Acorda Therapeutics, Inc.
Q4 2017 Earnings Call Transcript

Published: 15 Feb 2018

[Operator:]

Welcome to the Acorda Therapeutics' Fourth Quarter 2017 Updates. 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 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:]

Good morning everyone. Before we begin, let me remind you that this presentation will contain forward-looking statements. More 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.

[Ron Cohen:]

Thank you, Felicia. Good morning, everyone. Diving right in we achieved a number of key milestones in 2017. We reported AMPYRA net sales of $543 million, which was a 10% increase over 2016. This success reflects the help that AMPYRA is providing to tens of thousands of people with walking impairment associated with multiple sclerosis. And it also highlights the strength of our neurospecialty commercial organization, which has been recognized for its creative approaches to serving the needs in the MS community and also to risk sharing and reimbursement. We continue to vigorously pursue our appeal of AMPYRA with replied briefs filed in November 2017. The next step is the oral argument, which we believe most likely will be scheduled in the next few months. Our most important achievement of 2017 was the positive safety and efficacy data for INBRIJA, our investigational inhaled levodopa treatment for symptoms of OFF periods in people with Parkinson's disease. After we received the refusal to file letter at the end of August we refiled the NDA within approximately three months in early December. We took the time to respond to the two RTF issues and also to other questions that the FDA had indicated, they otherwise would have ask during the standard review process. We expect the FDA response to the refilling any day. We ended the year in a strong financial position with $307 million on the balance sheet. Moving to INBRIJA, this is an inhaled levodopa for people with Parkinson’s disease it is self-administered to address symptoms of OFF periods and it uses our proprietary ARCUS technology for inhale delivery, more than 1,000 subjects were studied in multiple clinical settings across the development program, which included a positive Phase 2b study, a positive Phase 3 safety and efficacy study and quite encouraging long-term safety data. INBRIJA represents a significant commercial opportunity, it addresses a large unmet medical need and we have a patent portfolio that goes into the earlier 2030s. In addition very importantly, in addition to the patent portfolio we have a large body of trade secrets and knowhow, which we believe gives a particularly long tale to the exclusivity on the technology. We believe that approximately 350,000 people in the U.S. have both Parkinson’s and OFF periods and based on our continued market research we believe the market opportunity for INBRIJA in the U.S. is greater than $800 million, and that does not include ex-U.S. projections. I will now pass the call on to Dave, who will review the 2017 financials with you.

[David Lawrence:]

Thanks, Ron and good morning, everyone. I want to take a minute to comment on a few key items of note in our financial results. As a result of determination of two programs in the fourth quarter of 2017 we recorded asset impairment charges of $233.5 million for the tozadenant program, as well as a $23.8 million impairment charge for the SYN120 program. These charges are included in our GAAP statement of operation net loss, however when these and other charges that are adjusted for non-GAAP reporting proposes we ended 2017 with net income of $80.7 million. In the fourth quarter of 2017, we received approximately $13 million for the monetization of Selincro royalty revenue. This transaction was recorded as royalty revenue in the fourth quarter. We also receive $40 million from healthcare partners in the fourth quarter of 2017, and exchange for the right to receive royalty revenue on Fampyra. This transaction was recorded as a liability on our financial statements. We will continue to record royalty revenues based on the actual biogen received, however the royalty revenue payments to healthcare partners will be recorded as an offset to the liability and interest expense. On the balance sheet we ended 2017 in the strong cash position with cash and equivalents of $307 million. Moving to our guidance for 2018, we project AMPYRA net revenues to be $330 million to $350 million. We expect to maintain exclusivity of AMPYRA through at least July 30, 2018. This guidance is subject to change based on the appellate court’s decision. R&D expenses for the full year 2018 are expected to be $100 million to $110 million. These expenses include manufacturing costs associated with INBRIJA. SG&A expenses for the full year 2018 are expected to be $170 million to $180 million. Year-end cash for 2018 is projected to be healthy at over $300 million. I will now turn the call back to Ron.

