Acorda Therapeutics, Inc.
Q2 2017 Earnings Call Transcript

Published: 30 Jul 2017

[Operator:]

Welcome to the Acorda Therapeutics Second Quarter 2017 Update. [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, Executive Director of Investor Relations at Acorda. Please go ahead.

[Felicia Vonella:]

Thank you. 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, please refer to our filings with the SEC. I will now go ahead and pass the call over to Ron.

[Ron Cohen:]

Thanks, Felicia. Good morning, everybody. We reported AMPYRA net sales of $131.5 million for the second quarter of 2017; that was an increase of 8% over 2016. We are reiterating our 2017 AMPYRA revenue guidance of $535 million to $545 million. On March 31, we announced that the US district court invalidated certain of our patents related to AMPYRA. We disagree with the ruling and filed a notice of appeal in May. The appeals process typically takes 12 to 18 months from the notice of appeal and our opening brief is due the first week of August. We will continue to drive the growth of AMPYRA and benefit from its revenue, at least, through July of 2018, pending the outcome of the appeal. Moving to our late stage pipeline, we filed our NDA for INBRIJA on schedule during the second quarter. This was a key milestone achieved, thanks to intensive work by many dedicated Acorda associates. We expect the FDA to notify us by the end of September, regarding whether the submission is accepted for full review and we expect the 10 month review. INBRIJA is being developed as an on-demand therapy for symptoms of OFF periods and people with Parkinson's who are on an oral levodopa carbidopa regimen. OFF periods are one of the most debilitating aspects of the disease. Our commercial preparations for the launch of INBRIJA are well underway. We also expect to submit a marketing authorization application or MAA to the European medicines agency by the end of 2017. In the last month, we presented efficacy and long-term safety data from the INBRIJA Phase III program at the MDS meeting in Vancouver. The efficacy study met its primary endpoint and improvement in UPDRS Part 3, the standard validated endpoint agreed to by the FDA. The long-term safety data showed no statistical differences in the mean changes in FEV1 and DLco, pulmonary function test from baseline to week 52, between INBRIJA and observational control groups. Overall, in these studies, patients were using INBRIJA in average of about twice a day up to one year of treatment. We're projecting peak INBRIJA net sales in the US alone of more than $500 million. Moving to tozadenant. Tozadenant is an oral adenosine A2a antagonist, representing a potential first-in-class treatment for chronic maintenance therapy of Parkinson's disease in the US This would be complementary to INBRIJA, which is intended for on demand use rather than chronic maintenance use in OFF periods. In the Phase 2b trial, tozadenant reduced average daily OFF time by more than 1 hour relative to placebo, even in people already being treated with several other concurrent Parkinson's medications. We expect results from our pivotal Phase 3 clinical trial in the first quarter of 2018. We believe that tozadenant, if approved, represents a commercial opportunity in the US that is greater than that of INBRIJA. Dave will now review select financials for the quarter.

[David Lawrence:]

Thanks, Ron, and good morning, everyone. We ended the second quarter with a non-GAAP net income of $13.3 million or $0.29 per share. Please note that this non-GAAP net income includes a reduction for the tax effect of reconciling items, totaling $7 million or approximately $0.15 per share. As we announced in April, we implemented a corporate restructuring to align our cost structure with our late stage programs, and we estimated approximately $8 million of pretax severance and other costs, would be incurred primarily in the second quarter of this year. We had substantially completed the restructure and incurred cost of $7.6 million in the second quarter. Of the $7.6 million, $4.8 million are in research and development expenses and $1.9 million are in SG&A expenses. We also incurred stock-based compensation expense related to the restructuring of $0.9 million. We expect to incur some additional costs related to the restructure in the second half of the year, however, these are not expected to be material and we continue to maintain our estimate of approximately $8 million in total restructuring costs. We ended the second quarter with cash and cash equivalents of $141.1 million, and continue to project the 2017 year-end cash balance to be greater than $200 million. I'll now turn the call back over to Ron.

