Acorda Therapeutics, Inc. (ACOR) CEO Ron Cohen on Q1 2020 Results - Earnings Call Transcript

Acorda Therapeutics, Inc. (NASDAQ:ACOR) Q1 2020 Earnings Conference Call May 5, 2020 4:30 PM ET

Company Participants

Tierney Saccavino - EVP, Corporate Communications

Ron Cohen - Founder, CEO, President & Director

Conference Call Participants

Michael Yee - Jefferies

Alexander Thompson - Stifel, Nicolaus & Company

Turner Kufe - JPMorgan Chase & Co.

Philip Nadeau - Cowen and Company

Andrea Tan - Goldman Sachs Group

Operator

Welcome to the Acorda Therapeutics First Quarter 2020 Update. [Operator Instructions]. Please be advised that this call is being recorded at the company's request. I will now introduce your host for today's call, Tierney Saccavino, Executive Vice President, Corporate Communications at Acorda. Please go ahead.

Tierney Saccavino

Thank you. Good morning or good afternoon, everyone. Before we begin, let me remind you that our presentation will contain forward-looking statements. Detailed disclosures can be found in our SEC filings, which are public, and we encourage you to refer to those filings. I will now pass the call on to our CEO, Ron Cohen.

Ron Cohen

Starting with the COVID-19 pandemic, this has created an unprecedented challenge for businesses throughout the country and the world. Our top priorities are ensuring the health and safety of Acorda's associates and their families while also continuing to serve the Parkinson's disease in multiple sclerosis communities. Most of our associates are now working from home, with the exception of a small number of employees who are needed to keep our manufacturing facility compliant and manage the operations of our Ardsley offices. Our facilities receive regular deep cleaning. Those associates who need to go in, have access to masks, gloves and hand sanitizer. And we also import social distancing.

We haven't had any interruptions in the supply of our medications, and we currently don't know of any circumstances that would cause a disruption. Our field sales and medical teams have adapted rapidly. They're now working virtually to provide education and information to health care professionals and patients. We're seeing a high level of interest in these programs from both groups. Acorda has also made a substantial donation of personal protective equipment or PPE, to support workers at our local hospitals in Boston and New York.

Moving to review of Q1. Revenue for both INBRIJA and AMPYRA at $4.4 million and $20.1 million, respectively, were consistent with our internal projections. And these took into account the traditional impact, the seasonal factors on our business in the first quarter. These include the fact that many patients switch health plans at the beginning of the year with resetting of deductibles and changes in coverage. In addition, Medicare patients, which form a majority of Parkinson's patients are impacted by the initial coverage phase at the beginning of the calendar year, which results in increased out-of-pocket costs for them to obtain their medications. Consistent with this, January ex-factory sales for both products were the lowest for the year to date. And they then increased month-over-month from February through April. So that February was greater than January, March greater than February and April greater than March.

In March, as it became clear that social destining and staying at home would help to slow the spread of the coronavirus, many physicians' offices were also moving to virtual operations and people living with Parkinson's who are an at-risk population were among the first to shelter themselves at home. Independent research has shown an approximately 80% drop in in-person visits beginning at that time, and that was in-person visits to neurologists during the ensuing weeks. Consequently, we saw a decrease in new prescriptions at the last week of March that continued into the first 3 weeks of April, and we have begun to see some recovery in new prescriptions over the last 2 weeks as physicians and patients have been adjusting to the new virtual interactions.

Our fields and customer service teams have moved quickly. They're engaging virtually with physicians and their staffs. They've been providing education and information about how to prescribe through our hub, also ordering samples even without access to the offices. Among our other new initiatives, we've also moved all of our speaker programs, both peer-to-peer and consumer to the virtual platforms. We recently had a virtual consumer speaking program, speaker program, for example, with presentations both by a leading physician and a patient ambassador. It was attended by over 500 attendees.

We believe that these techniques will continue even when the COVID crisis has passed based on the demonstrated power of current technologies to reach both patients and HCPs in large numbers and cost effectively. We also have a team of nurse educators now available to assist INBRIJA patients with questions about the correct way to administer INBRIJA, and we have customer service teams also available to assist INBRIJA and AMPYRA patients with questions about their medications or insurance coverage. Our specialty mail order pharmacy model for dispensing, both INBRIJA and AMPYRA allows patients with Parkinson's and MS to get their medications without having to leave the house or visit a retail pharmacy. We've also launched new tools and services to provide people with Parkinson's with more with more detailed information about how to administer INBRIJA, focusing on the understanding that we developed in 2019 of the need for supplementary training, particularly with respect to cough. These include a new Helpful Hints guide, which is now available both on our website and in print and an updated video, how-to video that takes patients through the administration process step by step. Our nurse educators are also connecting with every new INBRIJA patient to ensure that they're properly trained.

