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Acorda Therapeutics Inc. (NASDAQ:ACOR)

Q4 2008 Earnings Call

February 24, 2009; 08:30 am ET

Executives

Ron Cohen - President & Chief Executive Officer

Dave Lawrence - Chief Financial Officer

Tierney Saccavino - Vice President of Corporate Communications

Analysts

Joel Sendek - Lazard Capital Markets

Michael Yee - RBC Capital

Geoff Meacham - JP Morgan

Mark Schoenbaum - Deutsche Bank

Phil Nadeau - Cowen & Co.

Operator

Welcome to the Acorda Therapeutics, fourth quarter and 2008 year end financial results conference call. At this time all participants are in a listen-only mode. There will be a question-and-answer session that will follow. Please be advised that this call is being taped at the company’s request.

Now I’d like to introduce your host for today’s call, Tierney Saccavino, Vice President of Corporate Communications at Acorda Therapeutics. Please go ahead.

Tierney Saccavino

Good morning everyone and welcome. With me today are Dr. Ron Cohen, our President and Chief Executive Officer; and David Lawrence, our Chief Financial Officer.

Before we begin let me remind you that this presentation contains 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, including delays in obtaining or failure to obtain FDA approval of Fampridine-SR, the risk of unfavorable results from future studies of Fampridine-SR, Acorda Therapeutics ability to successfully market and sell Fampridine-SR if approved, and Zanaflex capsules competition, failure to protect its intellectual property or to defend against the intellectual property claims of others, and the ability to obtain additional financing to support Acorda Therapeutics operations, and unfavorable results from the preclinical programs.

These and other risks you are described in greater detail in the Acorda Therapeutics filings with the Securities and Exchange Commission. Acorda Therapeutics may not actually achieve the goals or plans described in its forward-looking statements and investors should not place undue reliance upon these statements. Acorda Therapeutics disclaims any intent or obligation to update any forward-looking statements as a result of developments occurring after the date of this presentation.

I will now turn the call over to our CEO, Ron Cohen.

Ron Cohen

Thank you, Tierney. Good morning everyone and welcome. This morning we reported our Q4 and year end 2008 financial results. 2008 was a year of exceptional achievement for Acorda. Today I’ll provide a brief review of some of the key milestones from ‘08 and ‘09 to-date and then I’ll turn the call over to Dave who will provide a financial summary. We’ll then open the call for questions.

Turning to our existing commercial product, the Zanaflex franchise performed well in 2008, with continued increases in sales and prescriptions. Gross sales for the fourth quarter were $14 million, up approximately 9% from Q4 2007. Total shipments were $16.5 million. For the full year, gross sales of Zanaflex Capsules and Zanaflex tablets were $53.4 million, compared to $43.6 million in gross sales for 2007.

As we had projected, the Zanaflex franchise was cash flow positive in 2008 on an operating basis, and we expect the same in 2009. This business continues to meet our strategic goal of supporting commercial operations at Acorda and providing us with the experience and infrastructure needed for a successful launch of Fampridine-SR if it’s approved.

We achieved several important milestones in our development of Fampridine-SR in 2008 and early ‘09, which I’ll review with you now briefly. We filed an NDA for Fampridine-SR on January 30, 2009. We expect that this submission, if accepted, will be subjected to standard review, which would provide a target for the FDA to complete its review within 10 months.

In June, we announced positive results from our second phase III clinical trial of Fampridine-SR, the MS-F204 trial, on walking ability in people with multiple sclerosis. These results, along with the results of our first phase III study MS-F203, were the basis for the NDA filing. As a reminder, both phase III studies were conducted under special protocol assessments or SPAs from the FDA.

In January 2008, we announced the results of a successful study Thorough QT study and the FDA requires Thorough QT studies for all new drugs seek regulatory approval. We also conducted meetings with the regulatory authorities in four European Union member states. As a result, we believe that the current data are sufficient to file a centralized Marketing Authorization Application or MAA.

