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Executives

Tierney Saccavino – SVP, Corporate Communications

Dr. Ron Cohen – President and CEO

David Lawrence – Chief Financial Officer

Analysts

Joel Sendek – Lazard Capital

Geoff Meacham – JPMorgan

Raghuram Selvaraju – Noble Financial Group

Yaron Werber – Citi

Phil Nadeau – Cowen and Company

David Amsellem – Piper Jaffray

Navin Jacob – ISI

Michael Yee – RBC

Josh Schwimmer – Leerink Swann

Acorda Therapeutics, Inc. (ACOR) Q2 2010 Earnings Call August 3, 2010 8:30 AM ET

Operator

Welcome to Acorda Therapeutics Second Quarter 2010 Financial Results Conference Call. At this time, all participants are in 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.

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

Tierney Saccavino

Thank you. 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 market Zanaflex Capsules, the risk of unfavorable results from future 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 therewith, competition, failure to protect Acorda Therapeutics’ intellectual property or to defend against the intellectual property claims of others, the ability to obtain additional financing to 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 the goals or plans described in these 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, as you know, we reported our second quarter 2010 financial results. Today, I’ll provide a brief review of the key milestones since our last quarterly report and then I’ll turn it over to Dave who will provide a financial summary. Then we’ll open the call for your questions.

We are very pleased with Ampyra sales during the quarter which total $29.7 million. As a reminder, gross sales of Ampyra are recognized following shipment of the product from the company’s distribution facility to our network of specialty pharmacies. As of July 30th, more than 4,200 physicians have written at least one prescription for Ampyra, approximately double the number from our last update on April 30th.

We’re not reporting data for total and new prescriptions at this time and we don’t expect to do so for the remainder of the year. However, inventory levels at the specialty pharmacies currently represent one month or less of supply.

We’re focused on three key priorities with regard to the Ampyra launch. First, we’re continuing to optimize the process for filling prescriptions to ensure that it’s as quick and easy as possible for physicians’ offices and patients receiving the medication.

Second, we’re working with managed care providers to educate them about Ampyra to achieve the broadest possible access for people with MS. I’ll address that program on the next slide in more detail.

And third, we’re continuing to educate prescribers and other healthcare professionals about the clinical profile of Ampyra and appropriate patient selection for the product.

Our commercial team has made significant progress in improving the overall customer experience at APSS, Ampyra Patients Support Services, which is our prescriber and patient service hub. We’ve increased staffing at APSS and we have eliminated the backlog of prescription requests from the initial pent up demand at launch.

Most new prescriptions now begin processing within 24 hours of being sent to the hub and the average time between submission of an Ampyra prescription and when the drug is in the hands of the patient has been reduced.

As with any new drug launch, the actual time in which patients receive their first prescription is still dependent on several factors primarily the requirements of the insurance carrier.

Now, to ensure that the process improvements we’re making at APSS are actually translating into a better customer experience, we’ve been implementing several programs including surveys and other market research. We’ve just completed a survey of 101 prescribing physicians and results indicate that we’re making solid progress, 98% of the respondents said that they are likely to continue to prescribe Ampyra.

Our marketing and medical teams have been implementing programs to support the launch including advertising in professional and trade publications, consumer and professional websites, exhibits at major medical meetings, and a professional speaker’s bureau. And we continue to submit scientific information about Ampyra for presentation at medical meetings.

As of June 30th, a majority of insured individuals had no or minimal restrictions to access. A significant minority are subject to more restrictive prior authorizations and a mid single-digit percentage of individuals are currently blocked from receiving Ampyra, in some cased because their plans have not yet reviewed the drug. These figures are consistent with our own internal pre-launch projections.

I want to stress that a restrictive PA doesn’t necessarily block access but it can make it more challenging or time consuming on the part of the physician and patient for an individual to receive drug. This is standard and it’s an anticipated part of launching an innovative drug.

