Acorda Therapeutics, Inc. (NASDAQ:ACOR) Q4 2022 Earnings Call Transcript

Acorda Therapeutics, Inc. (NASDAQ:ACOR) Q4 2022 Earnings Call Transcript March 10, 2023

Operator: Welcome to the Acorda Therapeutics Fourth Quarter and Year-End 2022 Financial and Business Update. 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, at Acorda. Tierney, please go ahead.

Tierney Saccavino : Thank you, Emily, and good morning, everyone. So 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. Today, during the Q&A, we will first take calls from our analysts, and then we will take questions that other investors have written in when they have registered for the call. I’ll now pass the call over to our CEO, Ron Cohen. Ron?

Ron Cohen : Thanks, Tierney. Good morning, everyone. Diving right in, in 2022, we achieved a stream of business successes, particularly in the latter 3 quarters of the year that all increased shareholder value. Despite an unusually challenging first quarter that severely impacted INBRIJA sales, which we believe was related to the COVID Omicron surge. The quarter delivered strong financial and operational performance. We met our financial guidance for AMPYRA and INBRIJA U.S. net sales and also for operating expenses although we were not cash flow neutral in Q4. We significantly lowered the trajectory of our cash burn and we expect to be cash flow neutral or positive for 2023. Additional successes included closing an agreement with Biopas, to commercialize INBRIJA in the 9 largest Latin American countries.

The launch of INBRIJA by Esteve in Germany and the licensing of our clinical stage asset, Nepicastat to Asieris for $500,000 upfront plus up to $7 million in regulatory milestones plus royalties on sales of commercialized products. We received an award of $18.3 million in our AMPYRA arbitration with Alkermes that also resulted in a marked reduction of our cost of goods going forward. We expect to save $10 million to $12 million in these costs in 2023 alone. And we renegotiated our agreements with Catalyst, which we expect to substantially reduce our cost of goods for INBRIJA going forward. And in addition, we obtained a waiver of our $27 million in Finland loans. And so far in the new year, we’ve received an extension from NASDAQ to June 20, 2023, to bring the company’s share price back into compliance with NASDAQ listing requirements, thus avoiding having to implement a reverse stock split.

And we just announced that Esteve has also launched in INBRIJA in February in Spain. So moving to INBRIJA. INBRIJA, U.S. net sales for the full year 2022 were $28 million. That was a 5.6% decrease from 2021 and fourth quarter U.S. net sales were $9 million, a 13.1% decrease over Q4 2021. But a 146% increase over the first quarter of 2022, and I’ll discuss this in more detail in the next 3 slides. So you see here the pattern of net sales each quarter since launch. Overall, the trend repeats itself each year. Sales always dip in the first quarter as a result of insurance deductibles resetting and Q4 buy-in by the specialty pharmacies and then sales increased steadily during the year. However, sales dropped far more in Q1 2022 than in the prior first quarters of the launch.

And we believe that this excessive drop was primarily related to the COVID Omicron surge that occurred in end of Q4 and through Q1 2022, that was by far the largest surge of the pandemic. However, sales recovered very well during the year. And as I noted, Q4 sales were 146% greater than Q1. We saw a similar pattern in this next slide in total prescriptions or TRx, which dropped by an outsized 27% in Q1 2022 and then recovered much of that lost ground over the year. And here you see cartons dispensed to patients, which is the most accurate measure of true demand. This also followed a similar pattern. You see a minimal drop in 2021 in Q1 2021 versus Q4 2020. But a 25% drop in Q1 2022 versus Q4 2021 . And again, we progressively recovered most of that lost ground during the year.

For the first 2 months of 2023, we’re running significantly ahead of 2022 similar period in dispenses to date. And we’re also encouraged that new prescription request forms for January and February are significantly higher than the comparable period last year. On this next slide, based on these encouraging trends as well as responses to the new programs that we’ve been implementing, we believe we will continue to grow the INBRIJA brand in the U.S. and ex U.S. in 2023. And we’re providing U.S. net sales guidance of $38 million to $48 million. INBRIJA currently has 67% of on-demand treatment market for Parkinson’s disease. But fewer than 2% of the about 380,000 people with Parkinson’s who could qualify are currently taking any of the on-demand treatments and that gives us a significant opportunity to grow that market, particularly now that patients and physicians are moving past COVID.

