron Cohen:]

Okay, so we can’t speculate on what other companies are doing, what the generics companies are doing. We can only monitor to see if they have launched. And we – at this point, we do not see any evidence that they have launched at risk. And that's really all we can say about that. Our business plan includes contingencies as you would expect. For – well, all these contingencies. Launch at risk, no launch at risk, the verdict on the case. So our business plan is taking all of that into account, and we have contingencies for all of that. I think, for us, the key is we've been working hard over the last year plus to ensure that we have cash in the bank. And as we said, we expect to end the year with over $300 million in cash to help move INBRIJA into launch and beyond.

[Kelechi Chikere:]

Got it, thanks that helps. Another question, based on what you know, are you fully confident in an on-time approval of INBRIJA, including what you know on human factors, manufacturing facility review and device, and any potential CMC requirements? Would you be fully prepared to launch and have a full launch effort assuming approval?

[Ron Cohen:]

Yes, so we are in across the board on everything you mentioned and beyond. We are prepared to launch, and we will be prepared to launch with an approval on the PDUFA date October 5. Obviously, we can't speculate on – the FDA response will be on October 5, but we are confident that we submitted a robust package, and we're looking forward to the date. Operator

[Kelechi Chikere:]

Got it.

[Operator:]

Your next question comes from line of Cory Kasimov from JPMorgan. Your line is now open.

[Carmen Augustine:]

Hi this is Carmen on for Cory. Thanks for taking the question. Just one question on the INBRIJA launch preparations. Could you talk a bit about how uncertainty around AMPYRA's prospects for the rest of the year and beyond are impacting those preparations, if at all?

[Ron Cohen:]

So you were talking about AMPYRA? The patent case, right?

[Carmen Augustine:]

Yeah, so how the patent case is affecting your preparations for INBRIJA. You had previously mentioned, I think, in the issue standard sales force.

[Ron Cohen:]

It is not affecting it at all. The sales force is highly motivated. They're doing a great job as you can see from the quarter with AMPYRA. They are still out there, working to bring AMPYRA to any patient who might benefit from it, and they are also – we are also in the process of transitioning them to training on Parkinson's disease and what they're going to need to know to transition into an INBRIJA launch. So none of that changes regardless of the case.

[Carmen Augustine:]

Okay, thanks. then a quick financial if I could. Could you provide any guidance on how we should think about tax expense over the next few quarters?

[Ron Cohen:]

I am sorry, how we should think about what.

[Carmen Augustine:]

Tax expense.

[David Lawrence:]

Yeah, This is David. So we're working towards the corporate tax of 21%, but we've got some strange things that go on with our tax calculations on a quarterly basis, related to the rates and the valuation allowance that we've got in place. So I can't really give you any specifics on what it's going to look like going forward, at least near term.

[Carmen Augustine:]

Okay, thanks guys.

[Operator:]

Your next question comes from the line Salveen Richter from Goldman Sachs. Your line is now open.

[Marine Abiad:]

Good morning. My name is Marine Abiad on for Salveen. I have a couple of questions. First of all, what is the legal precedence for that kind of situation after the oral arguments have been heard at the U.S. Court of Appeals?

[Ron Cohen:]

I am sorry, the legal precedent for what?

[Marine Abiad:]

For the patent litigation like what's – how have historically the U.S. Court of Appeals ruled in that kind of situations, do you know?

[Ron Cohen:]

I'm sorry. I need some specific question here. How they've ruled in what kind of situation with respect to what? Are talking about timing?

[Marine Abiad:]

When the patent expiration is – well, I mean, with respect to timing, but also with respect with how were they general – I mean, are they more positive or negative? Like what was.

[Ron Cohen:]

Okay, I am not being difficult. I'm really trying to understand your question. What sort of precedent are you talking about? We had oral arguments on June 7, and we are waiting for the verdict of the court. So, every case is its own case. Every case is individual. I'm not sure what sort of precedent are you talking about?

[Marine Abiad:]

Okay, I was basically trying to figure out if the U.S. Court of Appeals is – how should I say it, benevolent in that kind of cases. Let's move to INBRIJA. Quick question. Given that it's an inhalation device, how does the regulatory approval process differs from oral or injectable?

[Ron Cohen:]

Well, in terms of oral I can’t comment on injectable, but in terms of versus a simple oral pill, obviously, you're dealing with, excuse me, a drug device combination and the major way in which that differs is that it involves the device groups at FDA as well. Because you're dealing with both the device aspect of the product as well as the drug aspect. Fundamentally, it's not different in that the hurdles are the same. Safety and efficacy and you have to show that you can manufacture it reliably, and CMC and all that. But there is the additional layer of review in which the FDA includes the device division in the deliberation. In our case, because it's a pulmonary delivery, it also includes advice from their pulmonary division. So it does involve additional groups, although the fundamental precepts on which they approve are not – they're not philosophically different from any other drug.

