Acorda Therapeutics, Inc.
Q3 2015 Earnings Call Transcript

Published: 22 Oct 2015

[Operator:]

Welcome to the Acorda Therapeutics 2015 Third Quarter 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. Now, I would like to introduce your host for today's call, Felicia Vonella, Senior Director of Investor Relations at Acorda. Please go ahead.

[Felicia Vonella:]

Good morning, everyone. Before we begin, let me remind you that 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. With me today are Dr. Ron Cohen, our President and Chief Executive Officer; and Mike Rogers, our Chief Financial Officer. For our Q&A session, we are also pleased to have with us Rick Batycky, our Chief Technology Officer. I will turn the call over to Ron.

[Ron Cohen:]

Thanks. Bye Felicia. Ampyra results were once again very strong and continued outstanding performance by – due to continued outstanding performance by our commercial and medical teams ensuring that patients and their healthcare providers were educated about the potential benefits of Ampyra. Our sales were 117 million in the third quarter, a 21% increase over the third quarter of last year. Given the growth of our Ampyra in the first three quarters of this year, we are raising 2015 net revenue guidance to 420 million to 430 million. In August, the Pattern Trials and Appeal Board PTAB or PTAB denied the Inter Partes Review or IPR Petitions against two of our patterns. The filing party has requested reconsideration by the PTAB and in September that party also filed new IPR Petitions challenging four of our five Ampyra Orange Book-listed patents including the same two that was subject to the original IPRs. The Company is opposing the new IPR Petitions. If any are allowed to proceed, the Company will oppose the full proceeding. Acorda's response is due in December 2015 and the PTABs deadline for deciding whether or not to institute the petitions is March 2016. We also entered into settlement agreements with two of our ANDA filers Actavis and Sun. we are continuing to pursue our litigation against the remaining eight ANDA filers. A Markman hearings has been scheduled for March 2016 and the trial for September 2016. The expiration date for the Company is latest expiring Ampyra Orange with patterns is in 2027. Ampyra continue to grow robustly in the third quarter. This allowed us to continue our investment in an exciting late stage pipeline while remaining cash flow positive. Our top priority is the successful development of our clinical pipeline which addresses significant unmet medical needs. We are in the strong position of having 3-late stage clinical programs. CVT-301 for Parkinson's disease, Plumiaz for seizure clusters and Dalfampridine for post-stroke walking deficits. And we are also advancing three additional clinical programs rHIgM22 for remyelination in MS, CVT-427 for relief of acute migraine and cimaglermin alfa for heart failure. Returning to the late stage pipeline, CVT-301 is one of our most advanced programs. It’s our highest priority. This is an inhalable form of L-dopa intended to treat the reemergence of symptoms that afflicts many people with Parkinson's. These episodes are also referred to as OFF episodes. The commercial opportunity is substantial. We estimate about 350,000 patients in the U.S. alone may be appropriate for treatment and we do have worldwide rights. If approved, we project the U.S. peak sales would be greater than $500 million. Our second late stage program Plumiaz is a nasal spray formulation of diazepam. It’s being developed as a treatment for increased bouts of seizure activity. These are also called seizure clusters. If approved, we project peak U.S. net sales of more than $200 million. And the third program is dalfampridine in post-stroke walking deficits. There is no approved medical therapy to address this significant need in people who had strokes and have ongoing walking deficits due to those previous strokes. There are approximately 3 million stroke survivors in the U.S. who also have ongoing walking deficits. Importantly as well, we've made good progress in our collaborations to develop a once daily formulation of dalfampridine. We now have three different formulations that appear promising based on in vitro testing. All three of these we expect to move into Phase 1 clinical testing, meaning PK studies before the end of the year. So with regard to our earlier stage clinical pipeline, we have selected zolmitriptan as the active ingredient for CVT-427, an inhaled triptan in development for relief of acute migraine. This uses the same ARCUS inhale pattern technology as our CVT-301 program and the Phase 1 study for CVT-427 is expected to begin before the end of this year. We are currently enrolling our Phase 1 single ascending dose study of rHIgM22 and people with MS who are experiencing an acute relapse. In addition to safety and tolerability assessment during an acute relapse, the study includes exploratory efficacy measures such as timed walk, magnetization transfer ratio, imaging of lesion myelination in the brain and also various biomarkers. The cimaglermin alfa Phase 1b clinical trial remains on clinical hold as a result of the new case that met the criteria of Hy's Law for hepatic toxicity which we previously announced. Recall that we saw one Hy's Law case in the previous Phase 1 study as well and in both Hy's Law cases, the abnormal liver values return to normal within several days. The 23 patients who were dosed in the current trial are completing their follow-up and results of that study are expected by the end of the year, including six minute walk and cardiac ejection fraction data. We have ongoing analysis and non-clinical studies that are investigating the biological basis for the liver effect and we plan to review these and other data from the cimaglermin studies with the FDA. So with that, let me turn the call over to Mike, who will review for you our financial performance for the quarter.