Just to review some of the new programs that we’ve been implementing. Our new brand campaign for INBRIJA is focused on educating health care professionals, people with Parkinson’s and their care partners about the emotional impact of OFF periods on the lives of both people with Parkinson’s and their care partners. This is important, we’ve learned from our experience so far in the market that this is something that is widely missed among health care professionals who treat Parkinson’s disease. They understand about the medical aspects of OFF periods, but they don’t — many of them don’t fully grasp the impact on their patients. And just to give you an illustration or a couple of illustrations because we talk to a lot of patients out there. If you consider someone whose major activity, let’s say, is golf.

And that’s their major social activity, it’s their major exercise. And that’s very important for people with Parkinson’s to stay active, to exercise, to be social because it can be an isolating disease. And last couple of times they went golfing on the 8th hole, on the 11th hole all of a sudden, one of their hands started to tremble as their symptoms came back with their OFF period. Their game just — they started slicing and hooking every shot. It wasn’t a severe OFF necessarily. They weren’t incapacitated but their entire outing became embarrassing and miserable. And after a couple of these times, these are real stories that we’ve heard after a couple of times of that happening, the person the next time their buddy’s call and say, “Hey, tea time, Joe, on Saturday morning, 9:00.” They say, “Hey, you know what, you guys go on without me today.

I’m not feeling well.” They begin to isolate themselves, not because they’re having an OFF in that moment, but because they’ve had them before in embarrassing terrible situations and now they’re afraid it’s going to happen again, and they have no way of dealing with it. Whereas if they have a way of dealing with it, they have an on-demand therapy you can see what that would add to their ability to address their disease and the issues in their disease. And that affects care partners as well. So if you think about here’s a real example, we have one patient who’s wife is — he used to be a Coast Guard pilot. His wife is a salesperson, and her job requires her periodically to travel. She told us that it got to a point with his OFF periods where she was afraid to actually go out and do her job.

Afraid to go as she was thinking that she might have to give up her job because she was afraid to leave him alone if he got into trouble with an OFF period and couldn’t do anything about it. And now you can see the impact of having INBRIJA. This patient happens to be on INBRIJA, where they both know that he can address it at the time it happens and our data show that the onset of action is in as little as 10 minutes. So our campaign is encouraging physicians to think about how OFF results in Parkinson’s patients, making their lives smaller and how we need to encourage them and their care partners to take actions that will give them back some control over their lives. We’ve increased our digital promotion of this new campaign. And in Q4 relative to Q3 and we saw a 145% increase in returning website visitors and a 104% increase in website visitors taking what we call high-value actions.

Such as downloading a brochure or watching a video or registering to get more information and by the way, to the extent you all have an interest, I encourage you to go to imbrija.com. Take a look at the patient before and after videos you’ll actually see the one I just talked about with Jimmy and his wife, Christie as she helps him out of a chair with his OFF period. I find them extremely compelling. I believe you will as well. And more to the point, we have heard from physicians, other health care professionals and patients and their care providers that they find them compelling. Moving to AMPYRA. AMPYRA net sales for the full year 2022 were $73 million. That was consistent with our guidance of $68 million to $78 million and this was a 13.7% decrease from 2021.

Sales in the fourth quarter were $19 million, a $16.6 million decrease over Q4 2021. Recall that we have said all along that this will decline over time relative to generics. However, the rate of sales decline versus generics has been leveling off quite a bit, and we expect it to continue to moderate. And I’ll show you that in the next slide. So here, you see from the beginning of generic competition in Q4 of 2018, there is a leveling of the decline of sales through the end of 2022. The slope continues to flatten through 2022 and for 2022 — excuse me, 2023, we expect AMPYRA net sales between $65 million and $70 million. Next slide, we project that AMPYRA sales over the next 5 years will stabilize at approximately $60 million a year or higher based on these trends and something really encouraging to note about 200 doctors wrote prescriptions for branded AMPYRA in 2022, who had not written since it went generic in 2018.