We’re encouraged by the dedication of the physicians and their staffs to work through the PA, so if their patients can potentially benefit from Ampyra and we’re also encouraged by the progress we’re making with managed care organizations. We continue to meet with them to achieve the broadest possible access for patients. And as is also typical for a new product launch, we expect that reimbursement for Ampyra will continue to evolve through the rest of this year and into 2011.

Turning to our Zanaflex franchise, total shipments in the second quarter were $13.5 million. Gross sales in the second quarter were $13.7 million. As per our previous guidance, we expect sales of Zanaflex Capsules will decline in 2010 over 2009.

On July 1st, a Markman hearing took place regarding the ongoing Zanaflex Capsules litigation. The judge ruled on a number of patent term interpretations and we are pleased that he accepted Acorda’s position on many of the terms. However, much of the case is still ahead of us.

Touching on our pipeline and business development activities, our Phase I clinical trial for GGF2 which had been slated to begin in mid 2010 has been delayed due to deficiencies in the vial filling process. We’re working to remediate this issue and we don’t yet have an update on projected timing for trial initiation. I want to emphasize that there’s no issue here with the manufacturing process or production quality or quantity of GGF2, this is a vial filling issue.

Acorda and Vanderbilt University received a $1 million cardiac translational research implementation program or C-TRIP grant from the NIH to support research on GGF2 and if those studies are successful, Acorda and Vanderbilt will be eligible to apply for a second phase C-TRIP grant of at least $7.5 million.

And finally, we’re also seeking to acquire clinical and/or commercial stage products in the neurology space by the end of this year.

I’ll now turn the call over to Dave who will review the quarterly earnings.

David Lawrence

Thanks, Ron. For the second quarter ended June 30, 2010, the company reported a net loss of $6.8 million or $0.18 per diluted common share, compared to a net loss of $23.3 million or $0.62 per diluted common share for the same quarter in 2009.

Gross sales for the second quarter were $43.4 million, comprising $29.7 million in Ampyra sales and $13.7 million in Zanaflex Capsules and tablet sales.

Total operating expenses, which includes cost of sales for the quarter ended June 30, 2010 were $48.5 million compared to $34.7 million for the same quarter in 2009. Cost of sales were $7.8 million for the second 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 $6.6 million for the second quarter of 2010 which included costs related to Ampyra long-term extension studies and development of the company’s preclinical products.

Sales, general, and administrative expenses for the quarter ended June 30, 2010 were $34.1 million and included expenses related to our Ampyra launch activities. We expect that SG&A expenses will slightly increase for the remainder of the year.

We close the second quarter of 2010 with cash, cash equivalents and short-term investments of $216.4 million.

Now, we will open the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Joel Sendek from Lazard Capital. Please proceed.

Joel Sendek – Lazard Capital

Hi. Thanks a lot. It was a great quarter and a really strong number but I have to say when I look at the IMS trends in July it looks like you have even greater momentum building in July and I’m wondering, I guess a two part question. The first is can you confirm that at all and the second is, if not, can you tell us a little bit about the intra-quarter trends for the Ampyra sales? Thanks.

Ron Cohen

Thanks, Joel. I’m sorry. I really can’t comment on any of that. We’re not giving any guidance at all on numbers, obviously we’re very pleased with this quarter and we’re going to take each quarter as it comes at least for the launch year.

Joel Sendek – Lazard Capital

Okay. I’ll try one other one. Real quickly. Can you tell us a little bit about the response rate or the drop out rate for or is it too early to tell on that too with regard to when a prescription is written? How many of those result in refills as opposed to…

Ron Cohen

Yeah. It’s actually substantially early for us to be able to tell.

Joel Sendek – Lazard Capital

Okay. All right. We’ll keep asking next time. Thanks a lot.

Ron Cohen

Okay.

Operator

And your next question comes from the line of Geoff Meacham from JPMorgan. Please proceed.

Geoff Meacham – JPMorgan

Great. Thanks, guys, and congrats on the quarter.

Ron Cohen

Thanks, Geoff.

Geoff Meacham – JPMorgan

Two questions. Is one month of inventory do you think sufficient to meet demand based on kind of what you guys were seeing?