[Marine Abiad:]

Got it. And a quick question on the preparation for launch. Are you guys expanding the sales force? And also what is the – given that it's a very large patient population, how you're thinking about reaching out the physicians who are treating Parkinson's patients? Do you have geographical preference? Do you have like academic centers versus nonacademic centers? How you're thinking about that?

[Ron Cohen:]

Well, my geographical preference is New York, but that's personal. The sales force – in terms of the size of the sales force, it depends on the verdict on the case. So in the event that we keep exclusivity on AMPYRA beyond this year, the – we would need to expand the sales force to account for detailing two different drugs, even though they're all neurology and there's a nice overlap there. So we estimate that we would expand by about 35%, give or take. If we lose the case, and we have generic entry, then it will be a straight shift from the existing sales force. We'll just move right into INBRIJA. So they are rightsized, as of right now, to be selling INBRIJA out there. So we would not expand, but we also would not contract. It would be the exact same sales force. In terms of geographic preference, it really is dictated by where the patients are and where the treating physicians are, and we have mapped out the country with respect to those issues, both in terms of the movement disorder specialists all the way through the general neurologists and even into certain primary care who have robust Parkinson's disease practices. So that's dictated not by our preferences but really by the data. And that's exactly the same process, I think, everyone goes through. We certainly have gone through it with AMPYRA in the MS space. And what we find is, there is overlap, which is why we don't have to double the sales force. So there is overlap where the same practice might have a movement disorder specialist and an MS specialist or general neurologist who treats both, or if they are not in the same practice, they may be in the same building or across the street from each other. Then there are other areas of the country where it's much more spread out to so you have to account for that. That's why we say it's about 35% increase in the sales force to account for the lack of overlap across the country.

[Marine Abiad:]

Got it. Thank you very much.

[Operator:]

Your next question comes from the line of Laura Chico from Raymond James. Your line is now open.

[Laura Chico:]

Good morning, and thanks for taking the question. I'm wondering if you could characterize any potential impact to the inventory during the quarter? And then just given the setup of the remainder of 2018, I'm guessing – how should we assume this will unwind over the duration of the second? And I've got one quick follow-up.

[Ron Cohen:]

So inventories were at normal levels. Typically, we've said they have been within two weeks. I mean, they've always around two weeks or one to two weeks, depending. We did see some contraction of inventories in the first quarter, which we talked about on that call, and we also predicted that they were going to normalize, and they did normalize. So right now, it's completely unremarkable in terms of inventory levels. And again, depending on the status of the generics that will dictate what we see going forward, our assumption now is if we – to the extent we do not see generics in the marketplace, we don't expect any change in inventory levels that's substantive over the rest of the year.

[Laura Chico:]

Okay, that’s helpful. And then just one follow-up, Ron, on your earlier comments, you were kind of discussing the complexity associated with INBRIJA. I just wanted to clarify. Just wondering if you could remind us where you stand in terms of the facility inspections by FDA? What's still remaining to complete and what's been done? And again, also where do you stand in terms of commercial supply, in terms of your capacity to treat at launch and then capacity more at peak? Thanks.

[Ron Cohen:]

Okay. So we don't comment on ongoing FDA process unless we have something material that we need to report. So we can't comment on the status of PAIs or anything else related to the ongoing NDA process. What we can say is that at this point in the process, I guess it's August, then – so we're two months away from the PDUFA date, we're continuing to look forward to the PDUFA date, and we'll see where we stand. With respect to inventories, we have planned accordingly, and we are building up – continuing to build up launch stock, and we fully expect to be a fully stocked for a launch with an approval in October.

[Laura Chico:]

Thanks very much.

[Operator:]

Your next question comes from the line of Kenneth Atkins from Cowen. Your line is now open.

[Kenneth Atkins:]

Hi, thanks for taking my question. You'd mentioned previously that you're in discussions for ex-U. S. partnership with regard to INBRIJA. Any updates on those conversations? Do you still plan to partner that program ex-U. S.?

[Ron Cohen:]

We're continuing to have those discussions. We are focused mainly, as you would expect, on the U.S. approval in the near term and the launch in the U.S. However, we are – we do have ongoing discussions. I wouldn't speculate at this point as to when we might have a deal ex-U. S., but we have active discussions ongoing.

[Kenneth Atkins:]

Got it. Thanks.

[Operator:]

Your next question comes from the line of Ram Selvaraju from H.C. Wainwright. Your line is now open.