[Mike Rogers:]

Thanks, Ron, and good morning everyone. I want to take a couple of minutes to walk you through some of the financial highlights of the quarter. We had another strong quarter, not only for Ampyra sales but also for our overall financial performance. Despite the significant investment we are making in our late stage programs, we remain cash flow positive and in a very strong financial position. Ampyra net revenue for the third quarter of 2015 was $117 million, a 21.4% increase compared to third quarter 2014 revenue of $96.4 million. We've revised our guidance for Ampyra sales to $420 million to $430 million, up from $410 million to $420 million. Revenue from Zanaflex for the third quarter of 2015 was $26 million, including our own sales, as well as product sales to Actavis and royalties received on Actavis sales of generic tizanidine. Net revenue for Zanaflex for the quarter ended September 30 of 2015 includes the impact of onetime net adjustment of $22.2 million, representing the cumulative impact of the Company's converging from the sell-through to the sell-in method of revenue recognition. Under the sell-in method of revenue recognition which is the traditional revenue recognition model, revenues recognized on the product is shipped to the distributor. Whereas under the sell-through or deferred method, revenue is recognized when the product is prescribed to the patient. Going forward, Zanaflex revenue will be recognized under the sell-in method of revenue recognition. As an additional note, inventory levels at the wholesalers remain stable between one and two months on hand. And finally in our non-GAAP presentation of the financials, we've adjusted out the cumulative impact of the change. So Ampyra royalty revenue from sales outside of the United States was $2.5 million for the quarter, third quarter of 2015. Moving on to the expense side, total operating expenses for the third quarter of 2015 were $122.5 million, including $8.9 million in share-based compensation expense compared to $85.1 million including $7.3 million in share-based compensation expense for the same quarter in 2014. The increase in operating expense this year over the last year is primarily related to increased R&D costs to support our ongoing clinical development, as well as the addition of cost associated with our facility and operations in Massachusetts acquired in the Civitas transaction in the fourth quarter last year. We are reiterating our R&D guidance of $140 million to $150 million, and our SG&A guidance of $180 million to $190 million. As a reminder, guidance ranges exclude share-based compensation. On the tax line, for the third quarter of 2015, we recorded a net tax provision of $17.8 million. However, cash taxes for the quarter were $829,000. There are number of factors that can cost significant differences between the effective tax rate shown in our financials and our actual cash tax position. As a reminder, we had available federal NOL carryforwards of approximately $215 million as of December 31, 2014, which are available to offset future taxable income. For this reason we do not currently pay substantial U.S. Federal income taxes and we adjust for non-cash taxes in our non-GAAP presentation. Finally a note on the balance sheet. Our financial position remains strong. At the end of the third quarter, our cash, cash equivalence and investment balance was approximately $323.4 million and we expect to be cash flow positive for the year. With that, I'll now turn the call back over to Ron.