Ron Cohen

Yeah.

Geoff Meacham – JPMorgan

Okay. Do you think directionally could you see a situation where it would go higher than that or are you pretty comfortable…

Ron Cohen

No. I mean, the specialty pharmacies, they stock to meet the demand. It’s not exactly just in time in the sense that it’s not on a 24 hour basis but they manage inventories very tightly, particularly for specialty drugs as you might imagine.

So, it’s a rolling sort of ordering process on their part and they adjust that day to day, week to week. So, we don’t expect them to have more than a month of inventory at any given time and currently they don’t, it’s a month or less in many cases.

Geoff Meacham – JPMorgan

Okay. And then a question on the payers, for those who haven’t yet reviewed Ampyra or for those that the review is in process, maybe can you give us some sense as to how many payers this represents or covered lives or some sort of metric there?

Ron Cohen

Yeah. I -- that’s cutting it more finely than I can actually answer. I can’t at this point. Overall, as we’ve said, the majority, at this point, the majority of covered lives are getting through with either no or minimal sorts of PAs. For those who have not yet reviewed the drug that would be definitely a minority but we continue to meet with the managed care parties and obviously, we prioritize those who have not yet reviewed the drug or those where the PAs are more restrictive and we believe that by educating them we may be able to get them to see it in a different light. And so far, we’ve been very pleased with the reception we’ve been getting overall. We’ve met with the majority of large plans at this point.

Geoff Meacham – JPMorgan

Okay. Thanks.

Operator

And your next question comes from the line of Raghuram Selvaraju from Noble Financial Group. Please proceed.

Raghuram Selvaraju – Noble Financial Group

Hi, Ron. Thanks very much for taking the question. Just wanted to ask about your in-licensing efforts and what kind of agents you might be considering bringing in whether this would be a U.S. deal, how you plan to develop the agents going forward? If you could give us any color on that?

And then, if you could just update us on your plans for the pipeline and when we might be able to see additional progress on agents beyond GGF2 on that front?

Ron Cohen

We’re looking specifically in our sweet spot, our area of proven expertise and that is neurology products. So, we’re also looking in terms of stage of development for clinical stage or ultimately commercial stage. We would very likely not add a commercial product this year during the launch but at some point maybe next year when we get past the initial stages of the launch and we have some spare capacity in the sales force, that’s an asset we’d like to leverage.

So, we’re looking broadly in the neurology space, things that would be prescribed primarily or in a significant amount by neurologists who are our major port of call now with some physical medicine and rehab presence as well and stage of development again, clinical and/or commercial stage.

With respect to our own pipeline, we had a little hiccup as I mentioned on the vial filling process with our OEM vial filling. So, we’re working through that on GGF2 and hopefully that will be resolved in a reasonable time and we can get the Phase I program going in heart failure of the GGF2.

We are pushing ahead aggressively on our monoclonal antibody for remyelination and that is in the stage of being scaled up again through OEM manufacturers, scaled up under CGMP, so that we have enough product for an IMD and clinical trials to begin. In terms of timing, we don’t have any more timing to give right now but we will update that in an ongoing basis as we have more specific information.

Raghuram Selvaraju – Noble Financial Group

So, just to clarify with respect to the timing of in licensing of a development stage candidate, did I hear correctly that you think that might potentially be done by the end of this year?

Ron Cohen

That’s our goal. Obviously it has to be the right product and we have to have the right deal. We’re not going to bring in something just to meet the goal. But that is the goal both internally and externally. So we’ll push hard to meet it with a good product.

Raghuram Selvaraju – Noble Financial Group

And so, it would be correct to understand that you are currently evaluating potential targets right now?

Ron Cohen

Absolutely.

Raghuram Selvaraju – Noble Financial Group

Thank you.

Operator

And your next question comes from the line of Yaron Werber from the Citi. Please proceed.