As we announced in our fourth quarter call, our top priority this year is to reach people with Parkinson's, to educate them about INBRIJA. In the first quarter, we initiated additional programs to reach people with Parkinson's through a variety of online venues. Our research indicates that when patients ask their health providers about INBRIJA, about 2/3 of them receive a prescription. Our initial goal was to deliver at least one digital ad or impression per person per day, specifically to people who are self-identified as members of the Parkinson's community. Through the first quarter, we well exceeded this goal, delivering approximately 48 million impressions. This graph shows the increases in metrics between the first quarter and Q4 2019 as well as the breakdown between banner and Facebook ads. We generated 113,000 visits to the INBRIJA consumer website in the first quarter compared to 89,000 in Q4.

We're encouraged that these metrics have continued to increase in April, and a portion of these programs are also tied to AI machine learning engines. These are helping us both to measure and optimize the impact of these ads. This is an iterative process. We expect increasing impact over time, specifically over the next few months.

So moving to our first quarter 2020 financial performance and 2020 guidance. This table outlines key financials for the year, which you'll find addressed in detail in our press release. We ended the first quarter with cash, cash equivalents, investments and restricted cash of $126.3 million. In the first quarter, we recorded a $26.5 million change in the fair value of a derivative liability, which is contained in the 2024 convertible notes. Change was a result of a reduction in the fair value of the liability. This is a conversion feature of the new notes that will require reevaluation on a quarterly basis.

AMPYRA era is an established franchise, and our revenue projections are based primarily on the rate of refills and persistence, significantly more than on new prescriptions. Therefore, we remain confident in our full year expectations for AMPYRA and are reiterating our revenue guidance for 2020 of $85 million to $110 million. INBRIJA, which was launched last year, is still expanding its pace of patients. Its revenues are driven significantly more than AMPYRA's by growth in new prescriptions. As a result of the COVID-19 stay-at-home orders, widespread decrease in physician office visits, we don't have visibility into how changes in patient and physician behavior may impact new prescription starts over the remainder of the year. And therefore, we're withdrawing our 2020 guidance. We're also reiterating our guidance for operating expenses for 2020, which are expected to be $170 million to $180 million. As a reminder, our operating expenses in 2019 were $252 million. And so we've made dramatic reductions in our cost structure, and we are continuing to look for ways to reduce costs further.

We believe that INBRIJA will become a standard of care for the treatment of Parkinson's disease, and we continue to expect INBRIJA peak sales of $300 million to $500 million.

Looking ahead, our top priorities for 2020 are to accelerate INBRIJA's growth using all of the strategies we reviewed earlier, continue to support AMPYRA as it continues to generate valuable cash and is still an important medication for the MS community, and to drive long-term value for shareholders, managing our cost structure and strengthening our balance sheet.

We'll now open the call for your questions. Operator.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question comes from Michael Yee of Jefferies.

Michael Yee

Ron, hopefully, you can hear me okay on this new phone.

Ron Cohen

Mike, I can hear you.

Michael Yee

Two questions in the second here. One is, how do you think about 2020 trends for INBRIJA? You talked about how you thought things might recover a little bit. So maybe just talk about the extent you can with your guidance, how you think about Q2 and Q3 and Q4?

And the second question actually is digging a little deeper into it, do you think that revenue numbers are more of a patient awareness issue? A doctor awareness issue? Or insurance reimbursement issue? Maybe just talk to those 2 things, which of those things are more of the bottleneck? Just like with all these direct advertising and digital ads, that was actually a good thing. So is it something else?

Ron Cohen

Well, so yes, so let me tackle that one by one. So 2020 trends, now it's difficult right now in light of the sort of the curveball we've all been thrown with COVID, to project into the rest of the year, which is why we felt we really had to withdraw the guidance on INBRIJA. We are pleased with the patterns that I mentioned, where we've seen both for AMPYRA and INBRIJA, increased sales month-over-month in January through April. But remember, most of that doesn't account for the impact on new prescriptions that we began to see in the last week of March, and that persisted for the first three weeks of April. And then the last 2 weeks, we've seen some recovery. It's not back to where it was, but there's clearly been recovery over the last two weeks and having said that, that's not a long enough period for us to really project.

