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Acorda Therapeutics, Inc. (NASDAQ:ACOR)

Q1 2010 Earnings Call Transcript

April 30, 2010 8:30 am ET

Executives

Tierney Saccavino – SVP, Corporate Communications

Ron Cohen – President and CEO

David Lawrence – CFO

Analysts

Joel Sendek – Lazard Capital Markets

Michael Yee – RBC Capital Markets

Phil Nadeau – Cowen and Company

Geoff Meacham – J.P. Morgan

Navdeep Singh – Citigroup

David Amsellem – Piper Jaffray

Josh Schimmer – Leerink Swann

Mike King – Wedbush Securities

Operator

Welcome to the Acorda Therapeutics first quarter 2010 financial results conference call. 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, Tierney Saccavino, Senior 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 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 including Acorda Therapeutics' ability to successfully market and sell Ampyra in the United States and to successfully sell Zanaflex capsules, the risk of unfavorable results, computer studies of Ampyra, the occurrence of adverse safety events with our product, delays in obtaining or failure to obtain regulatory approval of Ampyra, outside the United States and our dependence on our collaboration partner Biogen Idec in connection there with competition, failure to protect Accorda Therapeutic intellectual property or to defend against the intellectual property claims of others, the ability to obtain additional financing in support of Acorda Therapeutics' operations and unfavorable results from our preclinical programs.

These and other risks are described in greater detail in Acorda Therapeutics' filings with the Securities and Exchange Commission. Acorda Therapeutics may not actually achieve these goals or plans described in the forward looking statements and investors should not place undue reliance on 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

Thanks, Tierney. Good morning, everyone. This morning we reported our first quarter 2010 financial results and today I will provide a brief review of the key milestones since our last quarterly report and then I will turn the call over to Dave, who will provide a financial summary and we will then open the call for your questions.

On January 22 of this year, Ampyra was approved by the FDA for the improvement of walking in patients with MS. This was demonstrated by an improvement in walking speed. In February, we announced pricing for Ampyra at $1,056 per month and the drug was launched on March 1.

We have been very pleased with the response of Ampyra's commercial event, with response to Ampyra's commercial availability with more than 2,000 physicians having written at least one prescription and a number of positive anecdotal reports coming in from the field.

Now, that said, it is still very early in the launch and there are a number of variables that will determine the sales trajectory over time. At this point, we don't have data on the filled prescriptions, we can't project if physicians will be repeat prescribers and we don't know how many patients will continue on therapy or for how long.

As we have a more complete picture, we’ll provide that to you. The pent-up demand for Ampyra has resulted in some delays processing prescription requests at our centralized hub, Ampyra patient support services with some patients waiting for up to 30 days for their initial prescription to be delivered.

In response, we have added resources at AMPYRA patient support services. The wait time has already been reduced and we expect it will continue to be reduced over time. Two points to note. First, we expect most patients who have received an initial prescription will not encounter similar waiting periods for their refills and second, this situation is not related to a shortage of drug. We believe we have adequate supply to meet commercial demand.

We are continuing to meet with both public and private managed care groups and have had more than 110 meetings to date with targeted accounts, including more than 60 since the approval of Ampyra. We are encouraged that clients are interested in meeting with us to discuss Ampyra. But at this point, we can't speculate as to what level of managed care coverage will ultimately have or with whom and similarly, we can't project what our payor mix will be including government and commercial plans since we only have very preliminary data at this point.

Turning to our Zanaflex franchise, total shipments in the first quarter were $13.4 million. Gross sales in the first quarter were $13.8 million. As per our previous guidance, we expect sales of Zanaflex capsules will continue to decline in 2010 due to managed care pressures among other factors. The 30-month stay on Apotex's paragraph 4 filing expired in March. Schedule for the remainder of the case has not yet been set.

In March, we filed an investigational new drug application or IND for GGF2 which was accepted by the FDA. We expect to start a Phase 1 clinical study in patients with heart failure in mid 2010. GGF2 represents a novel approach to treating heart failure and we are excited to have this compound enter clinical testing.