Yaron Werber – Citi

Hey, guys. It’s Yaron. Congrats. Very nice quarter. I had a question about, can you give us a little bit of a sense of the discounts and allowances on both Zanaflex and Ampyra? And then I had a question also about, help us understand maybe just a little bit about the, what we can expect from an R&D ramp for this year, I mean, you’re running right now at around $7 million. I’m trying to understand is that kind of a good run rate for the balance of the year until you actually bring something else in?

David Lawrence

Sure. Discounts and allowances for Zanaflex have historically run approximately 9% and that should continue. Ampyra, the discounting will depend a lot on the third-party payer, how those contracts come in and where we wind up with payer mix. So it’s early in the launch to give any guidance around D&A on Ampyra. On the R&D front, our year end guidance was that R&D would increase over 2009. That’s the guidance we’re given at this point on R&D.

Yaron Werber – Citi

That’s a bit -- that’s not changing then, despite the GGF2?

David Lawrence

Again, at this point in time, our guidance is holding that we gave at the beginning of the year.

Ron Cohen

Yeah. The major drivers of the R&D spend are not the Phase I GGF2.

Yaron Werber – Citi

Right, right. And then, what about on just SG&A, you mentioned it’s going to increase incrementally, I think that was the word you used or modestly over the back half of the year?

David Lawrence

Slightly increase.

Yaron Werber – Citi

Slightly. What -- can you give us a little bit of a sense, I mean, we’ve seen, are you pretty much its steady state now and from now on it’s just incremental marketing spend or just help us understand a little bit where that line can go over time?

David Lawrence

Sure. First quarter -- This is our first full quarter with a full contingent of field sales force and marketing spend on Ampyra. So, we’re forecasting that should remain at a constant level now, what you saw in the second quarter, for the remainder of the year depending on how the launch continues.

Yaron Werber – Citi

Okay. Great. Thank you.

Operator

Your next question comes from the line of Phil Nadeau from Cowen and Company. Please proceed, sir.

Phil Nadeau – Cowen and Company

Good morning. Let me add my congratulations on the quarter. Just to follow-up on Yaron’s question on Ampyra net sales. If I do the math that you just suggested, Dave and assume that discounts and allowances on Zanaflex were 9%, that suggests, based on the numbers in your P&L about $1.75 million in discounts and allowance for Ampyra during the quarter. Is that about the right number?

David Lawrence

Discounts and allowances for Zanaflex and for the quarter…

Ron Cohen

Ampyra, I think he’s asking.

David Lawrence

Ampyra or Zanaflex?

Phil Nadeau – Cowen and Company

Ampyra is really the one I’m trying to figure out.

David Lawrence

Okay. Yeah. That’s correct. Approximately $1.7 million for the quarter.

Phil Nadeau – Cowen and Company

$1.7 million. Okay. Great. And, Ron, on the prior auths that some of the plans are asking for, can you give us some idea of how restrictive they are? Are they simply patient needs a timed 25 foot walk? Or is there anything else people are asking for?

Ron Cohen

It’s a variety although they tend to cluster around that sort of thing, the timed 25 foot walk to qualify. Some of the more restrictive ones sometimes ask for another timed 25 foot walk later. Honestly, wherever possible we’re educating away from that for a very solid scientific and clinical reasons based on the way our clinical trials were done and frankly the lack of validity of doing that kind of an assessment to assess walking improvement.

We’re going in and educating on that where we see it. And so far we’ve been pleased overall with the reception that we’ve had to that message. So, that’s the sort of thing you see.

Phil Nadeau – Cowen and Company

Okay.

Ron Cohen

So, in other words, in general it doesn’t prevent the patient from getting the drug. It requires a little bit more effort -- in some cases a lot more effort depending on the specific nature of the PA.

Phil Nadeau – Cowen and Company

Okay. In the timed 25 foot walk, isn’t that a normal part of the workup of a multiple sclerosis patient?

Ron Cohen

Actually, it’s not. It’s primarily a research tool and it’s recommended as such by the National MS Society. So, it’s recommended as a tool for clinical trials but it is not recommended as a day to day clinical practice tool. When you go to academic centers, it’s frequently used because they’re academic centers. They’re used to using the tool. They’ve been trained in how to use it correctly and that spills over into clinical practice.