So we're going to have to follow it week-by-week, month-by-month, along with the more global trends in terms of physicians' offices opening up, more patients getting used to the telemedicine regime and getting back to more normal patterns in that sense. So we're going to be watching that as we go along. And that feeds into your other question. We mentioned, I think on the last call, the last quarterly call that we identified that the key issue right now -- all 3 issues you mentioned are part of the puzzle, right? So physicians, not -- physician awareness and willingness to prescribe a new product, insurance issues and then patient awareness and patient demand. And what we did last year was we focused largely on insurance and physician awareness. And by the end of the year, we really had made a lot of inroads on both. We had something like 75% unaided awareness of INBRIJA among our target physicians, over 90%. I think it was 92%, if I'm remembering correctly, aided awareness of INBRIJA. So the awareness was there, and we did, I think, a very good job with that.

Insurance, we got up to well over -- we got over 70% commercial formulary coverage, which was great. We were at 25% of Medicare coverage. And it's too soon to tell where we're going to be because Medicare makes its decisions on next year's coverage about mid year. But we've already seen some more flexibility through the COVID crisis even for patients who are not on formulary or plans that are not on formulary. There's been more flexibility in allowing patients to get to drug. So those trends so far have been positive.

What we identified by the end of the year was that the big push needed to be on patients. The research clearly showed that when patients go and ask the doctor about INBRIJA, about 2/3 of the time, they get a prescription. And what we were hearing from the doctors and elsewhere was there's just so much going on at every visit and so many different issues that they're dealing with, even if they're aware of INBRIJA, they're not necessarily thinking about it top of mind for the 15 or 20 minutes that they have at a given visit. And if they don't give a prescription, the patient goes out, they don't come back for another 3 to 5 -- 4, 5 months. So it's critical in our view that we drive patient awareness and the intent of the patient to talk to their doctors and ask them about INBRIJA. So that's where all of these digital and other initiatives come in. And we've been very pleased with what we've been seeing so far there.

Now having said that, our initial projection on that was that it would take a couple of quarters of all of those programs before we could really begin to get a handle on the impact that they were having on prescriptions. Given what's been going on with COVID, that's probably being pushed out probably by another quarter or so is my guess. But the trends are -- we're encouraged by what we're seeing happen with these digital programs. We can't yet tie it specifically to the output that we're mostly interested in, which is patients being given the opportunity to trial INBRIJA. But we'll be getting that information over the coming weeks and few months.

Operator

Your next question comes from Paul Matteis with Stifel.

Alexander Thompson

This is Alex on for Paul. Just a quick follow-up on the last series of questions. I just wanted to sort of understand. It sounds like Q2 -- it's a little bit early, obviously, but it sounds like you expect Q2 to probably have the largest impact. Is that at least consistent qualitatively? Have you been able to see sort of a little bit more granular data on new starts? I was hoping to hear a little bit more.

Ron Cohen

I'm Sorry.

Alexander Thompson

Sorry, can you hear me?

Ron Cohen

Yes, I'm sorry. You got a little garbled on my phone. I'm sorry to make you do it. Could you start the question again?

Alexander Thompson

Yes. No problem. Yes. So I just had sort of a quick follow-up, hoping for a little bit more color on the back of Michael's question. It sounds like what you're seeing in the data so far for Q2, it looks like maybe there's some rebounds. Can you provide any more color, I guess, around are you seeing more new starts in areas that are opening a little bit more? Do you expect sort of Q2 to be that sort of peak-impact quarter, at least looking forward into 2020?

Ron Cohen

It's way too soon to tell. I mean we have -- as I mentioned, it's only been a couple of weeks that we've begun to see a reversal and an upward trend again on new prescriptions. So it's early to tell on that. So I wouldn't project -- I would -- honestly, I would not -- I would hope that second quarter is not the peak that we're going to see. I would expect that as we get further and further into a resolution of the whole COVID crisis and get back to more normal operations, physicians' offices, and in the field and so forth, that quarter-by-quarter, I would expect to see continued growth through the rest of the year. And in particular, back to Michael's question, we're pretty excited about these digital initiatives that we've launched. The fact that we were able to get 500 patients to spend over an hour on a Zoom chat with a KOL and a patient ambassador who was taking INBRIJA. That was pretty compelling. And the fact that we've had 48 million impressions within an audience that is self-identified as having Parkinson's or being close to people who have Parkinson's is also very encouraging. And having said all that, it's -- the countercurrent is what's been going on with COVID-19. So we're going to need a little more time to sort it out. And I expect that by next quarter, we should have more clarity and more to say about it.