[Ron Cohen:]

Thanks, Dave. So in the first half of 2017, Acorda experienced a major setback, and also major positive milestones, respectively, the adverse AMPYRA patent verdict and the positive INBRIJA Phase III and safety data and timely submission of the INBRIJA NDA. Setbacks are inherent in the growth of biopharmaceutical companies and the difference between long-term value creation and not is most often diversification and execution. Acorda's management team and Board implemented an aggressive diversification strategy, beginning three years ago, which is now yielding results. Very importantly, following the reductions to our operating expenses, which we implemented after the patent verdict, we project that the company's balance sheet will be sufficient for us to achieve cash flow positivity with the launch of INBRIJA in 2018. This does not include any consideration of additional cash to be generated by royalty monetization or other business development activities. We're focused on three key areas this year and into 2018

[Operator:]

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

[Michael Yee:]

Hi, good morning Ron.

[Ron Cohen:]

Good morning, Mike.

[Michael Yee:]

Hey, two questions for you. Congrats on filing INBRIJA. Just wanted to think about, over the next 12 months, what are the things you need to work on, or what gating factors are there, either clinically or safety update vise that we might hear, or are we just sort of waiting on a potential panel next year. And any comments on that? And the second question was, there was a recent $1 billion deal in the Parkinson's space this week. Maybe if you could comment on your interpretation of it. Are there any reed bruised to your programs or any competitive dynamics there?

[Ron Cohen:]

So the activities between now, and hopefully, approval next year are executing, really, on the program. So we will be hopefully engaging with FDA throughout and responding to questions, providing them with information. There'll be the usual 120 days safety update that we'll provide. As we said on the call or in the presentation, we expect somewhere in September - by somewhere in September to be informed of, hopefully, acceptance of the MDA filing and then proceed from there with the actual review and back-and-forth with FDA. We're preparing separately on manufacturing pre-approval inspection, is a key item, and so we're drilling on that over and over and over so that we will be prepared for pre-approval inspections. So again, it's really execution and just making sure that everybody here is focused, has their eye on the ball and that we are thinking of anything possible that FDA may come up with our may need, so that we are able to respond in a very timely and crisp way. In terms of a panel, we certainly have not been informed the there'll be a panel and we don't know. I don't want to front run the FDA on this, because they will be telling us whether or not they think there's one necessary. We, personally, don't see why there would be a panel for this particular drug with the data sets that we have. But again, we can't preempt the FDA. We don't see a reason, but if they do, we'll discuss it with them. And then with regards to the Neuroderm deal that you alluded to, it's very encouraging to see that there are repeated signs now that the whole issue of OFF periods for people with Parkinson's is really gaining a lot of currency. When we did our original deals with Civitas three years ago, there were a lot of people, even I have to say, even in the medical field, who were not entirely convinced or not really into it. I think that deal really underscores that this is one of the key frontiers and key unmet needs in the Parkinson's space, and it's something that people with Parkinson's and MDS specialists are enthusiastically encouraging the industry to come up with solutions for. So we feel we're terrifically positioned with INBRIJA on that one.

[Michael Yee:]

Okay, thanks.

[Operator:]

Your next question is from Phil Nadeau with Cowen and Company. Please go ahead.

[Phil Nadeau:]

Good morning, thanks for taking my questions. First one on toz, Ron, I think this is the first time I can recall you saying that you think toz has a peak sales potential bigger than INBRIJA. Am I, correct that, you've got more optimistic about that market opportunity or have I missed you make those comments before? What are you basing those comments on?

[Ron Cohen:]

It's not that we are more optimistic, it's that our commercial team has continued to do it's market research and its work in the area. And we're at a point where we feel confident coming out and telling people that we think it's a larger opportunity based on the work that's been done. Remember, it's a chronic maintenance therapy versus an on-demand therapy, which would be used periodically in a different rates by different patients, which would be INBRIJA. Whereas here, you've got something where the Phase 3 looks like the Phase 2, you have a brand-new mechanism of action, a brand-new class of drug, first time in 20 years that that would be true in US So there's a lot of cachet for that and we think that, once you put a patient on it and if it works for them, they are going to take it every single day. So within the Parkinson's space, we would expect more broad and more chronic usage, which is why we think it's bigger. The other thing to point out is that we originally were expecting that we would be entering a market after istradefylline, which was Lynnbeck's entry. Because of the failure of that program, we no longer are accounting for that in our market projections, and that also feeds into, obviously, a bigger market opportunity for tozadenant.

[Phil Nadeau:]

Got it. Okay, that's very helpful. And second, among investors, there is a lot of concern or, at least, some concern, but the history of the FDA's review of drug device combos in that those can often be projective reviews that take multiple review cycles. What work have you done to understand issues that other drug device combos have had in getting through the FDA? What are the common reasons for multiple cycle reviews and what have you done to mitigate those risks in your filing?