[Ron Cohen:]

Thanks Mike. So, in summary, this was another terrific quarter for Ampyra which has allowed us to remain cash flow positive, whilst still investing in an exciting pipeline. Our top priority is the successful development of our clinical pipeline and we expect several data milestones in 2016, for our most advanced programs led by CVT-301, for off episodes and Parkinson's disease. We continue to be active on the business development front looking for opportunities that leverage our deep neurology development expertise and also one of the best specialty commercial organizations in the industry. I'll now turn the call over to the operator for your questions and our answers.

[Operator:]

[Operator Instructions] Our first question comes from the line of Mark Schoenebaum with Evercore ISI. Your line is now open. Please go ahead.

[Salim Syed:]

Hey guys, it's Salim in for Mark. Thanks for all the color, again, super helpful. Couple of questions on CVT-301. Ron, can you just remind us or give us an update on this new enrollment, how the enrollment is going for the Phase 3 trial, for 301, and when we should expect data? And then ex-U.S., what are your plans – again ex-U.S. for CVT-301 especially in light of valuations coming down - I don't know if you have a view on ex-U.S. valuations, if you could pine on that. Thank you.

[Ron Cohen:]

Okay. Hey, Salim, thanks, we never comment on enrollment in any trials, so that's historical and we just don't - what we have said is previously our guidance has been that we were aiming to file an NDA by the end of next year on CVT. What we have been saying and I think we said in the third quarter call as well, pretty consistently is that we inherited that target when we bought Civitas, that was the target that was originally published in [S1] [ph]. And once we had a chance to analyze the entire program, our conclusion was that that was a significant stretch goal so that we are advising people that it's achievable but it's something that could potentially slip into 2017. So, that's something that we have said and are continuing to say. The ex-U.S. valuation, could you just clarify for me what you're asking me there about valuations?

[Salim Syed:]

You have mentioned in the past that you're interested in BD ex-U.S. and that’s sort of coupled with some, your plans of taking CVT-301, you signed yourself ex-U.S. or partnering that sort of thing, so if you can just kind of tell us what you have used of valuations right now ex-U.S.?

[Ron Cohen:]

You're talking about valuations of potential targets?

[Salim Syed:]

Targets, yes.

[Ron Cohen:]

It's very difficult to alpine on that as a general matter. I mean, as you pointed out just globally in the industry, evaluations have come down lately it's no surprise. But our focus is really on looking for the right opportunity and something that has strong industrial logic. We think we have a fair amount of capacity on our balance sheet in terms of our overall capacity for funding to do a significant deal if the deal makes sense and if the value is there. So, we're really focused on that and with respect to taking 301 and any other products to Europe, we're still deeply interested in that and looking at options for how we would service products in Europe. Obviously, that's going to require commercial infrastructure and we either build it or buy it or some combination of the two, and we're assessing what it is that we could buy potentially that could help accelerate that. But that's all I can say at this point that it remains one of the points of great interest in our business development activities and if something material emerges, you will be among the first to know.

[Salim Syed:]

Okay. Great, thank you.

[Operator:]

Thank you. Our next question comes from the line of Cory Kasimov of JPMorgan. Your line is now open. Please go ahead.

[Unidentified Analyst:]

Hey, good morning. This is Morgan on for Cory. I just had a couple of questions on the IP side for Ampyra. How would you characterize the strength of the new IPR filings compared to the first two? And then with the two ANDA settlements 2027, is that a trend that we should expect from the rest of them? Thanks.

[Ron Cohen:]

Okay. Cory, which of those questions did you actually least expect me to be able to answer. I can answer either one. That calls for speculation on the patterns but I just can’t provide in a public forum. I can tell you that I’m pleased with the work that our legal team has been doing. Obviously, I’m pleased with the fact that we’ve had the two settlements. And there is really no way I can comment relative merits of a given IPR versus any other IPR. That’s something that the PTAB – that’s the PTAB job and we are going to - I mean no matter what part of this we’re talking about, whether it’s the ANDA filers or the IPR, we’re going to continue to defend our patterns vigorously. And I think you see that our legal team has been part of work doing just that.