GGF2 acts directly on heart muscle cells or cardiomyocytes. It is believe to improve the heart's ability to contract by promoting the repair of tissue damage resulting from heart disease or injury. Existing medications for heart failure primarily aim to modify the work load of the heart rather than to promote ventricular repair. So this would be a novel approach.

I will now turn the call over to Dave for review of the quarterly financials.

David Lawrence

Thank you, Ron. For the first quarter ended March 31, 2010, the company reported a net loss of $21.1 million of $0.56 per diluted common share compared to a net loss of $18.7 million or $0.50 per diluted common share for the same quarter in 2009.

Gross sales for the first quarter was $17.3 million, comprising $13.8 million in Zanaflex capsules and tablet sales and $3.4 million in Ampyra sales. We began shipping Ampyra product on March 1 of this year. Total operating expenses which includes cost of sales for the quarter ended March 31, 2010 were $37.9 million compared to $30.5 million for the same quarter in 2009.

Costs of sales were $3.1 million, for the first quarter of 2010 which included inventory costs related to recognized revenue. Royalty costs, intangible asset amortization and freight and stability costs. Research and development expenses were $8.1 million for the first quarter 2010 which included costs related to Ampyra long-term extension studies.

Ampyra inventory costs for product manufactured and received prior to regulatory approval and development of the company's preclinical pipeline products. Sales, general and administrative for the quarter ended March 31, 2010 were $26.7 million and included expenses related to our Ampyra pre-launch and launch activities and Zanaflex capsules promotional activities.

We expect that Ampyra launch expenses will continue to increase significantly throughout the course of 2010. We closed the first quarter of 2010 with cash, cash equivalents and short-term investments of $243.6 million. Now, we will open the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Joel Sendek of Lazard Capital Markets. Joel, you may proceed.

Joel Sendek – Lazard Capital Markets

Thanks a lot. So a couple of questions, I'm wondering the $3.4 million in gross sales if that is – is there any inventory build in there and is that sales to the specialty pharmacy or does it reflect filled prescriptions? Can you give us any detail on that, please?

David Lawrence

Yeah, sure, Joel. The $3.4 million is based on shipments to the specialty pharmacies. There is probably some build included in that as the pharmacies were gearing up for the launch. It is not a prescription number.

Joel Sendek – Lazard Capital Markets

Okay. Can you quantify at all what the build might be or at least what the holding period is for the inventory in the specialty pharmacies?

David Lawrence

No, no. I can’t. It’s too early in the launch to tell.

Joel Sendek – Lazard Capital Markets

Okay. And then previously you said you were going to target about 5,000 docs initially or neurologist initially. Now, that you already have 2,000 that are already, at least prescribed one, are you going to increase the target doctors, you are going to go after or is the 2,000 ahead of your expectation? Can you comment on the trajectory for the sales force?

Ron Cohen

Joel. It's Ron. Clearly having over 2,000 physicians write in the first month of the launch is quite encouraging. We are continuing to assess the target list as we go forward and we would be doing that in any case. So, we will continue to develop that as the launch proceeds. But, I guess the take home right now is that the over 2,000 physicians in the first month is quite encouraging for this early stage.

Joel Sendek – Lazard Capital Markets

Sure. Sure, yeah. Agreed, I'm just wondering – I guess you haven't talked about –

Ron Cohen

It is too soon to tell what that is going to translate into. It is encouraging for this early stage is the key message there. How that translates as I mentioned when we went through the slides, how that translates moving forward we are just going to have to see.

Joel Sendek – Lazard Capital Markets

Okay. Thanks a lot.

Operator

And our next question comes from the line of Michael Yee of RBC Capital Markets. Michael, you may proceed.

Michael Yee – RBC Capital Markets

Thanks. Good morning, Ron. Two questions. One is you mentioned the 2,000 docs that have prescribed the drugs. Can you characterize or break it down in terms of who are the high prescribers, what is the penetration there, what are the average number of scripts maybe that have been written, I'm just trying to understand, 2,000 is a great number but what about the high prescribers?

Ron Cohen

It is way too early to tell any of that, Michael, at this point. That is really all we can say in terms of numbers. We just don't have detail about which physicians are prescribing or how many per physician. We are talking about the first month of the launch here.