We’re preparing for an MAA as we determine the commercialization pathway that will optimize our ability to provide the drug to patients who need it and maximize the value of Fampridine-SR outside the US. In this regard, we have begun meeting with potential marking partners for ex-US territories.

We’ve also been conducting initiatives to increase awareness of walking disability issues among professional and consumer audiences. These activities included a partnership with the National MS Society, to sponsor 20 Walk MS programs across the country in 2008. In 2009, Acorda will be the national sponsor of the Walk MS program with a presence at 30 of the largest Walk MS events.

On the corporate front, we added several key senior team members. Tom Wessel joined Acorda as Chief Medical Officer. Most recently Tom was the Senior Vice President of Clinical Research at Sepracor where he led the central nervous system and respiratory medicine development teams and also served as the Medical Director for the Lunesta development program. Tom’s expertise will be invaluable to us, as we move toward potential approval of Fampridine-SR and advance our preclinical products toward INDs.

Ruhi Khan joined Acorda as Executive Director of Business Development and will be spearheading our corporate partnering discussions. Previously, Ruhi was at Lexicon Pharmaceuticals, Fidelity Biosciences, and MPM Capital Advisors, where she was responsible for numerous negotiations for in-licensing and out-licensing of biotech and pharmaceutical products.

John Kelley, the President and COO of the Medicines Company, was elected to our Board of Directors. John has outstanding experience in pharmaceutical commercialization and strategy which will benefit the company as we move toward the potential launch of Fampridine-SR.

Before I move on to providing an overview of Acorda’s outlook, we’ve received a number of requests to clarify our updated guidance regarding our regulatory path and commercialization plans in Europe and I’d like to take a moment to do that now.

As we said previously, in 2008 we reviewed with health authorities in four EU member states, the existing Fampridine-SR clinical development program and data. Based on those discussions, we believe we can file an MAA through the centralized procedure with our existing data package.

Earlier this year we said we plan to file the MAA in 2009. Given our current status and exploratory discussions with potential marketing partners for EU and other non-US markets, we will refrain from commenting on a timeline for MAA submission.

As potential partners may wish to participate in the MAA process, we want to have maximum flexibility for partnering discussions and not be prematurely anchored to a timeline. I want to emphasize however, that we believe we have sufficient data to file at any time at our discretion.

We expect that Zanaflex revenue will continue to grow modestly and that the franchise will continue to be cash flow positive on an operating basis. In late 2009, we plan to complete pre-IND toxicology studies for GGF2, and pending the outcome of those studies, submit an initial IND for congestive heart failure. We’re also well capitalized and expect our cash on hand to last through 2010.

Now I’ll turn the call over to Dave for the financial update.

Dave Lawrence

Thank you, Ron. For the fourth quarter ended December 31, 2008, the company reported a net loss of $20.2 million or $0.54 per diluted common share, compared to a net loss of $13.7 million or $0.48 per diluted common share for the same quarter in 2007. For the year ended December 31, 2008 the company reported a net loss of $74.3 million or $2.19 per diluted common share, compared to a net loss of $38 million or $1.45 per diluted common share for the year ended December 31, 2007.

Total operating expenses for the quarter ended December 31, 2008 were $30.4 million and were $109.9 million for the full year. Research and development expenses were $10.8 million for the fourth quarter of 2008, which includes costs related to our Fampridine-SR long term extension studies, NDA preparation costs and continued development of our preclinical pipeline products for potential IND filing in late 2009. Full year ‘08 research and development expenses were $36.6 million.

Sales, general and administrative expenses for the quarter ended December 31, 2008, were $19.6 million and included expenses related to Zanaflex promotional activities and Fampridine-SR pre-launch activities. Full year 2008 SG&A expenses were $73.3 million.

Other net income expense for the quarter ended December 31, 2008 included $1.2 million in interest income from our cash investment activities, offset by $589,000 in interest expense, primarily due to the Paul Capital Healthcare agreement.

