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Acorda Therapeutics, Inc. (NASDAQ:ACOR)

Q2 2008 Earnings Call Transcript

August 5, 2008 8:30 am ET

Executives

Jeff Macdonald – Director, Corporate Communications

Ron Cohen – President and CEO

David Lawrence – CFO

Andy Blight – Chief Scientific Officer

Analysts

Joel Sendek – Lazard Capital Markets

Matt Roden – JPMorgan

Ram Selvaraju – Rodman & Renshaw

Larry Neibor – Baird

Eric Chen [ph] – Banc of America Securities

Caroline Stewart – Piper Jaffray

Operator

Thank you for holding. Welcome to the Acorda Therapeutics second quarter 2008 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, Jeff Macdonald, Director of Corporate Communications at Acorda Therapeutics. Please go ahead.

Jeff Macdonald

Thanks, Eric. Good morning, everyone, and welcome. With me today to discuss our second quarter financial results, which we recorded this morning are Dr. Ron Cohen, our President and Chief Financial [ph] Officer, and Mr. 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 historically facts regarding management’s expectations, beliefs, goals, plans, or prospects should be considered forward-looking.

These statements are subject to risks and uncertainties that would cause actual results to differ materially, including the 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, the ability to obtain additional financing to support Acorda Therapeutics' operations and unfavorable results from its 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 its 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, Jeff. Welcome everyone. Today I’ll provide an update on Fampridine-SR and Zanaflex Capsules, and then I’ll turn the call over to Dave who will provide the financial summary. And we’ll then open the call for your questions.

In June, we were pleased to announce successful results of our second Phase 3 study of Fampridine-SR in MS. In that study, a significantly greater portion of people taking Fampridine-SR in the trial had a consistent improvement in walking speed compared to people taking placebo. 42.9% for Fampridine-SR versus 9.3% for placebo as measured by the Timed 25-foot Walk, and this was statistically significant with the p-value less than 0.0001. Consistent improvement in walking speed was the primary endpoint of the study, as outlined in the SPA for the study.

Previous studies had validated this endpoint for clinical meaningfulness and showed the Timed Walk responders also had statistically significant improvements in three different measures of clinical impact, including a 12-item MS Walking Scale and both Subject and Clinician Global Impressions. The studies only prospectively define secondary outcome measure, leg strength showed a statistically significant increase in the Fampridine-SR Timed Walk responders compared to placebo at a p-value of 0.028. These results were consistent with those of the previous Fampridine-SR Phase 3 clinical trial, which was also conducted under an SPA.

I’m pleased to report that an abstract on the most recently completed study has been accepted as a late breaker at the World Congress on Treatment and Research in Multiple Sclerosis that will be held in September in Montreal. We expect to file our NDA in the first quarter of 2009. Earlier this year, we submitted a request to FDA for Fast Track designation for Fampridine-SR, which the FDA did not grant.

We plan to request consideration for priority review at the time that we file our NDA and we will submit additional data analyses at that time in support of this request. Fast Track provides for additional interactions with the FDA during drug development and the option of submitting an NDA in sections rather than all components simultaneously, where priority review provides for a six-month rather than a ten-month PDUFA review period for an NDA.

As we previously announced, we’ve begun to meet with regulatory authorities in several EU member states to obtain their initial feedback on Fampridine-SR, and we are conducting market and reimbursement analyses in the EU as well. These initiatives will inform our commercial strategy for Fampridine-SR in Europe, which we expect to determine by the end of the year.

Moving to Zanaflex, our Zanaflex business continued to perform well this quarter, generating a combined $13.1 in gross sales for the Capsules and tablets, and combined shipments to wholesalers of $16 million. We expect the Zanaflex commercial operations to be net cash flow positive this year.

The Zanaflex business has been integral to our strategy in allowing us to fund the development of an outstanding sales and marketing operation, focusing on our target prescribers, while mitigating financial risk. This in turn has positioned us to launch Fampridine-SR in the US if it’s approved as well as other products that may be approved in the future.

Now I’ll turn the call over to Dave for a financial summary of the quarter.

David Lawrence

Thanks, Ron. The company reported a net loss of $18.8 million for the quarter ended June 30, 2008 or $0.58 per diluted common share compared to a net loss of $8.2 million or $0.33 per diluted common share for the same quarter in 2007. Total operating expenses for the quarter ended June 30, 2008 were $25.6 million. Research and development expenses were $8.1 million, which includes clinical trial costs related to our Fampridine-SR trial, NDA preparation costs, and development of our preclinical pipeline products.