And you might ask yourself, well, why and we believe that performance is due to the way we’ve been maintaining the brand. First of all, we increased our field sales calls on MS specialists to ensure that they’re aware of the various support programs that we’re continuing to provide for the brand, many of them thought once we went generic, that we were no longer supporting it. And we found that we need to get that word out because there’s a lot of embedded physician and patient brand loyalty that we built up when we had the exclusivity period. And we continue to hear from both the health care professionals or health care providers and patients that they value the support that we’ve always provided and are continuing to provide. That includes our first step program that gives the initial 2 months of AMPYRA free to commercially insured patients, co-pay mitigation so that patients with commercial insurance are paying no more than $10 a month out of pocket for the brand, which is less than usually they’re paying for generics.

And also, we continue to provide physician and reimbursement support. Access also has remained high for AMPYRA about 70% of covered lives can get access to it through insurance. And with that, I’m going to turn the call over to our CFO, Mike Gesser who will review the financials with us. Mike?

Michael Gesser : Thank you, Ron. Good morning, everyone. In addition to our U.S. revenue, we reported $2.9 million of INBRIJA ex-U.S. sales, $11.7 million of FAMPYRA royalties, $2.6 million in royalties for Neurelis and $500,000 from Asieris Pharma for the clinical assets we licensed to them. Looking at the 2022 financial performance, we achieved our guidance as announced at the beginning of the year for AMPYRA and adjusted OpEx. Adjusted OpEx, as you know, is research and development, sales and general administration and is down from 2021 by approximately $18 million. Net income improvement was impacted by Alkermes Award and the extinguishment of the Biotie Finland debt. We ended off the year in a strong cash position. For 2023, we expect INBRIJA U.S. net revenue between $38 million and $42 million and a pure U.S. net revenue between $65 million and $70 million.

We expect adjusted operating expenses of between $93 million and $103 million and we expect our ending cash balance to be between $43 million and $47 million. And we plan on achieving a net neutral cash flow for the year or better. Additional guidance can be found in our long-term financial guidance in the earnings release. And now I’ll turn the call back over to Ron.

Ron Cohen : Thanks, Mike. So reviewing our priorities, we’re continuing to build shareholder value in 2023. At first, accelerating INBRIJA’s trajectory in the U.S., taking advantage of the new post-COVID environment with the commercial programs that I discussed earlier and also closing new ex-U.S. deals, while our existing deals continue to roll out commercial launches in additional countries. For example, Biopas, our Latin American partner believes that they’ll begin to roll out launches in early 2024. And we are negotiating additional deals or discussing additional deals for other territories in the world right now. Maintaining AMPYRA also remains an important focus as we’ll continue to inform the MS health care providers about the various programs that we provide to support the product on behalf of MS patients.

And we’re also, as you just heard from Mike, reducing operating expenses further in 2023 over 2022 by between $9 million and $19 million, and that follows a total of $64 million in reductions that we’ve already made between 2020 and 2022. And as you heard, we expect to be cash flow neutral to positive in 2023 and we’re continuing to evaluate collaborations for creating important new inhale therapies with our ARCUS technology. And with that, we’ll thank you for your attention, and we will open the call for questions. Operator?

Q&A Session

Operator: We have a question on the line from Boobalan Pachaiyappan with HC Wainwright.

Boobalan Pachaiyappan : This is Boobalan. Can you hear me okay?

Ron Cohen : Yes, we can.

Boobalan Pachaiyappan : I’m dialing in for Ram Selvaraju. So firstly, how much are you spending on commercial costs for AMPYRA specifically?

Ron Cohen : You know what, I don’t believe we break out those numbers. But Mike, do you want to take that?

