Acorda Therapeutics, Inc. (ACOR) on Q1 2022 Results - Earnings Call Transcript
Operator: Good afternoon. Welcome to Acorda Therapeutics First Quarter 2022 Financial and Business Update. Please be advised that this call is being recorded at the company's request. I will now introduce you to our host, Tierney Saccavino, Acorda's Communications Consultant. Tierney, please go ahead.
Tierney Saccavino: Thank you, Bethany, and good afternoon, everyone. Before we begin, let me remind everyone 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 Q&A, we will first take calls from our analysts and then we will take some questions from other investors who have written in when they registered for the call. I'll now pass the call over to our CEO, Ron Cohen. Ron?
Ron Cohen: Thanks, Tierney. Welcome, everyone. We'll dive right in. INBRIJA net revenue for the first quarter of 2022 was $3.5 million, a 26% decrease over the first quarter of 2021. This does not reflect our expectations for INBRIJA's performance for the rest of the year. We were pleased to see that as the Omicron wave waned from the beginning of the year, INBRIJA sales rebounded significantly. In particular, whereas January and February sales were similar, March sales increased by approximately 85% over February and then continued to increase through April. So what happened? We believe the following factors affected the quarter's results. First, we typically see a decline in net sales in the first quarter over the fourth quarter of the prior year. And that's due to seasonal overstocking at the end of the year by patients and pharmacies as well as by changing of insurance carriers the beginning of each year. So we expect that. However, the declines were exacerbated this year, due in large part to a significantly higher estimate for discounts and allowances that we have in Q1 2022 as compared to the estimate in Q1 2021. And in fact, gross sales were essentially the same in each period. We expect D&A rates to decline during the rest of this year. We also saw significantly fewer refills of INBRIJA prescriptions in Q1. And that was related to both the overstocking in Q4 and the extreme spike in the national COVID cases that we saw in December to February, which we believe caused Parkinson's patients who are among the most vulnerable to reduce their activity levels, therefore reduce their usage of INBRIJA to treat their OFF periods. We believe that the large rebound in net sales in March and April reflects both the depletion of the overstocking from Q4 and the subsiding of that major Omicron wave with patients becoming more active again. Also related to INBRIJA, we are delighted to announce today that we signed an agreement with Biopas Laboratories to commercialize INBRIJA in the nine largest countries in Latin America, including Mexico and Brazil. Biopas is the leader in commercializing CNS therapies in Latin America. This is our third ex-U.S. commercialization agreement. We're also in active discussions with other companies for the rights to commercialize INBRIJA in additional countries. By way of update, Esteve plans to launch INBRIJA in Germany in June. And as a reminder, Germany is the largest pharmaceutical market in Europe, the fourth largest in the world, and we expect to begin to receive revenue from our supply agreement with Esteve in the current quarter by June. Moving to AMPYRA. AMPYRA net revenue for the first quarter was 14.9 million, a 27% decline over Q1 2021. However, gross sales were reduced only by about 11% over Q1 2021. And that was consistent with our internal projections. Again, as with INBRIJA, we had a higher estimated D&A for AMPYRA in Q1 2022 than in Q1 2021, and we expect the D&A to decrease over the remaining quarters of 2022. We're reiterating our guidance for 2022 net sales of AMPYRA of between $68 million and $78 million. So to provide a bit more depth on INBRIJA. As we noted previously, net sales were 26% lower in Q1 '22 versus '21. In addition, total prescriptions decreased by 12%. However, dispensed cartons, which we believe is a true indicator of demand, decreased by just 5%. And again, this does not reflect our expectations for INBRIJA performance for the rest of the year. We believe that the major overtime spike in December to February was the major contributor to these declines. Very importantly and really worth emphasizing again, we saw that 85% increase in net sales in March and then continued growth through April as that COVID spike subsided. The feedback we're hearing in the field is that people with Parkinson's are in fact anxious to return to their more normal levels of activity, and that motivates them to address their OFF periods more. Now, we've talked about the impact of COVID periodically on the launch of INBRIJA. I want to provide some color here, some data to give you some color on that. This graph illustrates that new prescriptions for INBRIJA have tracked with the average increases and decreases in in-person office visits during the various waves of COVID. This is IQVIA data. So you see that as office visits go up, prescriptions go up. As they go down, prescriptions go down, as you might expect, but then we can actually see it here. We don't have the data yet on office visits for Q1 2022. However, as I mentioned earlier, we also saw a decrease in daily utilization and refills in Q1 2022, as we experienced that record number of cases. There were over 20 million cases of COVID in January alone that was over 4x those of previous peaks. And hopefully as that is subsiding even with the more modest so far new wave, we will see improvements there. Moving to our financials and our goal for 2021, Mike, would you please go through the financials?