Sales, general and administrative expenses for the quarter ended June 30, 2008 were $17.6 million and included expenses related to Zanaflex promotional activities and Fampridine-SR pre-launch activities. Other expense included a $1.4 million out-of-period adjustments made during the second quarter of 2008. This adjustment corrected an error identified in the previously recorded effective interest expense related to the November 2006 amended revenue interest assignment agreement with an affiliate of Paul Capital Healthcare. This out-of-period non-cash adjustment will not increase the total interest expense associated with this agreement, but has corrected its timing of recognition.

As of June 30, 2008, Acorda held cash, cash equivalents, and short-term investments of $149 million. We expect this to be sufficient to fund the company’s operations into the fourth quarter of 2009 based on our current projected revenue and spending levels.

I’ll now turn the call back over to Ron.

Ron Cohen

Thanks, Dave. We’ll now open the call for your questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Joel Sendek – Lazard Capital Markets

Hi, thanks. I have a question about what you put in the press release about the extension studies. And in particular, can you let us know if you have the data, what percentage of those on the extension studies are the Walk responders?

Ron Cohen

We don’t have that specifically, Joel, although I can tell you that the substantial majority of the people in the extension studies really by definition are not the people who are the Fampridine Timed Walk responders in the double-blind studies. Over 90% of the people in the double-blind studies, which includes the 201, the 202, the 203, 204 studies. Over 90% of those people wound up going into the extension studies. And if you just look, you’ll find that the great majority of the people in those studies were either placebo patients or Fampridine Walking non-responders. So it’s a mixture of people in the extension studies.

Joel Sendek – Lazard Capital Markets

And then – okay. And then do you know why they go off study?

Ron Cohen

It’s a mixture of reasons. It could be perceived lack of efficacy, it could be adverse events, and it could be other, which is a broad category. For example, people move and they go to – they just move to another state. They are no longer near the center, various sorts of administrative issues.

Joel Sendek – Lazard Capital Markets

Okay. All right. Thanks a lot.

Ron Cohen

Sure.

Operator

Your next question comes from the line of Geoff Meacham with JPMorgan. Please proceed.

Matt Roden – JPMorgan

Hi, this is Matt in for Geoff. Can you hear me?

Ron Cohen

Yes. Hi, Matt.

Matt Roden – JPMorgan

Hi. So, I also have a question on the long-term extensions here. Firstly, other than gaining the benefit of Fampridine in mobility, is there any other incentive for staying on study? And then, secondly, is there any update on the safety from the long-term extensions?

Ron Cohen

So, to your first question, the stipulation in the extension study is that patients may stay in the study unless there are adverse events that are mitigating where the physician and/or the patient feel that they can’t tolerate it and need to come off, or there is a lack of efficacy. So if they feel – if the physician and the patient feel that they are continuing to benefit and there are no mitigating adverse events, they are permitted to stay on the study. Does that answer your first part of your question, Matt?

Matt Roden – JPMorgan

Yes, I think so. And then, the follow-ups were –

Ron Cohen

Right. And then on the safety, what we’ve said and continue to say is that we now have – I have to check my own press release. I think it says over 1,200 patient years. Is that right? Yes. So, over 1,200 patient years of exposure at the 10-milligram twice-a-day dose in MS patients. And I think that the key issue in safety that people have been focusing on is the seizure issue. The seizure rate remains within the expected historical rates for MS patients on placebo and long-term studies that are historical.

Matt Roden – JPMorgan

Okay. And then the last follow-up is, are you collecting any additional efficacy information on these patients in the extension studies? In other words, is there any way to know whether or not there is a change in effect size over time?

Ron Cohen

Yes. I’m going to let – Andy Blight, our Chief Scientific Officer, is here. And I’m going to let him respond.

Andy Blight

Yes. We are collecting some potential efficacy data though because this is an open-label, uncontrolled study, we don’t really have a placebo comparator. So what we can conclude from that efficacy data is limited, but it’s directional, I guess you could say. So we will be looking at that data as part of the NDA in terms of the signals that it may provide, though of course, without a placebo control group, you are very limited in what you can say.

Matt Roden – JPMorgan

Okay. Thanks guys.