Michael Gesser : Well, we don’t break those numbers out. So addressing that would probably be a — we need to discuss how we want to craft that. But I will say, as we answered a question similar to this in the past, we do provide direct sales and marketing support to AMPYRA through our sales force. We provide a lot of digital marketing and the normal kinds of advertising and support that way for AMPYRA. So and INBRIJA. It is not — it appears specifically, as Ron was saying, is not a forgotten product, and we find that the more attention we pay to AMPYRA through our sales and marketing and approaches returns rather well to us for that effort, the doctors respond positively.

Boobalan Pachaiyappan : Okay. And secondly, what do you expect peak sales of in INBRIJA to be in Europe? And how does the pricing compare between the U.S. and European territories?

Ron Cohen : Yes. So again, we are not currently giving guidance for European sales. First of all, a lot of that depends on which countries get rolled out and when and then each country has a different pricing scheme depending. So we’re not currently comfortable that we can give guidance on that. This really depends on our partners and their ongoing assessment of the market. I would say that in general, given our own experience here, it takes a while to get a sense of what’s going on in the market and how to project so at this point, we just don’t feel that we can be accurate enough in projections that we can give them. If we get to a point if and when we get to a point where we can, we obviously will do that. By the way, I do want to make one correction while I’m still thinking of it.

I’m told that I misspoke when I was presenting the slide on 2023 INBRIJA U.S. sales projections, I’m not sure I said the right range, but the correct range is $38 million to $42 million, $38 million and $42 million in the U.S. for 2023. So I just want to make sure I corrected that, and let me return to your questions.

Boobalan Pachaiyappan : All right. And then thirdly, how should we think about cost cutting and operating expense control over the remainder of 2023 and do you see any scenario in which further cost control would be required in 2024?

Ron Cohen : Mike, do you want to take that please.

Michael Gesser : Yes. So we are continuing to significantly reduce our operating expenses. We have that plan for ’23 as we just discussed. And if you go back and look at our guidance — long-term guidance that we provided in December, you’ll see that we do have a rather tight control on operating expenses, not growing significantly as our revenue grows in the outlying years. we are not necessarily planning on other significant decreases as we feel like we’re driving down our operating expenses to a point that can support the sales that we have given guidance on in the future. But we do look at every opportunity and what you don’t see, but you — is that we are exchanging certain cost departments for cost and other. So there might be net reductions in certain departments, but those are used to fund other activities and departments that need more funding are more beneficial to — that spend is more beneficial to the company.

Boobalan Pachaiyappan : Okay. And then one final question from us. What are your plans for refinancing your convertible debt? And what kind of debt instrument would you consider most desirable to replace the existing facility?

Ron Cohen : Yes. So we obviously have the debt and we need to address it. What we can say, we can’t give you specifics at this point but what we can say is that we stay in communication with the great majority of our bondholders, meaning the great majority who own the great majority of debt. Fortunately, it’s fairly concentrated. There are maybe 8 or so holders who are accounting for over 80% of the debt so we’re able to have constructive conversations regarding the debt. And we, the leadership team and the Board are in real time. We are continuing to evaluate various ways of dealing with the debt in hopefully, in collaboration with the bondholders. And when we have a decision or decisions on which way we’re going to go with that, we will certainly let everyone know.

Operator: I will now turn the call back to Tierney Saccavino, for further remarks.

Tierney Saccavino : Thanks, Emily. So we do have several investors who’ve written in questions as they registered and I’m going to read them now. The first question is, if the stock price goes above $1 for 10 days, and your company is back in compliance with NASDAQ listing rules, how will you announce that?

Ron Cohen : Well, we would certainly — yes, we would certainly announce it publicly that would be a material event. And as with all material events, we would put that out very likely, I would think, in the press release.

Tierney Saccavino : Okay. Next question. If you’re confident about your long-term business plan, we’d expect to see Acorda insiders purchasing stock. Do company leaders or directors have plans to do so?