[Ron Cohen:]

Thanks, Dave. So, we expect a number of key milestones clinically and corporate in 2018, they include the ones you see here I won’t read them all, but I will highlight that we are expecting the NDA expectance for INBRIJA this month and really any day now. We are also looking to file our MAA in Europe by the end of this quarter, the first quarter. And we would expect a PDUFA date also this year in the fourth quarter and looking to potential approval and commercialization of INBRIJA by the end of the year. Obviously we are also looking for a decision in the AMPYRA patent appeal this year. In closing, our strategic priorities are to advance INBRIJA toward approval and commercialization, maximize the value of AMPYRA, which includes vigorous prosecution of the appeal, and also continued financial discipline to ensure that we remain well capitalized. We will now take your questions. Operator?

[Operator:]

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

[Michael Yee:]

Hey, good morning, Ron.

[Ron Cohen:]

Hey, Mike. Two quick ones for you.

[Michael Yee:]

Hey. You suggested that you will or should get a notification of the acceptance of the NDA filing. I guess is there anything you can communicate to us that could give us confidence that that should be no problem. I know that you had initial filing previously and this all isn't really in a black box so presumably you had some communications with the FDA in general about any deficiencies. So that's the first question. And then the second question is there was another program reported out Phase 3 data recently with pretty high efficacy. Maybe you could just talk to that data, and how are you think your programs stacked up to it? And or whether you think the efficacy differences are clinically meaningful because we've gotten some various feedback around that. Thanks so much.

[Ron Cohen:]

Okay, great. Thanks, Mike. So with respect to the filing and hearing back, we have high confidence that we should get this accepted and we'll hear back. If the FDA keeps to the statutory timelines, then we should hear back any day now. Literally it's usually around 74 days after submission. So technically I believe that would be this Saturday. So it would be somewhere before or after that. We can't give anymore particulars on that, except to say at this point we have not heard from them already. Usually if we had heard from them in advance, we would expect that that would not be usually for the best reasons. So we have high confidence and more than anything we have high confidence in the quality of the NDA. And that's really the bottom-line. With respect to the data you've referred to, I believe you're referring to the sublingual film technology. So first of all, let's just say from the top, we don't comment on other peoples' data. We leave that to them, we think that's fair. Other than in broad terms, I think what we can say is that nothing in those data changes any of our thesis that we've articulated for some time about these products for OFF periods in the market. We've said consistently that we believe we will take or that INBRIJA will take a majority share of the market, but that if the other product comes to market, we would expect it to take a significant minority share. And the greater than $800 million projection for INBRIJA sales in the U.S. takes that into account. So that's $800 million is the INBRIJA share that we project, but it does take into account that there is another player in the market taking a significant minority share. You have to be very careful in comparing data across products and across studies and especially in Parkinson's disease. Parkinson's is notorious for major variability in the patients and studies. And more than anything major variability in the placebo effect. So if you look even at our own program, if you look at our Phase 2b study, we showed a -- which by the way that was a robust placebo controlled randomized adequate study, which is being used as one of the two studies for the NDA main studies for NDA. If you look at that one, we showed an over 8 point placebo adjusted change difference in the UPDRS Part 3. If you then locate our Phase 3, we showed about 4 point placebo adjusted difference, but the differences between the two studies were almost all based on placebo effect. If you looked at the absolute changes in UPDRS, they were about the same in both studies. So you have be very careful and especially now -- so these are the same products. When you're dealing with different products, different populations across studies, you really cannot make valid comparisons in that regard. Obviously we need to see their detailed data and we're looking forward to that whenever they choose to present that. But as an overall, I would caution everyone we caution ourselves not to try to make those comparisons because they are not valid. What I will say is that for INBRIJA, we had high statistical significance in both studies on primary outcomes, we hit number of secondary outcome measures that were important and are important. We like the fact that this is L-dopa and in fact if you look back on why Civitas, which was the company we acquire to get the ARCUS technology and INBRIJA, why they originally formulated L-dopa rather than Apomorphine for OFF periods, which was a choice at the time. It's because the market research came back strongly saying that L-dopa is the gold standard therapy that the prescribers in the Parkinson’s space immediately gravitate toward L-dopa, they are comfortable with it, they understand it deeply, they have been using it for decade. So that drove the original decision and I will tell you that our market research ever since then and into today continues to validate that assumptions.