[Unidentified Analyst:]

Okay. Thanks.

[Operator:]

Thank you. Our next question comes from the line of Paul Matteis with Leerink. Your line is now open. Please go ahead.

[Paul Matteis:]

Too bad Ron, he just took all my questions. No, I'm just kidding. So on Ampyra once daily, can you talk a little bit about structure of these studies and what you’re evaluating because I know the hurdles in the last product, I guess the setback was encountered. I think in a multi dose PK study where there was dumping in the presence of alcohol. So can you just talk about the various parameters that you’re evaluating and the different boxes and you can check in that study?

[Ron Cohen:]

Actually Paul I believe the issue in the last one was discovered in vitro testing. So what we saw was that it dumped - that formulation dumped quickly when exposed to alcohol and that was really the killer. We ultimately discovered that it also had food effects that were not favorable but the initial killer was the alcohol effect. So the three formulations we have now have already passed all of the vitro testing including the alcohol dissolution testing. So that’s already more encouraging than what we had before. What we are doing now is PK in humans to ensure that the PK characteristics, the absorption and the [indiscernible] under the curve and all the other things we look at in PK that they are consistent with the QD formulation that we want and with the characteristics we want in terms of what kind of plasma levels you get for how long and so forth. We model those effects based on the various in vitro tests that are done. The modeling is usually pretty good like you don’t know for sure until you actually put it in a human being. So, what I can tell you is that based on vitro testing, the in vitro modeling the lack of alcohol sensitivity in vitro, we like all three of these formulation for human testing. The human testing has got to be the acid test as it were both literally and figuratively if you think about it but that’s going to tell us whether the vitro modeling plays out in humans as well.

[Paul Matteis:]

Okay. Got it. And then Ron you talked about – you talked about the interim stroke analysis as an inflection points with the company on multiple angles. And one of them is, if you see a signal that looks like it could be replicated in Phase 3 and you have theory formulation that you’re confident and maybe you’ll change the program and just go with once daily in pivotal trial. So can you talk about the potential timing of analysis, when you’re expecting to do the stroke interim and when you’re expecting to know on the once daily and is just how you’re thinking about all those moving parts?

[Ron Cohen:]

So I think at this point I would say that if we have a QD formulation in which we are confident, that it is highly likely that the scenario you just outlined will be the one that we follow. In another word, unblinding the Phase 2 rather than simply doing the interim level, we’ll do the interim let's see what happens and then we’ll probably unblind it. And then two parallel Phase 3s that will be better designed because that will be based on the data that we’ve analyzed in the Phase 2b which is more data than we have from the original Phase 2 study. We expect to do the interim analysis next year in 2016, I can't narrow it down more than that for you but we do expect it next year. By the time we do that interim analysis, we hope that we’ll have a QD formulation that has passed muster in the human PK studies and in that case again its highly likely that we’ll unblind and then use the data from that analysis to inform two parallel Phase 3s that will use the QD.

[Paul Matteis:]

Okay. Great, thank you. And then one more if you don’t mind. Can you talk about what you're seeing with Ampyra. Your updated guidance, kind of like the last updated guidance, it seems to assume next quarter that is actually a contraction relative to this one. How do you feel about updated guidance? Do you feel like its conservative or is there a reason to expect 4Q to be less impressive than 3Q?