Ron Cohen : So I can’t speculate on that, but what I can say is that we have heard these concerns from our shareholders and I have to say I’m personally sensitive to it, and we’re all sensitive to it here on the Board and the leadership team. I would note that in the past, the company leadership team members, including me, have purchased our stock. This was obviously at higher prices before. So we are taking that under advisement, but we can’t make any advance or proactive announcements about that. I hope you can all appreciate. The other thing to understand is that the Boards and leadership teams are very often constrained by possessing material nonpublic information at any given time that limits how we can buy or sell the stock in the company.

And as you can appreciate, if you just look at the last 6 months, let’s say, and all of the things that we announced that we had previously been working on, you can get a sense that especially as we’re working to build back the value of the company and engaging in all kinds of initiatives, it’s highly likely that at any given time, we may be in possession of that information. So Again, we’re sensitive to it. We have done it before. We have bought our stock before. I have bought large amounts of our stock before, and we will take all of that into consideration.

Tierney Saccavino : Okay. Next question. Will you continue to make your debt interest payments with cash.

Ron Cohen : So — well, a couple of things worth noting. First of all, there’s only one more payment left at the upcoming June payment, where we even have the option to pay it in stock that’s just under the agreement with the bondholders. So that would be the only one where there would even be an option not to pay it in cash. The Board typically makes that determination about what we’re going to do shortly before the payments are due. So I don’t have a specific answer for you. But I can tell you that in general, as shareholders ourselves we are very sensitive to the dilution issues that are involved. And our preference is to pay in cash if we believe that is in the best interest, taking all factors into consideration. I think it’s also worth noting if it gives you some comfort that we currently do not have nearly enough shares to pay this June payment in shares at anything close to the current stock price.

So hopefully, that will give you some sense of the answer. And as we get closer, obviously, we’ll announce it. But our overall view is that it is generally speaking, preferable to paying cash unless there are other compelling factors that dictate otherwise.

Tierney Saccavino : Okay. Next question. It appears that a shareholder or shareholders are selling stock every time the Acorda stock goes above a $1 and maybe in order to keep the price depressed. What is your plan to address this?

Ron Cohen : So we — like you, we monitor the stock activity closely to look for any untoward patterns. I have to say that we have been concerned about the type of pattern that you just articulated to the extent that we see activity and can find sufficient evidence for activity that is unethical or outside the regulations or illegal we would immediately report that to the relevant authorities.

Tierney Saccavino : Okay. Next question regarding Alkermes. What do you think is the likelihood of being able to get clawbacks of additional royalties already paid with your current legal petition?

Ron Cohen : Well, we’re not able to comment on or speculate on ongoing litigation. The filing is public. As you know, if the filing indicates that we believe that we are owed an additional $65 million. That’s going to be in the hands of the court when we have our hearing, so please stay tuned for that.

Tierney Saccavino : Our next question concerning INBRIJA with a lack of COVID over the last calendar year, why are we still not seeing more robust growth?

Ron Cohen : So first of all, we have not had a lack of COVID over the last calendar year. If you go back, we had a surge last summer. We had another surge in the fall. So I would say it’s been more like approximately 6 months or less, where the country has really opened up to an extent and particularly our part of the country, which is the physicians, the patients there — by the way, walk into a lot of hospitals and doctors’ offices today, they’re still all requiring mask. So it’s not like everyone has already moved entirely past it. What we’re indicating is that over the last — let’s call it, 1 to 2 quarters, there’s been enough opening up and return to more normal patterns of behavior and medical activity that we feel, for the first time in the pandemic that we have the kind of opening we need.

And also understand this is not like turning on a light switch. It’s not like everyone moves past it to today. And then all of a sudden, we have this major burst of prescriptions. No. It’s almost like relaunching in some respects, where you just have to do the groundwork, you have to get in front of them. You have to get the new campaign out there. The other new things that we have implemented, for example, the ability to e-prescribe which has been taken up very nicely and very rapidly by most of the prescribers at this point. The ability to buy the product for cash for less than the co-pay for patients who cannot afford their co-pay on Medicare, for example. So all of these programs that we have been putting in place, you can see, we put the new digital programs into place in the fourth quarter.