We ended 2008 with a strong balance sheet. As of December 31, Acorda held cash, cash equivalents and short term investments of $246 million. We expect this to be sufficient to fund the company’s operations through 2010, based on our current projected revenue and spending levels. We expect our year end 2009 cash, cash equivalent and short term investments will be in excess of $150 million.

We will now open the call to questions. Operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And your first question comes from the line of Joel Sendek from Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

Hi, thanks. So I have a question about the partnering in. Obviously it’s understandable that you don’t want to be bound to a timeline. I’m just wondering if you don’t get the deal you want, is it still a possibility that you file solo ex-US?

Ron Cohen

Yes, that’s still a possibility, Joel.

Joel Sendek - Lazard Capital Markets

Okay and then the next has a financial component. I’m wondering the $150 million for at the end of the year; does that assume any partnering revenue at all?

Dave Lawrence

No Joel, there’s no partnering assumptions built into our cash forecasts.

Joel Sendek - Lazard Capital Markets

Then how about any capital expenditures?

Dave Lawrence

Limited.

Joel Sendek - Lazard Capital Markets

Okay and then the final question is any data at the Neurology Meeting that we should look forward to?

Tierney Saccavino

We’ll notify when you and if we have our presentation accepted.

Joel Sendek - Lazard Capital Markets

Okay. Thank you.

Operator

And your next question comes from the line of Michael Yee from RBC Capital Markets.

Michael Yee - RBC Capital

Great, a couple of questions; can you comment on long term safety, any update there, and confirming any or no additional seizures there? Then second question is, just in terms of disclosure, will you announce when the NDA was formally accepted?

Ron Cohen

Well, I’ll take the second question first. Yes, we’ll announce when the NDA is accepted. With respect to the extension study, we provide overall updates periodically and when you see the 10-K filing, you can expect to see an update on the long term extension studies. We don’t historically give a blow by blow every time there’s an event for any particular patient, but we do provide overall updates over time, which we think is really the more rational way to go. So we will have an update in the 10-K.

Michael Yee - RBC Capital

And actually just one last follow-up; have you considered buying back the royalty from Elan before or after approval? Any thoughts on that?

Ron Cohen

That’s something that we don’t comment on and can’t comment on.

Michael Yee - RBC Capital

Okay. Fair enough, thanks.

Operator

And your next question comes from the line of Geoff Meacham from JP Morgan.

Geoff Meacham - JP Morgan

Hi guys. Thanks for taking the question. A quick question on your cash guidance; what can you tell us as to what it assumes for the number of reps that you may hire in the US? Then what can you tell us about your launch preparation so far in the US?

Ron Cohen

What we’ve said is that we expect to approximately double the current sales force. Current sales force is at 65, so something in the low 100’s is where we think we’re going to need to be. I’m sorry; could you remind me of the other piece of your question?

Geoff Meacham - JP Morgan

Yes, just really anything that you can tell us about your launch projections and the timing of that in the US.

Ron Cohen

No, we really can’t. Obviously, the major gating factor will be the length of FDA review and what that entails and we just don’t have any insight into that yet.

Geoff Meacham - JP Morgan

Okay and is it fair to say that when you think about a European partnership, are you waiting to get any more input from perhaps the US process when you think about what questions regulators could have in Europe and how a partner may view that?

Ron Cohen

Yes, I don’t think we feel that the discussions on Europe are contingent on any additional data or information; we’re holding discussions now.

Geoff Meacham - JP Morgan

Okay. Thank you.

Operator

And your next question comes from the line of Mark Schoenbaum from Deutsche Bank.

Mark Schoenbaum - Deutsche Bank

Hey Ronald, it’s Mark Schoenbaum. How are you?

Ron Cohen

Hi Mark Schoenbaum. I’m good, how are you.