[Ron Cohen:]

We've had terrific growth this year obviously in Ampyra - I think the team has done a tremendous job making sure that more patients who quality know that it get access to it and can benefit if they’re going to benefit from it. So, that’s been great. I think it's really important the people avoid getting caught up in the quarter-to-quarter game because like anything else and like their fluctuations in short term quarter-to-quarter and even for us there is a limit to how much you can project on the basis of a few months here or there, it's just there seasonal issues, there are all kinds of other random issues that affected. So, we tend to look at these things more on at least a year-to-year basis and if you look at that based on our current revised guidance of 420 million to 430 million, let's say for example we’re at the top of the range. If you take the top of the range and that’s where we really wind up year-over-year, you’d see that would represent about 17% year-over-year growth. That’s pretty robust from our perspective. Just because there was 21% or whatever from one quarter to the next, it's not necessarily a read to the next quarter. The other thing to point out which is very important is that, the fourth quarter a year ago was unusually robust. It was just a blow out quarter and I have to say that even we are not 100% sure what it is was about the fourth quarter of last year that resulted in that level of outperformance if you will. So, we’re very leery about holding everyone to that standard for this coming quarter because for all we know it really was just albeit - a seasonal variation in the fourth quarter of 2014 that will not repeat itself in the fourth quarter of 2015. So again if you look at the larger view which is what is it look like year-over-year, it looks pretty healthy given our current guidance.

[Paul Matteis:]

That's fair. Was there anything unique you saw on third quarter? I think when people were forecasting the quarter based on IMS scripts, it looks more flattish. So was there anything unique in this quarter. I know there is nothing in the inventory side maybe on the growth, net reimbursement side, or clients or any other metrics serviced by uniquely.

[Ron Cohen:]

There are probably some people on the phone who have been following us since launch and they will know as better than anyone that the IMS issue has continued to come up over and over and our consistent answer on that is, that we cannot account for how IMS comes up with its number. If you look back historically relative to the actual numbers that we have, they are highly inconsistent quarter-to-quarter and so forth. So we can't account for what IMS is doing. I can tell you that our inventory levels are rock stable, we have contracts that ensure that we have control over that. I think at this point we have no more than two weeks approximately of inventory and that’s been consistent all year long. So this is not an inventory issue, this is not a channel issue, we have tight control over this in a specialty pharmacy network. The numbers we're giving you represent the actual prescriptions and sales that we are achieving.

[Paul Matteis:]

Okay. Great, thank you Ron. Thanks for all the help. Congrats on the quarter.

[Ron Cohen:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Tom Shrader with Stifel. Your line is now open. Please go ahead.

[Tom Shrader:]

Good morning. Congratulations on a nice quarter. I’m wondering - given how complex Ampyra is dosing and everything is, do you hope to move the QD formulation in the MS. Do you think you need more than just Phase 1 data, would you need some efficacy data?

[Ron Cohen:]

Tom there is no current plan to move the QD into MS. I can't account what might happen down the road as we think through things strategically. First thing is first. First we need a viable QD formulation, than we need a good interim analysis, a positive interim analysis on stroke so we can proceed with a stroke plan. And then we may turn our attention to whether strategically there are other things we can do with the QD, but right now we are pleased with the Ampyra franchise, with the [BD] [ph]. I can't speculate as to what we will do in the future on that but nor will I shut any doors. We are going to continue to consider how we could most effectively apply a QD formulation.

[Tom Shrader:]

Okay. And a similar question on the triptan, is that a Phase 1 and when do you think you could go right to Phase 3 or would you need - I think you're going to need Phase 2 data to understand efficacy.

[Ron Cohen:]

An advantage we think we have here is that as with CVT-301 we are using a compound that is well known and has been used for many, many years is well understood. So this will be a 505(b)(2) type MDA referencing the reference product zolmitriptan. So in that case we believe that the burden of clinical trials will be significantly less with respect to efficacy and most of the work we are going to be doing will have to do with the PK and the safety and so forth. Now, we will have to do some efficacy work, but we think likely that it will not be at the level of a brand new MCE.

[Tom Shrader:]

Okay. And then finally a little more detail on Plumiaz. You’re saying 175,000 people potential market and $200 million in sales. What does that assume about how the drug would be used with patients keeping on hand would they will get it, would they get it at the hospital, how it would be used.