So, they find it useful to follow patients with that tool among other tools. In the community, among community neurologists, it’s much less common to see it used ordinarily.

Phil Nadeau – Cowen and Company

Okay. That’s very helpful. And then my last question is on the patents. You mentioned in the press release that you got a non-final rejection for -- I think it was two of the patents in front of the USPTO. Can you remind us, one, do you have other patents still pending in front of the USPTO? And then, two, what’s next for those that you received the non-final rejection on?

Ron Cohen

I’ll answer the second one first. We do have other patents pending. Those two patents actually are very similar to each other. They were filed at the end of ‘04, ‘05 -- beginning of ‘05. A Non-final rejection is a standard part of the process. That’s why it’s non-final. So, it invites the company within six months of receiving the rejection to come back and argue the case with respect to the specific objections that the patent examiner has raised.

We’re in the process of doing that now which may involve actual discussions with the patent examiner and certainly filing a formal reply. So that work is going to go on over the next several months. This is just another stage in the process.

Phil Nadeau - Cowen and Company

Okay. When you look at all the patents you have to extend the IP around Ampyra, can you give us some idea of what they claim? What are the main elements of the defense?

Ron Cohen

It’s pretty broad. And I think on a call like this, it’s a very detailed sort of discussion. I guess the ‘04-’05 filing in particular it covers uses and aspects of formulation of the drug. It’s hard to go into it beyond that. I think the ‘04-’05 uses are interesting to us because they include our observation from our Phase II trial with regard to dose and the walking improvement which are part of our labeled indications. And that’s something that’s publicly available. SO for those who are really interested, you can access that online.

Phil Nadeau – Cowen and Company

Great. That’s very helpful. Thank you.

Operator

Your next question comes from the line of David Amsellem from Piper Jaffray. Please proceed.

David Amsellem – Piper Jaffray

Hey, thanks. Just a couple. I might have missed this before if you mentioned it but can you say what portion of Ampyra patients have been switched from compounded 4-AP?

Ron Cohen

We cannot. We don’t have that information and we haven’t given it, therefore.

David Amsellem – Piper Jaffray

Okay. Second question on the inventory that you cited, can you talk about how you think about steady state levels and the one month that was cited? Is that how we should be thinking about steady state inventory levels going forward?

Ron Cohen

Overall, the specialty pharmacies in general, we don’t expect them at any time to have more than a month on hand. They manage their inventories very tightly on an ongoing basis. They will adjust their inventories levels on a day to day or week to week basis to meet what they project to be the immediate near-term changes in demand. And overall their goal is to have no more than a month of inventory on hand at any given time.

Obviously, as the launch progresses and we get significantly further out into the launch where things are more stabilized and the trajectory is more stabilized, you would expect the inventories to follow suit. For now, if what we’re seeing is an increased trajectory -- for example, what we saw between first quarter and second quarter, you would expect on a month-to-month basis, they’ll be adjusting their inventories upward to meet the immediate near-term demand, but still with an eye to keeping no more than a month of inventory on hand at any given time.

David Amsellem – Piper Jaffray

Okay. That’s helpful. And then one final question if I may. You’ve talked about your dialogue with managed care. Can you comment on any specific formulary wins on the major plans that you’d like to call out?

Ron Cohen

I can’t comment on them, but I can tell you we’ve been very pleased with our overall reception in our discussions with certainly the major reimbursement parties.

David Amsellem – Piper Jaffray

All right. Thanks.

Operator

Your next question comes from the line of Mark Schoenebaum from ISI. Please proceed.

Navin Jacob – ISI

Hey, guys. It’s actually Navin for Mark. Congrats on the quarter. Just a quick question on inventory. The one month, when you say its one month, is it one month equivalent to June demand or Q2 average demand?

David Lawrence

What we hear back from the specialty pharmacies is that they’re carrying one month or less of inventory.

Navin Jacob – ISI

Okay. That’s fine. And then with regards to the patients that are on Ampyra, are you seeing any use outside of MS?