Mark Schoenbaum - Deutsche Bank

Hi. Okay, so all my questions are answered, but maybe can you like help us understand the European market a little bit? I think a lot of us sort of understand the US market, given access to physicians who have not -- that a lot of them have had experience with the compounded drug and are hoping to have better experiences with your formulation. What about in Europe? How widespread is use of the compounded drug and do you have any sense for if the availability of the compounded drug is going to end up being a more significant barrier to reimbursement discussions over there than over here?

Ron Cohen

With the research we’ve done in Europe and here, our impression is that it’s very similar. Overall the picture is very similar in terms of key opinion leading familiarity with the drug, impressions of the drug and the extent to which people may or may not be using compounded drug.

Compounding does exist in Europe. Its differential across member states, so in some member states you see more of it and some you see less, but just like in the US, it’s very hard to get a handle on precisely how much is being prescribed and for how many patience, because it’s not a regulated activity and you don’t have the records that you have for approved ethical pharmaceuticals.

Now, having said that, our impression is that overall it’s approximately the same situation and we would not regard compounding in Europe to be any more of an issue there, with respect to the regulatory process and approval and adoption than it is here.

Mark Schoenbaum - Deutsche Bank

Actually, one other question Ron on Europe. Just to clarify, so your in-partnering discussions, you’re no longer giving guidance on when you’re going to specifically file in the EU and just to be clear, you’re not giving guidance on when you may sign a partnership and then the question is, is it still an option to do it entirely alone in Europe or are you absolutely committed to partnership?

Ron Cohen

Yes, what we’ve said Mark is that these are exploratory discussions. The overriding goal is to maximize the value of the asset in Europe and ex-US. So to the extent that we have analyzed the situation, our belief is that the next rational step is to conduct exploratory discussion with potential partners and get a sense from those discussions about what that value proposition might look like. That does not in any way preclude us from pursuing other options, if during those discussions we determine that we’re not seeing the value that we feel we ought to be seeing.

Mark Schoenbaum - Deutsche Bank

And then a final question, any updated market research on the price point in US and Europe and then I’ll drop off. Thanks a lot.

Ron Cohen

We’re continuing to do pricing research and we’re accelerating pricing research, particularly in the US, but that is a rather lengthy and iterative process. We continue to believe that the price point in the US is likely to come in $5,000 to $10,000 a year range. We don’t have anything more specific to say about Europe yet.

Mark Schoenbaum - Deutsche Bank

Thank you.

Operator

(Operator Instructions) We have a question from the line of Phil Nadeau from Cowen & Co.

Phil Nadeau - Cowen & Co.

Good morning, thanks for taking my question. First Ron, I had a question on the IP extension strategy. Can you give us an update there of what’s the latest on your process?

Ron Cohen

There are a number of elements to it. As I think you know Phil, we expect seven years of market exclusivity based on the orphan designation that we have in the US for MS. In Europe, we expect to get the ten year NCE exclusivity that they gave for new chemical entities in Europe. In addition, we have a number of other areas to look at for extending the effective life of the asset.

One is the Hatch-Waxman provisions for patent life extension, which potentially could give us up to five additional years of patent life on our key patent, which currently runs out in 2013. If we got the full five years, which we believe is a distinct possibility, based on the length of the program to-date that would take to us 2018 and again, depending on when we got the actual FDA approval, that could potentially be up to an additional year or so on top of the seven years.

In addition, we are looking at various formulation extensions to see whether there might be improved formulations that would be of value to patients and in the marketplace and then we are also pursuing a patent application strategy. So we have filed additional patents and are filing patents as we go along that we believe could extend the patent life significantly, but obvious it would depend on getting those patents approved.

Phil Nadeau - Cowen & Co.

Could you give us some idea of what’s claimed in those patents?

Ron Cohen

I can’t do that yet; hold on, let me just check. Hey Phil, some of them have been published already and they cover various methods and uses that are pertinent to the current projected indications for Fampridine-SR in MS. So we can provide you with the references.