[Ron Cohen:]

We believe the way this would be appropriately used is, they would have it on hand, right, because this is for people where you can predict that at some point based on their illness and their previous patterns, they are going to have clusters of seizures that need to be arrested and they have to have it on hand if they are going to have that kind of access and not have to go to the emergency room and so on. So this is something that would be prescribed. You can think of it in the way people think of an EpiPen. It is different, but conceptually you want to have it on hand. You want to have it in your medicine chest, your glove compartment, in your pocket wherever you need it so that at the momentum when the event is starting to occur you are ready or at least you are care partners already.

[Tom Shrader:]

Okay. So in clinical work it’s given essentially immediately.

[Ron Cohen:]

When you are saying clinical work you mean in the trials.

[Tom Shrader:]

In the trials.

[Ron Cohen:]

Yes. It's given sort of right after someone has had a first or sentinel seizure. Because the idea here is, it's for seizure clusters where someone is going to have a seizure and then based on their history you know that they are highly likely to have another one and then may another one, and sometimes may be another one all within the 24-hour period and those are very dangerous. There is accumulative danger to the person of having these multiple seizures. So once they have an initial seizure you immediately want to give them this to arrest any future seizures that might occur.

[Tom Shrader:]

All right, perfect. Thanks a lot for the details.

[Operator:]

Thank you. Our next question comes from the line of Michael Yee with RBC Capital Markets. Your line is now open. Please go ahead.

[Michael Yee:]

Hi, thanks good morning. I had two follow-up questions, one is on the post-stroke deficit study. Can you just rewind just a little bit and clarify the design that in the interim what triggers that when you are looking for and actually I was looking - I think you mentioned Phase 2, but we thought it was consequence of Phase 3. So may be just rewind and walk through all of that a bit for us in terms of interim. And then secondly on business development, I know you made some comments about OUS. Do you have any thoughts around your debt capacity, would you be able to take on more debt et cetera? Do you have different debt ratios. How should we think about your capacity there to also help on deals? Thank you.

[Ron Cohen:]

Okay. Thanks Mike. So with respect to the interim look, I am not sure exactly what I said about Phase 2 and Phase 3. The current trial is designed is a Phase 3 study. So if I said Phase 2 I misspoke, because I was trying to refer to the previous trial, which was the original proof-of-concept study that showed promise for walking in post-stroke deficit. So, it’s designed as a Phase 3 trial with it, but an adapted design with an interim look. The interim look will take place at the point were approximately 50% of the patients have been entered in the trial and randomized and dosed, okay. And that will be an external group vis-à-vis type group that will unblind - the analysis will be blind to us. They will be looking at whether it is reasonable to continue enrolling the study and under what conditions. So, really what they are looking at is powering of the study. They could determine - there are really three things they could determine. One is, it looks likely that the study is well powered to hit a 10 point and you should continue enrolling as is. Second, determination instead might be well it looks like you could hit your endpoint but your under powered so you need to add ex-people to each arm okay. And the third one would be well it’s futile, it looks like no matter what you do its unlikely that you’ll hit your endpoint in which case you have to stop and then you unblind. Obviously that’s not the one we want to hear. So, in either of the first two cases depending on what's going on with the QD, if we have a viable QD as I said earlier, it is likely in our view that we would unblind this current study and do a full analysis, which would be very valuable in rationally designing two parallel Phase 3s using the QD. We think for example that it is probable, that there would be smaller studies than the one we have now because they will be - we will have much more confidence in the powering. Right now we are powering it off a - I think an 80-patient study that we did. So necessarily we are almost by definition overpowered significantly in this study. So that’s the way we are thinking about that trial. Does that answer your question on the -

[Michael Yee:]

Yes, it does. So if there is a single - it’s looking good – you’re basically going to start with the QD and redo it again and that’s helpful. So it helps the timelines. Okay, that’s great -

[Ron Cohen:]

Let me just say with respect to the timelines, it probably will add sometime, but not as much as you might think because if we are right and the studies are significantly smaller and therefore require less time to recruit, we are going to get back fair amount of that time on the back hand. With respect to our capacity for doing deals, I am going to turn that over to Mike.

