Acorda Therapeutics, Inc. (ACOR) shares are trading at around $36 and generated a 16% return last year. They have the potential to deliver around a 50% return this year.
The following reasons could be cited as the potential drivers of the stock.
1. The company, like every year increased the price of its drug Ampyra by 10.75%, effective from January 2014. This price hike is consistent with the company's strategy, as it has been raising the price of Amprya in the first quarter every year. The drug improves walking in patients suffering from Multiple sclerosis (MS). In the recently released fourth-quarter results, the drug reported revenue of $84.6 million and for the full year net revenue was $302.6 million. Due to the price rise of Ampyra, the expected sales in 2014 could reach between $328 million-$335 million.
2. This year Acorda can also receive FDA approval of Plumiaz -- diazepam nasal spray, developed for the treatment of epilepsy, a neurological condition. This nasal spray can be another major revenue driver for the company.
3. Acorda has six clinical-stage programs running in its pipeline for conditions like neuropathic pain, heart failure, spinal cord injury, and traumatic brain injury. In 2013 the company reported R&D expenditure of $53.9 million and expects to spend around $60 million to $70 million this year. Acorda's current portfolio and strong pipeline should further act as a tailwind.
Ampyra in post-stroke deficit - a long-term catalyst
Acorda is focusing on treatment for patients affected with neurological conditions. The company has a strong pipeline of drugs for these conditions and markets/generates revenue from the three drugs -- Zanaflex (tablets and capsules), Qutenza, and Ampyra.
Acorda's major achievement has been FDA approval of Ampyra, as it is the first and only product approved to treat walking in MS patients. Ampyra is available outside the U.S. with the trade name Fampyra. Acorda has licensed and collaborated with Biogen Idec (BIIB) to develop the drug outside the U.S. Under this agreement Ampyra will receive around $510 million, of which $110 million is an upfront payment and $400 million will be to achieve its development and sales goal. Fampyra is approved in the EU, Canada, Australia, Israel, and New Zealand, and was recently launched in Ireland.
"We are very pleased that FAMPYRA is now available for use in Ireland," said Terry O'Regan vice president & managing director of Biogen Idec Ltd. "As a leading company in MS we feel a strong sense of obligation to the MS community to bring new and innovative therapies to the people that need them and we're absolutely delighted to be able to offer this new treatment option for MS patients with walking disability."
The company reported $9.3 million of royalty revenue outside the U.S. from Fampyra, growth of 30.9% year over year in the recently released results. Along with the higher sales guidance of Ampyra, the company also provided revenue guidance for Zanaflex and Fampyra, which stood at $25 million.
Apart from MS, post-stroke deficit provides a significant opportunity to the company. In a meeting with the FDA in December, Acorda discussed the process to start Phase 3 trial of Amprya for post-stroke patients, and it is incorporating the FDA's recommendations. The study is expected to start in the second quarter of 2014. Currently around 7 million patients in the U.S. have had a stroke, and almost half suffer from walking impairments, with no approved therapy for this condition.
In its Phase 2 proof-of-concept study, Ampyra was well tolerated and improved walking, measured by a Timed 25-Foot Walk (T25FW) test. In this study, 83 patients were included who had experienced stroke prior to six months of trial and were also suffering from walking deficit. In the crossover design, participants received two doses of dalfampridine-ER or placebo for 14 days, after which for one week all participants were given only a placebo. This was followed by another 14-day treatment where they received alternative treatment.
In the analysis, patients showed significant improvement in walking speed in comparison to those who only took the placebo (p=0.027). Although the average walking speed improvement was lower than that observed in previous trials of dalfampridine-ER in MS, the average percentage improvement from the baseline of 5% was almost similar to 6% improvement achieved in MS trials. The data was further analyzed by a threshold response analysis in which the percent of participants achieving different level of improvement in comparison to the baseline was analyzed (greater than or equal to 0%, 10%, 20%, 30%, 40%, 50%). At every threshold level a higher percentage of patients given dalfampridine-ER showed improvement compared to patients who were given the placebo.
The company will need a two- to three-month trial, and the program will be of the same size as its Phase 3 MS trials (i.e. 150 patients per trial and also a 150-patient longer-term safety trial). The trial may take around one and half years, and this can provide an additional opportunity, but it will not have any significant effect this year.