And as I reported to you, we’ve already seen a 145% increase in visitors coming back versus the third quarter. We’ve seen over 100% increase in visitors taking high-value actions when they come back. So all of that is extremely encouraging. And as I indicated, we’ve already seen significantly higher prescription activity in the first 2 months of this year versus last year. So we believe it is taking hold, but it’s just going to take some time. And our integration of all that is reflected in our projection that we’ve given for INBRIJA for this year of between I don’t want to get it wrong again. It’s between $38 million and $42 million for the year.

Tierney Saccavino : The next question is, was there a delay in the launch of INBRIJA in Spain.

Ron Cohen : No. No. Actually, we were pleased that, that was right on schedule. We’ve been telegraphing for much of last year that we expected it to launch in Spain based on Esteve’s timetable in early 2023. And in fact, they launched in February. So I think that qualifies as early 2023. We did not announce it until recently because we had to wait for Esteve to announce it in Spain. And when they announced it, we announced it, which was recently.

Tierney Saccavino : Next question, is the company on track to deliver on the long-term financial results outlined last year?

Michael Gesser : I’ll take this, Ron.

Ron Cohen : Yes, please, Mike.

Michael Gesser : Yes. So our long-term guidance is included in the earnings release. You’ll notice that it’s essentially the same as the long-term guidance we released in December for INBRIJA and AMPYRA sales and the only adjustments we’ve made to the other item is a result of the catalyst restructuring the Catalent deal that we’ve recently concluded. So we will continue to monitor the performance closely, and we will reiterate our guidance or any changes in guidance as appropriate.

Tierney Saccavino : Thank you. Next question, why are you not able to be cash flow neutral in 2022?

Michael Gesser : Ron, I’ll do this one also, please. I was hoping we were going to get this question. As we’ve been talking about, the Omicron impact in Q1 significantly impacted INBRIJA revenue and it impacted it for the year. That reduction in revenue adversely affected our cash flow position because we were just not receiving the revenue we anticipated and therefore, the payments for the sales of our product. That is the real reason that we had as far as not getting cash flow neutral in Q4. When we had talked about that in the past, we had talked about the quarter, the fourth quarter being cash flow neutral. We had made significant reductions in our operating expenses as we had described. We did meet that guidance for operating expenses well as meeting our guidance for AMPYRA.

And we feel like we’ve ended the year in a rather strong cash position for us and we are continuing to reiterate the guidance that we’re aiming to be cash flow neutral or at least or positive for the year of 2023. So we feel pretty good about where we are given the immense hold that we have been describing now for 4 quarters that we were faced with in Q1.

Tierney Saccavino : Thank you, Mike. Okay. The last writing question is, first, let me congratulate the team and the management for the great work you are doing. I would like to see more updates and news with regard to your operations. And maybe it’s time to talk about a buyback or conversion of the convertibles shares for shares and that would leave the company with great numbers and no debt.

Ron Cohen : Well, thank you for the current feedback. We are pleased overall with the performance this year and — excuse me last year, and what we’re seeing early this year and the milestones that we’ve been able to hit. We do announce news promptly whenever we have a material update in the company, we made quite a number of those announcements as I indicated in the last several months. We are aiming to have more to make this year. As I mentioned earlier, with respect to the bonds, we are in touch with the bondholders. We are continuing to evaluate different ways of addressing the debt. And when we have a way that we have settled on, we are certainly going to announce that promptly.

Tierney Saccavino : Right. That is the end of the writing question. So Ron, I’ll turn it back over to you.

Ron Cohen : All right. Well, thanks, Tierney. Thank you, everyone, for joining us, and we look forward to our next update. And the ones after that, we’re aiming to continue what we’ve been doing for the last 6 months or so in terms of generating positive news and shareholder value. Talk with you next time. Thank you.

Operator: This concludes Acorda Therapeutics Fourth Quarter and Year End 2022 Financial and Business Update. Thank you for your participation.