[Michael Yee:]

Thank you, appreciate and appreciate the confidence in comments from both those questions.

[Operator:]

Your next question comes from Cory Kasimov from J.P. Morgan. Your line is open.

[Unidentified Analyst:]

Hi, this is Carmen [ph] on for Cory, thanks for taking the question. For INBRIJA, could you speak to how ex-U.S. partnership discussions are going? You’ve guided to an MAA filing in the first quarter, given that timeline what do you see is the optimal timing for getting a partner onboard just for launch there?

[Ron Cohen:]

Well, I would say overall that the optimal timing for getting a partner is when you get a partner with the deal that you think is excellent. So, obviously you would like to do it before approval so that you ready to launch. We announced last year that we were exploring ex-U.S. partnerships versus going loan strategies in various parts of the world. We're continuing to have those conversations and I think I'll leave it to that that's continuing to develop and we're not letting that tail wag the dog. The most important thing is to get the MAA in a timely way we have time on the rest of it.

[Unidentified Analyst:]

Thank. And then, an one other question on AMPYRA if I could, what are you expectations for the pace of erosion post July assuming it does leave exclusivity at that point? Thanks.

[Ron Cohen:]

Yes so, obviously the main imperative there is for us to win our appeal so that we don't have to deal with that. If we do have to deal with that and we loss exclusivity by the end of July, we expect a pretty dramatic erosion curve, that's what you expect we've got 10 or 11 generic filers, several of whom have gotten conditional approval already. So, we would expect multiple entrances into the market and a pretty rapid erosion curve. We are taking whatever steps we can to mitigate that curve because anything we do to mitigate it is worth a significant and meaningful revenue to the company. So we are taking steps to do that and our year projections for AMPYRA this year take as a base case that we loss exclusivity at the end of July. And you can just extrapolate based on what those numbers look like, how rapidly the curve will decline.

[Operator:]

Your next question comes from Phil Nadeau from Cowen and Company. Your line is open.

[Phil Nadeau:]

Good morning, thanks for taking my questions. First one on INBRIJA, in the Refuse to File letter there were a couple of elements that referenced manufacturing, can you talk a bit more about what those elements were how you rectify them and I guess more importantly where you are today with INBRIJA manufacturing? Are you ready for an inspection? What else do you need to be to be able to commercialized INBRIJA later this year?

[Ron Cohen:]

Thanks, Phil. So, yes, we're ready for the inspection, let me just put that right out there. There was really only one -- there was really one manufacturing related issue other than the inspection issue, which I'm going to submit was trivial. And it wasn't so much an issue of whether we were actually ready or have the right stuff going on in manufacturing. It was more about the way in which we presented certain data in the NDA and the FDA preferred something else and we gave that to them and frankly we were able to do that very rapidly. The only reason it took three months to resubmit was not that because if we’d had to rectify only that it would have been a matter of probably a couple of weeks. The only reason it took three months was we took the time to add sort of all their other questions, which were ordinary review questions. So we got those out of the way ahead of resubmitting the NDA. So we are as prepared as we believe it’s possible to be at the manufacturing plant and all aspects about manufacturing. We have done our own mark inspections, mark PAI inspections with external experts, many of them ex-FDA people. So we’re feeling as confident as we can about that absent actually having had the PAI from the FDA. So we’re doing everything that I think you would reasonably or even unreasonably expect that we would do to ensure the integrity of the entire manufacturing chain.