[Ram Selvaraju:]

Hi, thanks very much for taking my questions. Just with respect to qualitatively how you anticipate the sales force to be spending its time if you win the appeal or lose the appeal? In terms of what percentage of time they would be spending detailing INBRIJA and what percentage of time they'd be spending detailing AMPYRA? If you could give us some information on that, that would be helpful. Secondly, I previously asked about the specific distribution channel you would be using for INBRIJA and whether this would involve a specialty pharmacy network that in any way resembles that which is favor for AMPYRA or not? And lastly, with respect to what you had said previously about potentially looking at strategic opportunities in neurology for further development to broaden the pipeline, I just wanted to get a sense of your disposition, specifically with the context of Parkinson's disease. If you would consider adding other L-dopa focused modalities to complement potentially INBRIJA? Or if you would look at other anti-Parkinson's drugs? And especially, if you have an opinion at this time regarding the use of gene therapy in Parkinson's disease as an L-dopa delivery mechanism? Thank you.

[Ron Cohen:]

That's a hefty passel of questions, Ram, thanks. So with respect to the sales force time, to the extent that they are detailing both drugs, and again, presupposing that – that presupposes that there's not generic entry, we would expect that as of an approval of INBRIJA, INBRIJA is going to take first position for them and AMPYRA would then be in the second position in the bag. So obviously, the bulk of their time would be – or the majority of their time would be on INBRIJA, but they would still have time allocated to MS. The only exception to that would be when they call on specifically the MS specialist offices, and obviously, in that case, it flips. So overall, we would expect that the lion's share of their time would be on the launch because that's the prime directive to have a successful launch. With respect to distribution channel, we anticipate that it will be similar to what we've done with AMPYRA, which is to say a spoken hub specialty pharmacy network. This is a drug that we think will benefit from more high touch with patients and in terms of compliance and so forth. So – and for that and a number of other good reasons, we would anticipate it will be through that channel. On BD, you're absolutely correct. We are interested broadly in neurology assets. We have a specific interest within that broad interest in other Parkinson's assets. Obviously, we had a Phase 3 product that would have been a great complement in tozadenant and unfortunately, that did not work out at the end of last year. But we remain quite interested, because there is a clear complementarity between novel and beneficial new daily regimens or chronic regimen type drugs together with INBRIJA, which is indicated – or which was intended to address the episodic and pretty much random OFF periods that people with PD get no matter what, no matter what chronic regimen they are on. So we do like other L-dopa modalities. We are interested in other mechanisms of action. We think gene therapy is very interesting. It's earlier stage in our view and a higher-risk profile in our view. So it would really depend on a level of confidence based on existing data for that because our overall – at least in the near and intermediate term, our thrust is going to be for later-stage assets with more risk squeezed out of them at the time we get involved.

[Ram Selvaraju:]

Great, thank you very much. And one quick question for David, if I may. Could you comment on how you expect stock-based comp to trend over the coming quarters? Thank you.

[David Lawrence:]

I would not anticipate any changes in what you're seeing historically on stock-based comp.

[Ram Selvaraju:]

Thank you.

[Operator:]

And your final question comes from Jay Olson from Oppenheimer. Your line is now open.

[Silvan Türkcan:]

Thank you, this is Silvan Türkcan on for Jay Olson. Thank you for taking my questions. And congratulations on this quarter’s AMPYRA sales.

[Ron Cohen:]

Thank you.

[Silvan Türkcan:]

Can you tell us a little bit more about your AMPYRA launch kit and the packet size and expected utilization? And if you've learned anything new from your recent surveys?

[Ron Cohen:]

You mean the INBRIJA launch kit? I think I heard AMPYRA.

[Silvan Türkcan:]

I’m sorry, of course INBRIJA.

[Ron Cohen:]

And you're asking about the launch kit preparations?

[Silvan Türkcan:]

Yes, because I believe you expected to have 30 doses in the kit for one-month usage and the trial patients used up to five doses per day. So just what you expect in terms of usage post your survey?

[Ron Cohen:]

Yes. You know what. I'm not sure where that information came from, but we are not prepared at this point to talk about what a kit or kits will look like. At the time that we announce pricing, we'll also talk about what the kits look like.

[Silvan Türkcan:]

Okay, great. Thank you. And then just a quick follow-up. Is there any read across or anything from the denial of the injection to your appeals case? Or is that going to be a separate court, separate judges?

[Ron Cohen:]

Yes. We have no way to speculate accurately or not about what that means. It was a very quick one-page denial from the – and it's from the same judges who are doing the case. But it was not a detailed denial. So we have no information there with respect to reading through on the case itself.

[Silvan Türkcan:]

Okay, thank you.

[Operator:]

There are no further questions at this time. I'll turn the call back over to Mr. Cohen.

[Ron Cohen:]

Well, thank you. And thank you, all, for being here and your questions. We're looking forward to updating you as we move into a vital and exciting, I think, third quarter and fourth quarter this year. Have a great weekend, everyone.

[Operator:]

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