[Ron Cohen:]

Yes, so we have studied extensively all of the drug device, particularly, the inhaled drug device combinations and what the story was there. The team at - what is now Acorda Boston, but was Civitas, has been doing this for 20 years, and had an enormous amount of experience with FDA as they did the original insulin program, which delivered over one million doses over that program for several years. So they've been able to fold all of that learning over that long period of time and interactions with FDA into what we've done with INBRIJA. Let's admit right up front, we do all the work we can and the FDA may still find things, but what I - what we are comforted by is that the Civitas team has checked every single box that we and every consultant that we brought in and some of them being ex-FDA as well, could think off. Typically, when these things have had issues, if there have not been direct issues with the clinical data like safety or efficacy issues or the molecule itself, there've typically been delivery issues, reproducibility of dose from dose to dose or manufacturing issues around the device itself. We have done a huge amount of work to mitigate that. One of the things, with this product, that is more comforting than some others for example, is that it's not a metered-dose inhaler. Typically, the metered-dose inhalers tend to be more complicated, right, because you have multiple doses in a single device. You have to ensure that every single dose that comes out is the same every time and so on. This is a much more simple and straightforward device that's been refined over many years. It has, I think, six or seven pieces of plastic that are molded together and one little metal piece that pierces the capsule. But the dose is actually much more like an ordinary pill or capsule, because it is a capsule. So you know you're getting the same amount of powder every single time because that's what's in the capsule. You put it in the device, it pierces and then you inhale what's in the capsule. So from that standpoint, there's just less complexity. There are just - It's like when you buy sort of a modern refrigerator with a digital display and all kinds of bells and whistles, and the one thing that you are always worried about is there more things to break, right? Here, there are really fewer things to break and so that, in and of itself, gives us a lot of comfort, that and the fact that we've just done a huge amount of homework over and over and over and having said that, if FDA comes up with questions about it, we will be ready.

[Phil Nadeau:]

Good, that's very helpful. Thanks for taking us through that.

[Operator:]

Your next question is from the line of Paul Matteis with Leerink. Please go ahead.

[Jeffrey Lin:]

Hi, this is Jeffrey Lin on for Paul Matteis. I actually have two, as you alluded to about the recent failure of istradefylline. Could you perhaps give us some commentary on what have you done to maximize your chances in this event for tozadenant in Phase 3 and like what are the statistical assumptions for that study?

[Ron Cohen:]

Okay. So they are nominally the same going after the same target, which is the adenosine to A2a receptor. Istradefylline is a different class of molecule. It's tizanidine versus an adenosine based molecule, which is tozadenant. Now having said that, that doesn't give you the answer, but it does tell you that they are very different types of molecule. What we were attracted to when we made the decision to buy Biotie Therapies with tozadenant, was that when we looked at the history of data in the field, the Phase 2b trial for toz, we believe, had more robust data than the istradefylline trials had had. So the outcome measures were stronger, there was more internal consistency. There was clear dose responsiveness. It was an extremely robust Phase 2. Istradefylline was quite variable when you looked at the data. So there were certainly signals there, but in our view, it was not nearly as convincing and strong as tozadenant. So we start out with that as a baseline. If you look at the Phase 2 data, we come out and our external experts come out concluding that it worked in Phase 2. And then the issue is, how do you translate that reliably into a larger Phase 3 study, so that you get, at least, the same result that you did in Phase 2. And that's been an area of difficulty for this class of drug and that was seen with preladenant, which was the merc entrant into the field. So we took learnings from the preladenant study, there was a paper in Jana that was published after their Phase 3 failed, pointing to very clear steps that were missteps that occurred during that trial, which we have taken into account in our trial. So for example, there were entire countries where they decided to put centers that did not work out well, that did not have high-quality data. We avoided those countries. We made sure that we vetted the centers that we're doing the trials extremely, so that we only had the highest quality centers that had a track record of producing high-quality data. We have an external group of expert movement disorder consultants, specialists, some of the most accomplished in the field, who actually reviewed the recruitment in this study, and that's probably the secret sauce that goes along with this. So they actually are reviewing the recruitment to make sure, in an ongoing way, that the patients that are coming into the study are actually the right patients, and if they conform to the inclusion-exclusion criteria, with no exceptions. That's also been an issue for other trials where, frankly, it's gotten sloppy and it just wasn't picked up and they did have the right patient population. We have ongoing monitoring of the trial. We look at the blinded data that's coming in just to make sure that there is nothing on tour that looks weird or funny going on. When something comes up that sounds like it might be an issue with the center, we have a swat team that goes out and that immediately engages with the center. So we're doing everything that we can think of and that our external experts can think of to ensure that the trial will have the highest possible quality data. Our belief is that, for other members of the class that have not done well in Phase 3, that these were the reasons why they did not do well. And so we're mitigating those risks.