Operator

Your next question comes from Cory Kasimov with JPMorgan.

Turner Kufe

This is Turner on for Cory. Just one quick one. You described some trends from INBRIJA in March and through April. I'm just curious how sales stacked up relative to your expectations earlier in the year, particularly in January, February, prior to many of the social distancing and sheltering mandates were in place.

Ron Cohen

Yes. So I think I just touched on in my presentation, we actually hit our internal projections. So the performance in the first quarter was consistent with our internal projections and expectations for the first quarter, both for INBRIJA and AMPYRA. And that's based on a lot of experience that we've had over the years in the neuro specialty market, engaging what the patterns tend to be. The first quarter, in our experience, has always been -- taken a hit, as it were. And it's primarily related to the massive changes in insurance coverage, in resetting of deductibles, resetting of the initial coverage phase and doughnut hole, so that patient out-of-pocket costs go up. And you're just seeing more patients being ginger about filling their prescriptions. That tends to adjust itself as you get through the first quarter and then into beyond. And consistent with that, as I mentioned, very consistent with that projection was that we would see continued improvement throughout the quarter, which we did. February better than March -- better than January, March better than February and now April better than March.

Operator

Your next question comes from Phil Nadeau with Cowen and Company.

Philip Nadeau

Ron, a follow-up to the one you just answered. You mentioned that, let's say, your internal projections based on all your experience that you've had with AMPYRA over the years and Q1 disruptions. Based on that experience, can you give us some magnitude of the dollar impact in Q1 for INBRIJA and AMPYRA? So if you were able to back out the seasonal factors, ex COVID, excluding COVID, what approximately would be the impact of the seasonal factors on reported revenue?

Ron Cohen

The impact of the seasonal factors was by far the greatest part of it because the impact that we saw in terms of new prescription impact really didn't hit until the last week of March. So you've got a week or so out of the whole quarter, where you saw that. And that would not have substantially impacted sales because it takes more time than that to get to the prescription and so forth. So I would say that almost all of what we saw in the first quarter was related to seasonal factors rather than COVID. We would not have expected to see the impact of COVID until April.

Philip Nadeau

And would the baseline be flat quarter-over-quarter sales for both products in the absence of the seasonal factors, or are there anything -- any other changes that we should take into account?

Ron Cohen

You know what, I don't know how to answer that, I don't have the specific numbers. Obviously, you can look at our sales numbers in the fourth quarter and compare it to the first quarter. And I understand what you're saying, how do you gauge the impact of the seasonal factors. I mean I suppose we could go back -- you can go back and look over the last few years for AMPYRA just as a proxy and look at what those factors look like over time because typically -- but doesn't -- that only takes you so far. So I don't have a specific answer there, Phil, other than to say qualitatively that we expect a decline in first quarter actual demand every year because of the -- mostly the insurance factors that we talked about. And then that picks up as people get their new plans, get online and you work out the new insurance issues and get them back on. They get through their deductibles. They get through their initial coverage, and in some cases, the doughnut hole. So all that factors in. But at least in our specialty neuro areas, we just see that decline occur in the first quarter. So that's the best I can tell you.

Philip Nadeau

Okay. That makes sense. And then second question is on reimbursement, particularly in the Medicare portion of the population. In the past, you've suggested it can be hard to have physicians write a script when there is a reasonable likelihood it's going to be denied because of reimbursement access issues. Do you have a sense of whether that's still -- how often that's happening in the marketplace? And when do you think the Medicare reimbursement rates will be sufficient so that physicians will write freely for INBRIJA?

Ron Cohen

What we're finding is it's really a physician by physician basis, and so it's hard to make a global claim. Our teams are out there constantly with the physicians, educating them and their office staffs about what their coverage universe looks like in their specific geography and their specific practice, what their -- what percent of Medicare is covered, what percent they're going to have to do medical exceptions and what they can expect. I can say that globally, overall, by the end of last year, it was night and day compared to when we launched in the beginning of March because the first few months, we heard nothing but complaints. It was almost universal complaints. Doctors throwing up their hands, not wanting to touch it because it was being rejected constantly. And by the end of the year, I would say we still heard some of that, but it was a minority voice. Because the majority of physicians and offices we were calling on had gotten it. They got used to it, they understood it.