[Phil Nadeau:]

Great. And are you able to manufacture product today to stockpile in advance of approval?

[Ron Cohen:]

We are I don’t want to get into the weeds too much on this. We are -- we will be stockpiling adequately this year for an expected launch.

[Phil Nadeau:]

Got it, okay. And then second on the pipeline one of the events is there were again 22 Phase 1b data later this quarter, can you give us your thoughts what we should be looking for in that data? Is it simply a safety look or could there be any signals for the efficacy?

[Ron Cohen:]

So the primary endpoint if you will is really safety in people who are experiencing acute relapses, given the fact that they are in an immune charged state if you will and we’re introducing an antibody. So we wanted to make sure that there is no untutored interaction there with an acute relapse state. But having said that, we are looking at various markers or indicators of myelination in the study probably the most interesting one is the magnetization transfer ratio on MRI, which is felt to be one of the better ways to look at myelination in the CNS. So we’re crunching all those data and the difficulty here is because it was designed as a Phase 1 safety study, you have a relatively small number of participants in the study, very highly variable conditions. So you take what you can get in this kind of a situation. If we have a signal of some kind that’d be great, but it is a very small number of patients relative to the power you would need to really come home with a conclusion.

[Phil Nadeau:]

Got it. And one last question for me, just on the AMPYRA potential generics, what are your thoughts on an authorized generic is that something you would consider?

[Ron Cohen:]

We’re very familiar with authorized generics we did it for example with Zanaflex after we lost exclusivity there, so we have experienced with that. I guess what I’d say Phil is we have explored every potential way of preserving revenue stream and mitigating the tail on the loss of exclusivity. We have certainly explored authorized generic, I don’t want to commit right now to which of those different ways we are choosing. But you should be comfortable that we have explored it thoroughly.

[Phil Nadeau:]

Got it, thanks for taking my questions.

[Operator:]

Your next question comes from Charles Duncan from Piper Jaffray. Your line is open.

[Charles Duncan:]

Hi, Ron and team. Thanks for taking our questions and looking forward to some news flow in the near-term. Wanted to ask you a question about the Refuse to File and subsequent regulatory interactions on INBRIJA. Thought that you’ll be able to speak about specifics, but wondering if you could provide any additional color on some of the other kind of subjects that were addressed. And whether or not you think that this process could actually have been value creating in terms of ultimately the clarity of an approved label or at least time to regulatory review.

[Ron Cohen:]

Thanks for the question, Charles. So, look, overall let me just say we were not happy to have got Refused to File, and that we have recovered from it and that’s great. And we hope never to repeat that. But having said that, I do see your point and it’s something we’ve contemplated internally as well. We do have drug device combination the pulmonary drug and things that people have pointed to as less usual and therefore often more complicated during an FDA review process. So, anything you can do to mitigate that or make it more straight forward or easier for FDA and a review is a good thing. And it did give us -- the silver lining, which you point out is it did give us the opportunity to respond to multiple question that they came up with during their first couple of months of review of the original NDA. And in doing that, our hope is that with the new NDA, they are starting from a point two months further ahead in their review, because we’ve already responded to the first couple of months' [ph] worth of questions. So, hopefully what we get now is going to be the question that would come beyond that, which means it gives us leg up on this new timeline. Now, there’s no way to project for sure how that works out. But I will say we think it’s a silver lining in that respect.

[Charles Duncan:]

Okay, that’s helpful. And we’ll look forward to the PR near-term, wondered and this may seem like a nice question, but is there any chance that they could bring up the idea of conducting a panel and add comm panel, are you contemplating that?