Michael Yee – RBC Capital Markets

Anything anecdotal?

Ron Cohen

Well, as a professor of mine, he used to say the plural of anecdote is not data. So we're going to wait for the data.

Michael Yee – RBC Capital Markets

Okay. Second question is, you are talking about trying to work through the pent-up demand, may be you can sort of walk us through the logistics from script to drug. Where is the exact bottleneck that you see is causing the delay and what are you actually trying to do to relieve that?

Ron Cohen

We have had some growing pains, as it were, particularly at the level of the intake and valuation. So the AMPYRA Patient Support Services hub that we use to take in the service request forms, which essentially is the prescription from the physician's office and then that hub has to go through multiple steps to check the patient's insurance status, to look at their co-pay status. And if there is a co-pay mitigation that we need to provide them to arrange for that, if it is a patient assistance program candidate to arrange for that.

And once all of that is checked then the patient support services sends the prescription to the specialty pharmacy. Sometimes and we have about 12 – a dozen specialty pharmacies contracted. Sometimes the specialty pharmacy will have its own internal procedures where there are certain checks that they will want to do as well. But the primary sort of time involved here is at the level AMPYRA Patient Support Services. And we have had significant pent-up demand in the very early going in the first month, so we have increased the resources at the patient support services.

One of the nice things about this model is that it is very scalable, so that we can scale up or down in response to demand, in the marketplace fairly rapidly and that is what we are doing here. So, we have a certain amount of time where we have a bottleneck, that is going be relieved and it is already being relieved based on the increases in personnel that we have put in.

Michael Yee – RBC Capital Markets

Okay. Thanks.

Operator

And our next question comes from the line of Phil Nadeau of Cowen and Company. Phil, you may proceed.

Phil Nadeau – Cowen and Company

Good morning. Thanks for taking my question. Ron, first a follow-up to Michael's question, can you talk a little bit about the bottleneck in regards to whether the pent-up patient demand was more than you expected or was it the workload per patient was some what higher?

Ron Cohen

It's primarily that the demand – the initial demand was higher than we anticipated. We got approved in January. We got out five weeks later which was pretty quick and launched. And somewhere in the interim, those people who were particularly enthusiastic in the upfront had prescriptions written and they came in very quickly. So that was really the primary issue.

Phil Nadeau – Cowen and Company

Okay. And early in the launch when you were putting together or prior to the launch, when you were putting together the APSS plan, can you give us some idea of what type of throughput you thought you would need?

Ron Cohen

I'm not going to provide any numbers on that because then we would be giving you projections.

Phil Nadeau – Cowen and Company

Yeah. I didn't think you would. I just thought I would try.

Ron Cohen

You can try again if you'd like.

Phil Nadeau – Cowen and Company

Last question is on reimbursement. It sounds like you are still going through the process with many payors in order to get final placement or final status. Bu nonetheless, the payors – it seems like they are reimbursing, are paying for the patients in the interim, so. Can you tell us how that works, or kind of what status you have or what type of interims status while you are awaiting, a final decision?

Ron Cohen

I really can't, Phil. It is all across the map because there are just so many different plans. So anything I said would be an incomplete picture and we are going to just need to wait for the data to come in and then share that with people.

Phil Nadeau – Cowen and Company

Okay. Great. Thanks for taking my questions.

Operator

And our next question comes from the line of Geoff Meacham of J.P. Morgan. Geoff, you may proceed.

Geoff Meacham – J.P. Morgan

Great. Thanks. Question for you, Ron, just about your fill rate. Is there any way to determine, what percent of our scripts are filled versus those written at this point? Is it 50, is it 75, is it 90?

Ron Cohen

Not yet. Not yet.

Geoff Meacham – J.P. Morgan

Okay.

Ron Cohen

Again, I just want to emphasize here. We are talking about – it is the first quarter call but the reality is we are talking about one-month and it is the first month at that. So it just necessarily, we are just not going to have the data, now that we are going to have later. And in future calls, hopefully, we'll have a better picture to give you. But right now we just can't tell.