Ron Cohen

That’s something we can’t really comment on.

Navin Jacob – ISI

Okay.

Ron Cohen

The overwhelming use is certainly in MS.

Navin Jacob – ISI

Great. And finally, when you said you had other patents filed other than the 2004 and 2005, were you referring to the Hatch-Waxman extension? Or is it something else?

Ron Cohen

No. There are actually other patents filed.

Navin Jacob – ISI

Okay. Great. And then if you don’t mind, one last question, what’s your IP on your pipeline products? I know it’s early but --

Ron Cohen

Wow.

Navin Jacob – ISI

Just because IP is such a focus.

Ron Cohen

If everyone else would excuse us for the next hour and a half -- it’s a very detailed answer, right? Many of those patents are, again, available online if you want to -- in fact, most of them would be. I guess the best way to characterize it is that for each of the other three main pipeline products we have, we have substantial patent space including issued and pending patents.

Navin Jacob – ISI

Okay. Thank you much.

Operator

Your next question comes from the line of Michael Yee from RBC. Please proceed.

Michael Yee – RBC

Hey, great. Thanks. Two questions. One on refills. How are payers handling refills? Is it pretty much whatever the doctor and patient agree on? Or is there any restrictions at all? Are you hearing any sort of one-offs? And how do you deal with that? Do you actually go after these guys?

And then secondly, on retention rates, I know you don’t have any sort of percentages or maybe you do, but can you give us a sense of whether you think that’s actually higher than the clinical trials? How are you thinking about retention rates?

Ron Cohen

Yeah. So, second question first. It’s way too early to know anything about retention rates. We’ve just gotten through our first full quarter. So, it’s going to be awhile before we have a good handle on retention rates. With respect to prescribing patterns, clearly it’s all over the map. There are certain prescribers who will prescribe two or three months at a time, some of them a month, some of them less for the first prescription.

In terms of refills, typically, once the patient has gotten enrolled and gotten their first prescription filled, depending on how many refills the prescriber has written for, it goes on semi-automatic pilot where the specialty pharmacy has that in their database and when it’s getting close to time for a refill, they will contact the patient and arrange to ship the refill and so forth. So, the big time sink and effort sink is getting them enrolled and getting all the boxes checked on reimbursement and co-pay assistance and so on up front. Once that’s done in the great majority of cases, we expect it to be fairly automatic.

The one caveat to that is if there are plans that require a follow-up at some point, a couple of months, three months later, a year later, whatever it is, where they have as part of their PA some verification that the drug is working as planned for the patient, then that gets factored in where the physician will now need or the prescriber will now need to satisfy that requirement. As I said, that’s a significant minority of plans. The great majority of plans are not requiring that now and the majority of plans are not requiring that now. There are some plans that are. So it really depends.

Michael Yee – RBC Capital Markets

Okay. Thanks.

Operator

And your next question comes from the line of Josh Schwimmer from Leerink Swann. Please proceed.

Josh Schwimmer – Leerink Swann

Hey. Thanks for taking the question. And sorry to harp on the inventory but I guess depending on how we define inventory and current run rate and one month or less, I guess that kind of get inventory contribution could range anywhere from $5 million to $15 million which is a pretty big range. I’m hoping maybe you can kind of narrow it down or kind of directionally give us a sense where in that range the inventory contribution was? Thanks.

Ron Cohen

Josh, unfortunately there’s nothing more we can tell everyone about this because it’s a moving target. So, what everyone needs to appreciate, again, is that the specialty pharmacies judge the immediate near-term demand that they see coming in and they project internally what they believe their needs are going to be and they order to anticipate that need. They can do so -- they can order on a daily basis if they want. So they can actually do it that finely to adjust their inventory to meet what they see as changing levels of demand either up or down.

So, what they tell us is that at any given time based on the demand they’re seeing their goal is to have a month or less -- in some cases just a few weeks, a couple of weeks of inventory on hand and that it’s a moving target as long as you have a trajectory on your demand. If you had steady state on your demand, we could answer the question pretty easily. But because it’s a trajectory, the answer depends on the angel of the trajectory at any given time.