Diazepam Nasal Spray -- a game changer
In December 2012, Acorda acquired the privately held company Neuronex, Inc. for $6.8 million. This acquisition brought Diazepam nasal spray to Acorda's strong pipeline of neurology drugs. Acorda will also add payments of $18 million to achieve regulatory and manufacturing related milestones, and up to $105 million related to specific sales achievements of Neuronex.
In December, Acorda announced new data from a pharmacokinetics study on Diazepam nasal spray, developed to treat people with epilepsy. This neurological condition causes seizures and affects various mental and physical functions. Around 2.75 million people in the U.S. suffer from Eplipsy, and of those around 175,000 experience cluster seizures, also known as acute repetitive seizures (ARS), and have recurring pattern of seizures.
In this study, out of a total of 30 patients, 10 patients' doses were delivered while having a seizure, and the other 20 patients received their doses after their seizure stopped. This nasal spray showed a consistent safety and tolerability profile. The company has submitted a new drug application (NDA) of Diazepam nasal spray to the FDA and is relying on the previous findings of Diazepam rectal gel. In the previous findings (phase 1) announced by the company in March 2013, 24 patients were treated with a single dose of 20 mg of Diazepam nasal spray, and 20 mg of diazepam rectal gel had comparable plasma bioavailability. Both the nasal spray and rectal gel were well tolerated and showed similar safety profiles.
"Currently, the rectally administered form of diazepam is the only FDA-approved outpatient therapy for people with epilepsy who experience cluster seizures. We believe that a nasal spray formulation offers a more accessible and socially acceptable therapeutic alternative dosage form for people with epilepsy," said Enrique Carrazana, M.D., Acorda's Chief Medical Officer. "This new mode of diazepam delivery can provide an important new treatment option for people with epilepsy and their caregivers."
The only approved diazepam rectal gel is Diastat AcuDial, made by Valeant Pharmaceuticals International (VRX). The approval was received in October 2005. It is used as an emergency treatment for patients to treat seizures by non-medically trained caregivers. Diastat AcuDial being rectally administered and in syringe form leads to uneasiness of usage. This creates an opportunity for Acorda as the treatment will be available in spray form and can be administered easily, and upon approval by FDA will be another major drug to lead the top line of the company.
Other drugs that Acorda has in the pipeline are NP-1998, GGF2, rHIgM22, AC105, and Chondroitinase.
Phase - 2
Phase - 1
Phase - 1
Phase - 2
* Spinal Cord Injury (SCI), Traumatic Brain Injury (TBI)
Source: Company Data
Recently, the company provided guidance for research and development (R&D) expense to be in the range of $60 million to $70 million this year. Acorda's R&D expenses have increased from $42.1 million in 2011 to $53.88 million in 2012 and $53.90 million in 2013.
R&D to Sales (%)
The company's R&D to sales as a percentage is in accordance with the rising sales figures. This shows the company's ability to manage R&D expenditures, which is not the case normally. Considering the revenue guidance of the company for 2014 of $328 million to $335 million and R&D expenditure of 60 million to $70 million, R&D to sales is 18.3% and 20.9%, respectively.
1. The company depends heavily on Ampyra (major revenue contributor) to fund operations. Though the company is diversifying its product portfolio, the current dependency on just one product is a headwind.
2. The company has a strong pipeline of neurology drugs, but most are in early trial stages except Diazepam nasal spray. This spray is expected to arrive in the market this year, whereas other pipeline drugs will take years. Also, most of the company's drugs are in trial stages, so FDA approval will depend on the results that are uncertain at present.
Total Debt (mrq)
Source: Yahoo! Finance
ttm= trailing twelve months mrq=most recent quarter
Acorda's financial metrics as stated above look impressive in comparison to Biogen Idec. Higher forward P/E, lower price/book value ratio, and low price/sales ratio indicate the stock is undervalued. The figures are in line with shareholder expectations and management hopes for future profitability. Also, with the approval of Diazepam nasal spray the company's financial position will strengthen this year. Looking at the current trading price and the company's growth prospects, I recommend buying at the current level.