[Ron Cohen:]

Well, when we get the letter it should indicate -- if they’re contemplating a panel, we expect the letter would indicate that. We’ve not heard anything about that, in any of our conversations with the FDA. It doesn’t mean it won’t happen it’s just that we’ve no inside into that, because they’ve never raised the possibility so far. From our own perspective, and that of our consultants we’re not sure what it is they would be trying to accomplish with a panel, L-dopa is a well-known drug. The only difference here is the mode of delivery and frankly that comes down to usability and safety more than anything. Our long-term safety data look terrific from our perspective on this. So, it’s not clear to us, what they would be trying to accomplish, if they were to want an add comm. Now having said that, we have to wait and see. If they decide they want an add comm, presumably we’ll find out in the letter.

[Charles Duncan:]

And that’s a great said segue to my last question. Talking about the mode of delivery being really the key question here in terms of approvability, I’m assuming approvability and eventually I guess, with that regulatory review, assuming that it’s not overly challenging. Could you foresee further application of the ARCUS technology to merge in call it the 12 to 18 months, would you contemplate expanding the use of that technology?

[Ron Cohen:]

Yes. So, we’ve already looked at a triptan for migraine and inhale triptan for, hopefully rapid relief of migraine that was CVT-427. We reported last year that we ran into a bump on that one with some bronchoconstriction seen particularly in people with histories of asthma bronchoconstriction, So, we felt that there was a need to tweak the formulation because of some of the issues elsewhere that we accounted last year that required the focus of the organization like the RTF and the refilling, the MAA and so on. We’ve not been able to accelerate that reformulation, but it is our plan, that’s a high priority once we get a little bit further ahead in this year’s priorities on INBRIJA, the patent appeal and so on. It is our plan to accelerate that program as well as other programs involved in the ARCUS technology. We reported at the JP Morgan Conference this year, that we have a couple of really interesting programs for orphan lung disease diseases that one of which is being funded by the Bill Gates, Bill & Melinda Gates Foundation. So we are looking to continue to build on that.

[Charles Duncan:]

Thanks for taking my questions.

[Operator:]

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

[Laura Chico:]

Thank you for taking my question. Quick one, if I could just revisit the R&D expense, I think you mentioned that manufacturing would be influencing kind of where you are in that band. I was just wondering if you could give us a little bit more color in terms of what extent that is for the guidance and also how we should be thinking about the underlying R&D going forward? And then I have a follow-up.

[David Lawrence:]

Yes, Laura, so you're right the R&D guidance for next year or for 2018 includes all the costs around manufacturing, preparing for launch, I can’t get specific into the exact breakout of those numbers, but it's fully loaded for the cost to launch the product.

[Laura Chico:]

Okay. And then I guess just a follow-up question, kind of related to the FDA and the RTF, I think FDA senior leadership is definitely emphasized more recently putting out greater clarity around guidance for complex products like drug device combo yes three of the last four RTSs we have seen come out of been issued poor drug device combination. So I guess with that backdrop I'm just wondering if you can opine perhaps with your own experience given AMPYRA and INBRIJA how you might see the agency kind of changing direction or if communication has changed at all just compared between INBRIJA and AMPYRA?

[Ron Cohen:]

It's hard to answer that question, I will say, yes, the FDA -- I think the FDA has acknowledged and realizes that they can be doing better with respect to the clarity that they -- with which they deal with drug device combination and the guidance they are giving to sponsors who have drug device combinations. So we see that as a good thing and we certainly hope and encourage them to accelerate that process.

[Laura Chico:]

Thanks very much.

[Operator:]

Your next question comes from Jay Olson from Oppenheimer. Your line is open.

[Jay Olson:]

Thanks for taking my questions. I guess with the potential loss of exclusivity for AMPYRA in July and in the PDUFA for INBRIJA coming in the fourth quarter, can you just talk about how you are going to transition your sales organization over to prepare for the launch of INBRIJA? And then how they line up in terms of the number of representatives and the doctors they are calling on.