Josh Schwimmer – Leerink Swann

You’re able to somewhat track the number of patients on drug? Are you able to use your own sense of end user uptick to ballpark that inventory level? Or do you not have that level of granularity?

Ron Cohen

Yeah. We have our own insights into the overall prescriptions out there and so forth but that is not particularly relevant to the individual specialty pharmacies. You’ve got I think now 13 specialty pharmacies in our network. Each one of them will adjust their inventory levels based on the demand that they are seeing. And by the way the mix may change over time, right?

A given specialty pharmacy may have a certain percentage of the demand today. Next month they may have a different percentage of the demand. It depends on which way the demand is going nationwide and how much is being funneled to a given specialty pharmacy by our hub.

Josh Schwimmer – Leerink Swann

So, for this quarter what did you use to estimate the rebate and discount numbers? Should we just kind of take the same ratio as Zanaflex and apply it for this quarter for Ampyra? Or what did you do given the lack of visibility that at least we can get?

David Lawrence

Well, some of the discounts -- there are none at this point and since we’re recording sales for the current quarter that we are not going to be responsible for a discount on, there were no estimates to put in place. The discounts you see for this quarter are certainly going to change going forward as these third-party payer contracts are put in place and we have more of a robust payer mix. That’s really the best information I can give you right now. We don’t know where it will wind up.

Ron Cohen

Yeah. I mean, we share your frustration. It’s just I think what everyone -- what we’re trying to get across to everyone is this is an early stage of a major launch of an innovator drug. It’s just not possible for anyone to project out beyond a day or two at this point where things are going.

And with regard to payer mix, that’s still ahead of us as well, to Dave’s point. So, there is some frustration, we understand, in trying to model it out but these numbers are changing and they’re changing in some cases quite rapidly so that it’s going to be awhile until we get to a steady state where we can come back and say, okay, on average, here’s what it looks like because it’s just changing.

Josh Schwimmer – Leerink Swann

Okay. I appreciate that. Thanks so much.

Operator

You have a follow-up question from Mr. Werber. Please proceed.

Yaron Werber – Citi

Yeah. Hi. Thanks for taking the follow-up. I’m just trying to understand a little bit how we should look at cost of sales all in? I mean, if we look at last year, it was around -- each quarter was around between 20% and 24% on Zanaflex and we’re kind of thinking that Ampyra is about 20%, right? All in with the royalty to Elan.

So, in Q1 and Q2, when I take the blended average of both Zanaflex and Ampyra I get to 18%. So, I’m trying to understand. Is that a good run rate? Or are you still kind of using some of the pre-expense inventory on Ampyra? Or I’m just trying to understand a little bit because it’s lower than I would’ve expected.

David Lawrence

Yeah. You hit it exactly. In the quarter, we received inventory prior to launch which had to be expensed. So, we’re selling through some of that inventory which obviously has an impact on the cost of sales. So, you can think of the 18% all in on inventory and royalties to Elan.

Yaron Werber – Citi

Is that a good run rate from now on or is that too low?

David Lawrence

That’s all the information that I can give you at this point. Again, the first quarter is a bit low because of that expensing of inventory that occurred.

Yaron Werber – Citi

Okay. What’s a good kind of -- How should we think about Zanaflex? Should we continue to model that as 20% to 24% cost of sales?

David Lawrence

I think if you use the historical cost of goods that you’ve seen on Zanaflex that should be a good number to go with.

Yaron Werber – Citi

And then 20% on Ampyra? All in?

David Lawrence

Again, I can’t give you guidance going forward at this point. But --

Yaron Werber – Citi

Okay. Okay. Fair enough. Thank you.

Operator

This concludes the question-and-answer session. I would like now to turn the call over to Dr. Ron for closing remarks.

Ron Cohen

Thank you. And thank you to everyone for participating. Have a great week.

Operator

Ladies and gentlemen, 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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Source: Acorda Therapeutics, Inc. Q2 2010 Earnings Call Transcript
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