Operator

Your next question comes from the line of Ram Selvaraju with Rodman & Renshaw. Please proceed.

Ram Selvaraju – Rodman & Renshaw

Hi, thanks very much for taking my question. Would it be possible for you to comment at this time regarding the likelihood of achieving priority review?

Ron Cohen

Obviously, we can’t speculate on regulatory processes. What we can say is that we filed for priority review at the time that we filed the NDA. And we’ll submit the formal request with the appropriate data analysis at that time.

Ram Selvaraju – Rodman & Renshaw

Okay. And with respect to the development of the pipeline, obviously you reported preclinical data for the neuregulin product in a cardiac model. Does this signal a change in strategic deployment of this asset away from addressing the remyelination in models of multiple sclerosis? And if so, could you say a little bit more about what the plan is for that product candidate?

Ron Cohen

Yes. So, what we’ve said is that we are in the process of GMP scale-up on the manufacture so that we can do the required preclinical – excuse me, the required tox work that we'll need to do with clinical grade material and then file our IND by late 2009. The data on the neuregulins are quite interesting. They span both neurological, potential neurological applications as well as cardiac applications. And so we are following the science, as it were. We are still very much focused on being a neurology company, a neurological repair company, but obviously we’re not going to ignore potential significant application of the neuregulins. So we’re still interested in the neurological applications, but we are also interested in exploring how the asset might have applications in cardiology.

Ram Selvaraju – Rodman & Renshaw

And just one more question. With respect to the European regulatory pathway for Fampridine-SR, can you comment on any potential interactions you’ve had with the EMEA at this time?

Ron Cohen

We can say that we have been holding meetings and have additional meetings to hold, and that when we have something concrete that we can talk about, we will report on that.

Ram Selvaraju – Rodman & Renshaw

Do you expect at this stage to look at potentially filing for approval of Fampridine-SR in Europe at around the same time or within the short period of time after you file the NDA for Fampridine-SR in the US?

Ron Cohen

Yes. Again, Ram, that’s going to rely on our meetings with the regulatory authorities in the member states and completing that process. And when we have completed it, we’ll have more that we can say with respect to that question.

Ram Selvaraju – Rodman & Renshaw

Okay. Just one other thing. Does the EMEA have anything approaching priority review or something like that, the way the FDA does?

Ron Cohen

Not to my knowledge, but I’m not an expert on that. I would have to get our regulatory guys in. So, I’m sorry. To my knowledge, no.

Ram Selvaraju – Rodman & Renshaw

Okay, thank you.

Operator

(Operator instructions) Next question comes from the line of Larry Neibor with Baird. Please proceed.

Larry Neibor – Baird

Thank you. Good morning.

Ron Cohen

Good morning, Larry.

Larry Neibor – Baird

In the extension studies, the declining percentage of patients remaining on study over time, are you concerned that you are losing patients from these studies, or could you give us a breakdown of the reasons why people are leaving by percentages? Earlier you mentioned adverse events or lack of efficacy, or some other reason. I was wondering if you could give us –

Ron Cohen

Yes. Absolutely, Larry. We are quite encouraged by the profile that we’re seeing. If you notice that even after an average of – I need to look at our own press release, but I think it was something around four years. In our longest running study, it’s been running – the patients have been on treatment between 3.8 and 4.4 years. And 57% of the people who came in 3.8 to 4.4 years ago are still on study. And when you consider the difficulty historically of keeping people on studies for years, we’re quite encouraged that 57% are still taking the drug at that point. In the second study, we have 269 patients who enrolled. At this point, they have been on study between 1.8 to 2.6 years and three-quarters of them are still taking drug after that period of time. We think that considering the fact that these patients need to continue to actually be part of the study, there are requirements, there are visits, there are tests that are done. There is a commitment on the part of the patient in order to do that, we think that that’s pretty encouraging. And if you look at the Timed Walk responder rate in our double-blind studies, that ranged from 35% to 43%, and yet, 57% are still on study after 3.8 to 4.4 years.

Larry Neibor – Baird

What benefit do you think these patients are seeing if it’s not Timed Walk response?

Ron Cohen

Well, we can’t speculate as to that. What I can tell you is that in our own double-blind studies, we have evidence of increased leg strength. There is some evidence of possibly a spasticity effect. And certainly anecdotally in the literature there are other comments with respect to that. Those are things that, obviously, if we wanted to explore, we would need to design specific double-blind studies to test each of those areas.