[Mike Rogers:]

Okay Michael, so on a standalone basis the answer is yes. We have capacity to do a number of things including convertible debt, bank debt, working capital revolvers. We can do a number of things on a standalone basis, but we are not eager to do that without a well thought through strategy there to just add debt for the sake of adding debt. But in the context of an acquisition, which is I think where you are going with this, it is very much asset dependent. What are we acquiring? If it’s a cash flow generating - commercial asset cash flow generating, there is a lot more flexibility to use leverage to acquire that product. If it’s in earlier stage product, there is certainly less flexibility from our standpoint about how much debt we want to put on the balance sheet for an earlier stage product acquisition.

[Michael Yee:]

Okay, thanks.

[Operator:]

Thank you. Our next question comes from the line of Phil Nadeau with Cowen & Company. Your line is now open please go ahead.

[Phil Nadeau:]

Good morning. Thanks for taking my question and congratulations on the progress. Ron, historically one of the growth services of Ampyra has been pricing and I know through your work with bio, you have been down to Washington, and you probably understand the pricing environment or the thinking on pricing better than just about anyone. Can you discuss with us what you found through your work with bio on pricing and whether that has specifically changed Acorda's views on taking price increase for Ampyra?

[Ron Cohen:]

Yes. Thanks Phil. So obviously a much bigger conversation for different venue on the whole pricing issue and we are clearly working on that at bio as you point out. The fundamental - our fundamental view on this is, the issue is not cost in a vacuum. The issue is value. So it is what is the price, and what is the value of the service or the product that you're providing in this case a medication. So from our point of view we are in a good place, we are proceeding from a position where we are providing significant value to patients for what we're charging for the drug. We also have been leaders in coming up with creative ways of cost sharing for values. So, the best example of that is our first step program which has actually been recognized by some of the bigger third party payers as being a good faith creative and reasonable way of establishing value and cost sharing. So, just to remind everyone, under first step which now is about 75% of all new prescriptions, we give away the drug for free for two months. And the reason for that is, we know based on our clinical work that not everybody responds to the drug effectively. Giving people the drug free for two months, we're paying for it, insurance is not paying for it, the government is not paying for it, it's entirely on Acorda and those people who are not responding get off the drug, because two months is plenty of time to establish that. The people who are left are the ones who are responding, in that case we deserve to be paid for the service and the value we're providing those patients. So we have other programs that we implement in that regard, we collaborate as well as we can and closely with managed care. So our view is that that's the way to approach this globally in the industry is that the insurance industry, the third party payers and industry, the pharmaceutical industry need to work together to come up with reasonable ways of paying for the actual value which can be quite substantial of the medications that we are providing.

[Phil Nadeau:]

Okay. So, it sounds me to like Acorda’s view on pricing hasn't really changed.

[Ron Cohen:]

No.

[Phil Nadeau:]

Great. And then second, you mentioned with regards to the guidance, top end of the guidance is about 17% growth year-over-year, can you just discuss what your most recent perception of what is driving that growth is?

[Ron Cohen:]