[Ron Cohen:]

Sure, so the sales force -- if we have a loss of exclusivity at the end of July, it would be a seamless transition it’s essentially one for one, it’s the same size sales force the same sales force, same commercial organization, it just transitions over to the Parkinson's space. We've already got all the territories mapped out, there will be some realignment of territories just to take into account areas where there wasn't overlap there's a fair amount of overlap, but obviously not complete. But it will be the same sales force, I will say that our sales force is very excited about the prospect of launching brand new drug, important drug in the Parkinson's space. I’ll also pitch for them and say that you will see what they've done with AMPYRA it’s just an outstanding neurospecialty force out there. They are very well respected by the prescribers and they take real ownership and real pride in delivering important medicines to these communities. So we're very excited for them and for us to have that happen. During the transition period, so if we have a loss of exclusivity let’s say at the end of July and we don't expect an approval until let's say the fourth quarter they’re still going to be out there working to mitigate the tail on AMPYRA. So they will be fully employed as they are now continuing to do the best possible job with AMPYRA, delivering it to patients, delivering the messages about the importance of it to people with the MS and walking disabilities. And they are already being trained. They're being fully trained on Parkinson's disease on INBRIJA. Obviously once we get the label we'll complete the training. So they will be ready immediately as soon as we're ready to launch, they will be making that transition. And until they make that transition they will be maximizing the AMPYRA potential. Now if we win the appeal, which is every bit our intention, and we keep AMPYRA that comes under the heading of very high quality problem to have. We would expect in that case, that we would increase the sales force, we would expand it by about 30%, 35% something like that. We currently have, call it around 100 people in the field. It depends on who you're counting. But -- so we would add another 35 people or so to that, realign the territories and then we would have them promoting both AMPYRA and INBRIJA.

[Jay Olson:]

Okay, great. Thank you. And then can you please update us on your latest thoughts about how you plan to price INBRIJA? And then if you've had any discussions with payers any feedback from those discussions.

[Ron Cohen:]

Yes, so yes, we have had conversations with payers as part of our ongoing market and pricing research. We will be having many more conversations over the next several months into the approval and launch. We have developed we think a pretty robust sense of where the market is here as I alluded to in my original remarks today. We're not prepared to talk about price as of now. And we will not -- I don't expect we will talk about price until we're right around launch, when we make a final determination. What I'll say overall is we've been very encouraged by the trends we see in the overall movement disorder space, new entrance into the market, the market research on INBRIJA in particular the payer research in terms of receptiveness to the value proposition of an OFF period drug. So putting it all together, I think the best statement I can make it about is it to point to our increase in projection on the market potential in the U.S. for INBRIJA, which is now we're saying over $800 million. And that is a reflection of the entire picture that we're getting from our market and reimbursement research.

[Jay Olson:]

Okay, thank you for taking my questions.

[Operator:]

[Operator Instructions]. Your next question comes from Raghuram Selvaraju H.C. Wainwright. Your line is open.

[Unidentified Analyst:]

Hi, thank you for taking my questions, this is Julian [indiscernible] on for Rag. You previously indicated at the oral argument for the AMPYRA patent appeal is expected to take place in the first half of this year. How soon after this takes place would you expect to receive a decision from the appellate court?

[Ron Cohen:]

No, that’s -- it's really not possible for us to know that. It's entirely dependent on the judges and their docket and all the factors that go on their end. Typically would be in months, you had measured it in months, but how many months we don't know. And it's worth again repeating that if the timing is such that we don't have a verdict prior to the July 30th, and the exclusivity on the existing patent, we would request an injunction to prevent the generics from launching.

[Unidentified Analyst:]

I see.

[Ron Cohen:]

Until we have the verdict.

[Unidentified Analyst:]

Okay, thanks.

[Operator:]

[Operator Instructions] We do not have any questions over phone at this time. I will turn the call over to the presenters.

[Ron Cohen:]

Alright. Thank you, operator and thank you everyone for joining us. Look forward to updating you next quarter.

[Felicia Vonella:]

Thank you.

[Operator:]

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