Larry Neibor – Baird

Do you plan on doing that in the future?

Ron Cohen

We have an ongoing planning effort with regard to other studies that we would do looking at extensions of the indications in the label.

Larry Neibor – Baird

Final question, have you given any further thought to pricing, or have you come to any decisions on that?

Ron Cohen

We have not come to any decisions. Our research is ongoing in full flower. We have a number of groups working on it doing our – everything that we would do for pricing research, including assessing the patient community, the prescribers, payers, and the entire landscape. So we don’t have an answer yet, except that we have said that we believe that the range between $5,000 to $10,000 is a rational one to explore. And that’s really where we are focusing the bulk of our research.

Larry Neibor – Baird

Great. Thank you.

Operator

Your next question comes from the line of William Ho with Banc of America Securities. Please proceed.

Eric Chen – Banc of America Securities

Hi, this is Eric Chen [ph], Will’s associate calling for him. We were just wondering why you chose the Congress on Treatment and Research in MS to present the Phase 3 data as opposed to maybe AAN next year, because that could potentially provide more support to the stock right before launch?

Ron Cohen

Well, our desire and I think the best interests of this are to do it as soon as possible to present data in a recognized scientific forum. The World Congress is the leading meeting for MS in the world and combines both the European and the American MS treatment community. So we actually thought it was a good opportunity to present, and we’re delighted that we’ll be able to be there. In terms of future, our intent is to submit all of our studies for publication, and we would expect to submit the 204 study to a peer review journal as well. So hopefully we can get that out later on in more complete printed form.

Eric Chen – Banc of America Securities

All right. Great. And we were also – we would like to know if you could give us any more clarity as to why the FDA didn’t grant Fast Track?

Ron Cohen

The FDA stated that under that our application did not demonstrate that Fampridine-SR addressed an unmet medical need under the criteria for Fast Track designation. So – but our focus is – frankly, that would have been nice to have, the Fast Track. At the time we applied for it, we thought, at this point most if not all the potential benefits are really no longer relevant, and we still expect to file the NDA in the first quarter of ’09 as scheduled. So our focus is really the priority review application, which as I said will be filed at the time of the NDA.

Eric Chen – Banc of America Securities

Sure. All right. Great. Thanks guys.

Operator

Your next question comes from the line of Caroline Stewart with Piper Jaffray. Please proceed.

Caroline Stewart – Piper Jaffray

Good morning. Just a really quick question. I know you mentioned before that in anticipation of the launch you'd be building up kind of the sales force and of course doing a lot of kind of pre-market – pre-launch marketing type activities. I just wanted to get an update on that, if there was any more detail on that?

Ron Cohen

Caroline, maybe you can help me understand, more detail on the pre-launch activities?

Caroline Stewart – Piper Jaffray

Yes, just kind of what kind of – I know you were sponsoring the MS Walk, but what other kind of activities you’re trying to raise awareness of Fampridine and the fact that it will be coming out to market?

Ron Cohen

Yes. We have – well, obviously we can’t promote to Fampridine specifically prior to an approval. But what we are doing is educating on mobility issues, on walking issues for the community. So, for example, we co-sponsored with the National MS Society a Harris poll that we released earlier this year that looked at the extent of walking disability in the MS community, what it meant, how it was handled. One of the things we discovered that was perhaps most interesting was that a large number of patients don’t bring it up with their physicians either because they are embarrassed or because they feel that by talking about it, it’s admitting that they are disabled and possibly facing a wheelchair down the road. So there are some very serious emotional issues tied with that. So, a good part of our program is educating the physicians and other caregivers to raise the topic of mobility and to talk about what they can do about mobility for patients, and also for patients to be more aware that they can discuss this with their caregivers. As you mentioned, we’re the first national sponsor last year of the MS walks and we will continue to be doing that and actually ramping up that activity next year. We also have websites that we have launched. One for community awareness, MS patient community awareness; the other one for the caregivers, physicians, nurses and soon. You might want to check out the site iwalkbecause.org, which is our community outreach site for walking and mobility issues in MS.

Caroline Stewart – Piper Jaffray

Okay, thanks.

Operator

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

Ron Cohen

Thank you everyone for joining us today. This concludes our call. And have a good week.

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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Source: Acorda Therapeutics, Inc. Q2 2008 Earnings Call Transcript
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