Yes it's been pretty consistent since the second half of last year where we began to see a real inflection point. And at that point we noted that - we thought a number of different factors were simultaneously coming to fruition. One of them actually was first-step which I just discussed. I think that program is now about three years old, something like that, three and half years old, and it took us a couple of years to build up ahead of steam with it, it's not like we introduced and then everyone was using it. We had to educate the prescribers and everyone else about it and get it implemented. So it progressively crept up so that now it's about 75%, I think at the end of last year it was over 60%, but it took until we had a critical mass of first-step patients, because what we discovered through our analysis is that people who start out on first-step as a group are stickier, in another words more of them stay on the drug longer. And there are various reasons you could speculate as to why that might be but those are the data. So, to the extent that you have more people coming on through first-step, that one is translating into longer time on drug and increasing the overall PRX line which is really what's driving sales. So, that was one of the biggest single factors. Also we introduced several different marketing initiatives to get the word out, to get patients educated. The physicians have been educated for long time but getting the patients to know that this is available has taken time and continues to take time. By definition the people who have not yet heard of Ampyra or not yet really aware of it are the hardest ones to reach. So it takes more effort to get to them, and over time we've been more and more successful especially with our digital marketing efforts, we have a very sophisticated digital program that has wound up, reaching people that couldn't reach before. So put it all together and I think in the last year or year and half or so, these different threads have come together and have given us a boost. And then finally and probably with some significance, in the last year or two, we've seen some overall expansion in the MS market due to the entry of the new DMT's particularly the oral ones, and maybe some more effective ones so that patients who are on the sidelines and essentially had given up on therapy had now come back into the doctor's offices to be treated with the new DMT's and while they're added, we get an opportunity to educate them about Ampyra and get some of them on Ampyra. So that's basically - I guess one other - the last one to think about is that, with the Medicaid conversions under the ACA, that probably brought some more patients into the overall healthcare system. But again if you think about it, some of the things I'm talking about really are one-offs and you don't expect to see a repeat year-over-year of those elements, and that again goes into the reason why it appears we're being somewhat conservative but in fact when you take all these into account, we're looking at year-over-year growth of about 17% and we think that that's a fine place to be.

[Phil Nadeau:]

Great. And one last question from me, if I may ask, can you update us on the status of those trials and I'm sorry I should know this, but have they actually begun enrollment yet or is it still yet to come?

[Ron Cohen:]

Yes, those trials are ongoing.

[Phil Nadeau:]

And still complete next year?

[Ron Cohen:]

Yes.

[Phil Nadeau:]

Great. Thanks for taking my questions.

[Ron Cohen:]

Thanks, Phil.

[Operator:]

Thank you. Our next question comes from the line of Robert LeBoyer with Aegis Capital. Your line is now open. Please go ahead.

[Robert LeBoyer:]

Good morning everyone and congratulations on the nice quarter. I had a question on the IPR and the filing for reconsideration. Is that under the same guidelines in protocols as the originals in terms of timeframe and requirements or is that slightly different and subject to different types of requirements and would have you an opportunity to submit a response to their request?

[Ron Cohen:]

The filing for reconsideration is just so people know. To my knowledge, there is no time deadline on that, that is something where the PTAB already rejected the two original IPR flings or in other words did not choose to or choose not to institute them, which I think is the way they put it. There is a filing for reconsideration meaning that the filer wants the PTAB to reconsider that decision not to institute the original. To my knowledge there is no set time course the way there is for an original IPR filing and with respect to a pattern holders ability to file counter, I believe that that is upon request of the PTAB only.

[Robert LeBoyer:]

Okay.

[Ron Cohen:]

The second set of IPR filings, the four new IPR filings, those are on the classic time schedule for an IPR filing which is three months for us to respond and then three more months for the PTAB to consider whether or not to institute.

[Robert LeBoyer:]

Okay. And just in terms of the basis for this reconsideration, is there any new information in these filings that wasn't considered in the original petition?

[Ron Cohen:]

Yes, I can't really comment on any specifics in our legal proceedings, Robert, I'm sorry about that.

[Robert LeBoyer:]

Okay, that's all right. Okay, well thank you very much.

[Ron Cohen:]

Thanks, Robert.

[Operator:]

Thank you. There are no further questions in queue. I would now like to turn the call back to Dr. Cohen for final comment.

[Ron Cohen:]

Well, thanks for joining us everyone. We're obviously very pleased with the quarter and look forward to talking with you again next quarter.

[Operator:]

Ladies and gentlemen, this does conclude today's program. You may all disconnect. Everybody have a wonderful day.