Phil Nadeau - Cowen & Co.

Okay .Yes, I’d be interested to see that.

Ron Cohen

They’re published.

Phil Nadeau - Cowen & Co.

And one last question on the EU partnering process; could you give us some idea of the level of interest in Fampridine? Is it the established MS players that are interested; are you having to beat off potential partners with a stick? Where along the spectrum is the interest falling now?

Ron Cohen

I think it’s fair to say that it is a competitive process and the interest is high.

Phil Nadeau - Cowen & Co.

Okay, great. Thanks for taking my questions.

Operator

(Operator Instructions) And we have a follow-up question from the line of Michael Yee from RBC Capital Markets.

Michael Yee - RBC Capital

Two questions; one, can you better characterize your thinking in the US? I mean as an ex-US partner, would you be open to them doing everything worldwide and then maybe co- promoting with your sales force. Is that an option or are you basically committed to doing it here alone?

Then secondly on the expenses, the SG&A actually came down from Q3. Is that a better run rate? Were there a lot of one-time expenses in the third quarter that caused that to spike? Similarly with R&D, R&D actually had a bit of spike in the fourth quarter; is that the best run rate to model off of going forward?

Ron Cohen

Okay, I’ll take the first piece and then I’ll let Dave respond on the financials. In terms of partnering, our goal is to keep the US. The entire strategy of the company for the last several years has been to prepare the company through the Zanaflex franchise to be a highly effective commercial force. I think we’ve achieved that through Zanaflex as you can see from the track record.

So from our perspective, the bar is extremely high to allow anyone to co-promote in the US with us. Obviously everything has a price and we’re going to be guided by what we think optimizes the value of the asset, but from our perspective right now, the very much most likely way to optimize the value in the US is for us to do that, and to commercialize it ourselves; whereas ex-US, the opposite obtains.

We think that depending on the nature of the deal we could do, it’s likely that partnering would be a more effective way to go, but again, that’s an outlook. It really depends on what sort of offers people make and we have to assess those on a as they come basis.

Dave Lawrence

Yes, so on the SG&A expenses we expect that they’ll continue to increase next year, in 2009 over 2008. We haven’t given specific R&D guidance, although that coupled with our year end cash balance should get you where you need to be.

Michael Yee - RBC Capital

Okay. I mean, is fourth quarter basically the best run rate to go off with?

Dave Lawrence

Again, we’ve given the guidance on SG&A and cash.

Michael Yee - RBC Capital

Thanks.

Operator

And your final question comes from the line of Mark from Deutsche Bank.

Mark Schoenbaum - Deutsche Bank

Okay, a quick follow-up Ron. Number one, do you expect the panel for Fampridine?

Ron Cohen

No way for us to speculate effectively on that; it would be just speculation. We have no indication yet one way or the other, but let me just make it clear, being conservative planners as we’ve always been, we’re going to prepare as though we’re going to have a panel until proven otherwise. So that we are completely ready if there is a panel.

Mark Schoenbaum - Deutsche Bank

And then final question, what’s your tolerance for spending cash in 2009 on potential end-licensing opportunities?

Ron Cohen

I don’t think it’s substantially different from what it’s ever been, which is, we’re always looking for ways to increase the value of the company to shareholders, and part of that exercise is being alert to opportunities out there. There is a school of thought that says that the opportunities are greater than ever given the general depression in valuations and the difficulties that some asset holders are experiencing now, in developing their programs.

So we’re constantly alert to that, but as you can see, we haven’t brought anything in over the last couple of years. We have a pretty high bar for bringing in something that we think has a high probability of success and is going to be significantly accretive. So that continues to be our measuring stick and we’re continuing to look.

Mark Schoenbaum - Deutsche Bank

Okay, thanks.

Operator

And I would now like to turn the call over to Ron for closing remarks.

Ron Cohen

Well, this concludes our conference call this morning. Thank you all for joining us and we’ll see you next time.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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