Now it doesn't mean that they were all delighted with it. No one's delighted with our system. It's still an impediment. It's still an impediment to some physicians to write, right? Because they just -- they know that they're letting themselves in for doing all that extra work. But as we go forward, our goal is to keep lowering the prior threshold, which will make their process easier. We continue to work with them very closely to navigate every obstacle. And I will say that maybe the best metric we have for that now is that the conversion of part D prescriptions right now for INBRIJA is similar to the conversion rates for commercial. And just to put a finer point on it, that means that in commercial, where we are able to pay down the copays to $10, we're still seeing the same conversion rate in part D where we're not able to pay down the copays. And that says that people are being educated as to the value of the product. They're navigating the hurdles better. And even in Medicare, it's working much better than it did in the beginning of last year.

Operator

[Operator Instructions]. Your next question comes from Salveen Richter with Goldman Sachs.

Andrea Tan

This is Andrea on for Salveen. Maybe a question on the patients that are on INBRIJA right now. Could you speak to what the refill rate has been? And if it's dependent on the usage profile for the patient?

Ron Cohen

I'm sorry. Say -- the patients who have been on INBRIJA and the refill rate?

Andrea Tan

Yes. For patients that are currently on INBRIJA or they were, what the refill rate is? And if it's dependent on what their usage profile is?

Ron Cohen

Yes. So what we can say is that persistency rates, we've shown various types of persistency rates before on this. But overall, what we've said is that the cohort of patients who takes more than 2 doses or 2 or more doses a day is about 70% -- I'm sorry, 72% of those patients are persistent out to a year.

Andrea Tan

Got it. So that's still consistent from the last time?

Ron Cohen

Yes. Yes. So again, the people who like it and getting benefit, they stay on it, is the lesson there.

Andrea Tan

For the patients that are, I guess, maybe not -- they are opting not to stay on it, are they -- do you have any color on what the reason is for the discontinuation?

Ron Cohen

Yes. The -- if you go back to our Q4 call, where we went into a fair amount of detail on the learnings that we had from last year from the first 9 months of launch and that we're now addressing. So one of the key learnings was that cost was a bigger impediment than we had expected based on the clinical trial data. So the clinical trial data consistently in Phase II and -- in the 1-year open-label study, consistently, we were seeing about a 15% rate of cough and a very low dropout rate related to cough. It was less than 2% related to cough.

So going into the launch, we didn't anticipate that it would be a major issue. What we learned by just going out in the field and getting all the feedback from patients and physicians, was that it's a bigger issue than we thought. And in retrospect, we realized that during the clinical trials, the -- these people we were seeing the top centers, they were being handheld every step of the way when they had cough, the centers were adapting them to it and so on. That's not what happens in the real world. So it gave us really a full sense of what the issue was. So we believe that a fair number of patients get the drug at home or even in the office, they try it, they cough, some of them have a really strong cough reaction because they're inhaling the drug very quickly and very hard. And that is in part related to how we were educating them to do it. It's -- if you look at our video, if you look at the way they were being taught to do it, it was to take a deep comfortable breath. And what they were hearing was deep. And so they would take this giant breath and wind up with a giant cough.

So what we've learned from the centers that already had developed best practices and were telling us they had no problem with cough, was that they were telling patients that to go more easily. All you have to do is take a gentle breath, and as long as you're hearing the capsule wearing in the device, which doesn't take much -- really just a regular tidal volume will do that, you can get in gently. And the instructions for use actually allow them to take more than 1 breath, if they need to. So we've adjusted all of our training, the video, the Helpful Hints and so on. And the way in which we're using our nurse educators to educate patients, the way we're educating the practices now, all of that has started as of earlier this year in getting them to a better experience right upfront.

And we will be gauging that over the course of the year. It's our belief that it's probable that we're going to have more people staying on once we get that training embedded. Again, our metrics are going to be delayed a bit just because of the -- what's going on with COVID in the end of the first quarter and in the second quarter. And over time, we're going to be able to measure that, and we'll report when we get on these calls. By the way, I would say about 30% of the patients that we track who've gotten prescriptions, about 30% are taking it 2x or more a day. And that, as I said, our persistency on those patients is about 72% by one year out.

Operator

There are no further questions at this time.

Ron Cohen

Okay. Tierney?

Tierney Saccavino

Okay. Thank you, everybody. This concludes the call. Have a good day, and stay healthy.

Ron Cohen

Thanks, everyone. Bye now.

Operator

Thank you for participating in today's conference. You may now disconnect.