Geoff Meacham – J.P. Morgan

Okay. And then with respect to the source of patients, whether some of them are de novo versus ISD switches.

Ron Cohen

That also would be entirely anecdotal at this point, so not really data driven information.

Geoff Meacham – J.P. Morgan

And final question, where are you guys with respect to the P&T Committee, I know you said that could take maybe a quarter or two to check all those boxes. Just curious, if you made any good progress during the first quarter, so far?

Ron Cohen

It entirely depends on the plan, Geoff. So every plan has its own cycle and timing. Some of them it could be by the end of the third quarter, frankly. There are many plans that just by internal process, or standard operating procedure, they don't take up anything for six months on a formal basis. So it really – again, as I said earlier, it is all across the map, in terms of how quickly these plans are acting and what the process they use is and so forth.

And we are just not going to know until the next few quarters roll out. So hopefully with each quarter, we will have better and better information that we can share with you.

Ron Cohen

Okay. Thanks a lot.

Operator

And our next question comes from the line of Yaron Werber of Citigroup. You are on. You may proceed.

Navdeep Singh – Citigroup

Hey, guys. This is Navdeep filling in for Yaron. I have a couple of questions. How did you plan to record the $19 million in stockings further on and did you plan to provide the metric every quarter during the launch?

David Lawrence

The $19 million is – a portion of it was expensed, because it was received prior to regulatory approval. The rest of it, well, basically the inventory on the balance sheet represents the stocking. So, we announced it – because it was a material number in the first quarter. It will be business as usual going forward. We are likely not to continue to report inventory received. You will see the numbers on the balance sheet.

Navdeep Singh – Citigroup

All right. In the press release, you also indicated its taking patients about 30 days to receive Ampyra. I was wondering where that stands now?

Ron Cohen

Yeah. What we said it’s taking up to 30 days. Some patients are getting it – in the first week, some are two weeks, some are three weeks but we were saying up to 30 days, which is what we have been seeing. And again, what we can tell you is that we have substantially added staff at Ampyra patient support services that has made a major difference in their ability to process the number of claims per day or number of not Claims but requests for service or prescriptions per day.

So we are making good progress in getting through the backlog as well as processing all of the new incoming prescriptions as they come in. But that’s all we can tell you right now. We don't have anything else more specific.

Navdeep Singh – Citigroup

Okay. Thanks a lot.

Ron Cohen

I guess the other thing to say is we expect that, that 30 days is already coming down and we expect it to continue to come down as they work through the backlog.

Operator

And our next question comes from the line of David Amsellem of Piper Jaffray. David, you may proceed.

David Amsellem – Piper Jaffray

Thanks. So just we're clear on the backlog, just as we get to sort of a steady state and you work through – and you work through this, I mean how should we be thinking about the waiting time steady state for a patient to expect to receive his or her prescription?

Ron Cohen

Yeah, David. I don't have a new way to answer the question. We have added staff. They are working through the backlog. The times are coming down and we expect that over the next reasonable period of time that we will get through the entire backlog and then be on a steady state basis.

David Amsellem – Piper Jaffray

Okay. And you may have answered this before, but do you know – do you have a sense of what portion of patients who have gotten a prescription for Ampyra have gotten a repeat prescription or is it too soon?

Ron Cohen

Much too soon to tell.

David Amsellem – Piper Jaffray

Okay. And then one last question on the R&D spend, if you mentioned this earlier in the call. I mean how should we think about the ramp or in spend as the year progresses. And can you comment on what we should be thinking about for next year on R&D?

Ron Cohen

Well, our beginning a year-end guidance on our last call, we guided that R&D expenses are expected to increase in 2010 over 2009, due to preclinical programs, GGF2 Phase 1 study and post marketing study commitments. That’s the guidance that we gave at that point.

David Lawrence

Yeah. We can't give anything more specific right now except to say there will be an increase over the year.

David Amsellem – Piper Jaffray

All right. Thanks, guys.

Operator

And our next question comes from the line of Josh Schimmer of Leerink Swann. Josh, you may proceed.

Josh Schimmer – Leerink Swann

Great. Thanks very much. Just wondered of the 2,000 prescribers or so, do you have any sense of what percentage of those of MS specialists?