[Jeffrey Lin:]

Thanks a lot for answering our questions.

[Ron Cohen:]

Sure.

[Operator:]

And your final question comes from the line of Tom Shrader with Stifel. Your line is open.

[Tom Shrader:]

Good morning. I'm just wondering, we're in kind of a holding period for the other two drugs, how much are you thinking about SYN120 now? Do you still have a trial that should read out or be done around the end of the year? It's a pretty ugly indication. Is there a good sense of what good data would look like?

[Ron Cohen:]

Yes, so it's very much alive. We didn't emphasize it on the call because we wanted to emphasize the near-term late stage products. But in fact, we have of a number of drug in the pipeline that are going to have read outs this year, SYN120 prominent among them for symptoms of dementia in Parkinson's disease. Just to remind people, this is a combined 5-HT2A/5-HT6 antagonist. 5-HT6 has been implicated in cognitive systems. 5-HT2A is more on the affective side where you would be looking at symptoms of psychosis. And you find - if you look at the field, you've got Pimavanserin from Acadia that's really primarily 5-HT2A, that's already been approved for psychotic symptoms in people with Parkinson's, you've got Ativan working and others working on 5-HT6 angle for dementia, mostly in Alzheimer's and other dementia ambitions. So we're actually quite excited by the potential of SYN120. This is the first real human proof of concept trial for this particular molecule in Parkinson's with dementia. We should have a read out by the end of the year. Now - yes, the caveat audit is that the trial is, somewhat, underpowered. We inherited that when we bought Biotie. They did not have the funding to do tozadenant properly and to do a larger SYN120 trial. So they did the best they could with the funding available. Nevertheless, we hope we'll see some useful data and if we see positive signals that are credible out of this study, we would have another molecule that we can launch into late stage development that would be extremely exciting, plus the potential that it could actually be used as a dual mechanism, because people with these degenerative brain conditions, Parkinson's, Alzheimer's, others. Typically, there are a lot of them, who suffer from both cognitive symptoms and psychotic symptoms. And this would offer the potential of having a single treatment that could address both. So we're excited about it. But we have to wait for the data at the end of the year. And then of course, we're still waiting for data, also, by the end of the year on our M22 antibody for remyelination in MS, and also on our molecule for our VAP-1 inhibitor for primary sclerosing cholangitis, which is a proof of concept. It's a potent anti-inflammatory molecule with potentially multiple indications. This is a proof of concept. If this looks interesting, we would look at it for perhaps - or it could be looked at for things as diverse as liver fibrosis, for example. So all of that should be reading out by the end of the year and we'll see where we are.

[Tom Shrader:]

Thank you. Just to follow up is dementia, I mean are changes across diseases kind of comparable or would you be in a new - would you kind of have to set the scale, if you're dealing with Parkinson's, specific dementia?

[Ron Cohen:]

Yeah, it's an excellent question and I'm not sure I have the full answer for you. I will tell you that when you are dealing with symptomatic relief, typically, these indications have a lot more in common physiologically than not. If you are dealing with disease modification, you're in a different mode, right? Because then you are addressing different disease substrates. But when you are getting into the substrates of cognitive dysfunction in dementia, so for example, by boosting cholinergic output, those have more in common than not across these different conditions. So we would expect that if you see a positive signal in Parkinson's, that, that ought to translate into something like Alzheimer's disease.

[Tom Shrader:]

Perfect, thanks a lot Ron.

[Operator:]

There are no further questions at this time. I turn the call back over to the presenters.

[Ron Cohen:]

All right. Well, thank you very much for joining us, and we are looking forward to some exciting developments over the next six to 12 months and we'll see you at the next quarter call.

[Operator:]

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