Ron Cohen

We don't, Josh.

Josh Schimmer – Leerink Swann

How about of the 5,500 physicians that you are targeting. What percentage of those would be MS specialists?

Ron Cohen

The vast majority of them are MS specialists. The vast majority are neurologists with the substantial portions of their practice in MS. There is some others who deal with MS as well but it’s really primarily neurologists.

Josh Schimmer – Leerink Swann

Okay. And then the press release, you comment that the company, believe to has adequate supply to meet demand. Can you give us a sense, is there a lot of cushion here, is there some point where we need to come back and ask whether we are going to be running into supply constraints or are you taking actions now to kind of adjust the supply and inventory on hand to meet the maybe greater than expected demand that you are seeing?

Ron Cohen

To what decimal place of specificity would you like me to project that? It – we can't give projections. What we can tell you is that we have adequate supply and we have a system in place with Elan, who manufactures it. So that periodically, we reassess based on demand and what we see in the market we reassess where we are and order more inventory as needed.

So it’s standard procedure there. We believe that what we have on hand is an adequate supply for the initial inventory stocking and then we will continue to adjust that as needed.

Josh Schimmer – Leerink Swann

Okay. Great. Thanks very much.

Operator

And our next question comes from the line of Mike King of Wedbush Securities. Mike, you may proceed.

Mike King – Wedbush Securities

Good morning, guys. Thanks for taking my question. I just wanted to maybe pick up where Josh left off in that I'm wondering is any of your marketing effort, the CME activity directed towards non-neurologists at all or is that something for the future?

Ron Cohen

I actually would have to talk to our medical affairs group to get the up to the minute. I will tell you that overall the effort is going to be geared in educating neurologists and other specialists who deal with MS. Particularly physical medicine and rehabilitation who also have a significant presence in treating MS, as well as allied healthcare professionals so nurses, physical therapists and others who deal with MS. So that would be the major focus. Clearly, the focus has to be on those healthcare professionals, physicians and allied healthcare professionals who deal substantially with MS and that’s what we are gearing it to.

Mike King – Wedbush Securities

Okay. And then you may have said this and not answered but, do we know what the number of patients in the backlog is?

Ron Cohen

Well, I don't think you know.

Mike King – Wedbush Securities

I'm sure, I don't. That's why I asked you guys.

Ron Cohen

We are – we are not going to give specific numbers on the backlog or the forms that have come in. For the good reason that again, it’s an incomplete picture at this point. Until we get well rounded data where we can really extrapolate what’s going on any number we give other than the sales number is going to be partly speculative and we don't want to do that.

Mike King – Wedbush Securities

Okay. Fair enough. And then just as far as penetration of reimbursement is concerned, Ron, did you say that there were 60 plans that are currently reimbursing Ampyra?

Ron Cohen

I don't think, I said any number of plans that are reimbursing Ampyra.

Mike King – Wedbush Securities

Okay.

Ron Cohen

I'm sorry I think – hey, Mike, I think what you might be referring to is the meetings that we have had.

Mike King – Wedbush Securities

Okay.

Ron Cohen

Yeah. So we’ve had over 110 meetings and 60 of those have been since the approval.

Mike King – Wedbush Securities

I see. Can you say anything about what the target number of accounts is?

Ron Cohen

No.

Mike King – Wedbush Securities

Okay. And then finally, is there any effort on your part to secure a code from CMS? Is there an appreciable Medicaid population that could be a target for Ampyra?

Ron Cohen

Again, too soon to tell. We are going to have to wait until we get a reasonable sampling over time under our belt. So that we can get reliable figures on what percent, falls into each bucket, whether it is government pay or commercial pay and what sorts. At this point, you have got the first month with a lot of pent-up demand in there. It’s just not going be reliable at all. And we just have to wait for the next few quarters to roll out until we get a good picture of what the balance of payors is.

Operator

And at this time, we are showing no further audio questions available. Ron Cohen, you may proceed.

Ron Cohen

Thanks. Well, this concludes our conference call this morning. And thank you all for joining us.

Operator

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

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