Mike Gesser: Thanks Ron. For INBRIJA, net revenue was down 26% quarter-over-quarter, as described previously, on essentially flat to stable due to the increase in D&A. For AMPYRA, net revenue was down 26.6% quarter-over-quarter on lower gross sales and due to the increase of the D&A estimate. The decrease of AMPYRA gross sales were within our internal expectations. On OpEx, we are lower quarter-to-quarter by $7 million, reflecting our actions taken in 2021 to reduce OpEx going forward. Note that the Q1 2021 cash included the proceeds of the Chelsea facility sale prior to the $6 million to $9 million paydown of our debt in Q2 2021. As we have noted, we are aiming to be cash flow neutral on a run rate basis by the end of the year. For 2022, our quarter continues to expect AMPYRA net revenue to be within the range of $68 million to $78 million. We expect operating expenses to be within the range of $110 million to $120 million. As previously announced, given the uncertainty about how long the pandemic will continue to impact INBRIJA revenues, we are not providing revenue guidance on INBRIJA at this time. Now, I'd like to turn it back to Ron. Ron?
Ron Cohen: Thanks, Mike. So moving to look forward and look ahead on building long-term value, our focus is to build that through execution. The key goals you see here; first, with respect to driving INBRIJA's growth. Now, as the effects of the pandemic continue to recede, we believe that people with Parkinson's are anxious to become more active, as I mentioned. And that's especially since activity is an important part of managing their Parkinson's. And we've heard from patients plus the healthcare providers in the field that patients had sequestered and they felt even more vulnerable than the regular population. And in fact, they have been -- overall, there's been much more laxity with their overall medication regimen so that the doctors are having to address that as they begin to come back to the offices. We expect that the trends now with patients coming back, accelerating, getting back to active lives are going to positively impact INBRIJA's trajectory. We also, as I mentioned, expect that Esteve is going to launch in the EU's largest market Germany this June and in Spain in early 2023. Plus, we have just entered into the deal with Biopas for the nine largest countries in Latin America. So we're very pleased with that, and we are in active discussions with several parties for additional territories in Europe and the rest of the world. So, I'd like to take just a couple of minutes to talk more about the big picture as we see it. Obviously, the quarter was not what we would have liked to see. And we've talked about that. And I know everyone is tired of COVID explanations. I am tired of them. It begins to sound like an excuse over time. Now I did show you some of our data. We have more that makes it clear. It's data. It's not an excuse. It's a reality. It's a set of challenges that happen to overlap with the launch of this drug. This drug, in particular, requires training. It's not a pill. It's a drug device. It's an inhalable. You do have to give it some tender loving care with both the prescriber offices and the patients to train them appropriately, to educate them appropriately. And not having the proper access in-person over the last couple of years has just been a drag. It's been a challenge. Now having said that, all of the research that we have been doing, continue to do, all of the conversations, and I've had many of them personally, tell us that this is still a superb drug. It is a great drug for patients. It is still the number one selling -- it's the number one prescribed on-demand therapy for OFF periods in Parkinson's. It empowers patients to treat their OFF periods in the moment at the time that it happened. So it is a very much needed and appreciated by the patients adjunct to their daily regimen of medications for Parkinson's. We have been doing our research. We have been listening. We have been modifying and amending our programs accordingly. We've had a huge amount of success online with millions of views of our ads driving hundreds of thousands of views of various assets on our Web site. One of the things I would encourage you to do if you want to learn more is go to INBRIJA.com. We've added new patient videos showing the actual before and after effect of INBRIJA. We have new messaging that is going out with regard to having patients talk to their doctors about on-demand therapies. We have several new programs that we have been implementing just in the last couple of months. We still -- so all the data tell us that as long as the society and Parkinson's patients start coming out or keep coming out of the sequestering over the last couple of years, that we will get a tailwind and we will see an acceleration of the growth of INBRIJA trajectory as long as that happens. So with that, on AMPYRA, we expect the brand to continue to decline against generics. However, we're very pleased that it's been very durable, more durable than many expected, and that the tail off, the decline rate, has been flattening over time. We are reiterating, as you heard, our net sales guidance this year of 68 million to 78 million of net sales. With regard to finances, we are continuing to exercise our fiscal discipline to evaluate OpEx in relation to revenue in an ongoing way. We also expect to have the royalties from Biogen on ex-U.S. sales of FAMPYRA revert back to a quarter in the middle of this year. Those are double digit tiered royalties on net sales. And as I mentioned, we also expect to begin to see revenue from sales of INBRIJA in Germany as of this June. And then, as we've mentioned in the past, we're also building on the ARCUS technology platform, which has been validated by the approvals of INBRIJA in the U.S. and EU, which allows large quantities, relatively large quantities of drugs to be delivered systemically via the lungs where that may be advantageous versus going through the gut or other means. We are in discussions about potential collaborations with other companies that have expressed interest in formulating their novel molecules for pulmonary delivery to the ARCUS. And we've already been performing feasibility studies on a number of those opportunities. So with that, I will open the call for your questions.
Operator: Thank you. We have one question by the phone from the line of Muzamil Saleem with H.C. Wainwright. Please go ahead.
Muzamil Saleem: Good afternoon. Thanks for taking my questions. Congratulations on the Latin America deal, by the way. Just one from us. Do you have any promising preclinical research in the pipeline for neurological disease, including from your Acorda Grant Program that you can share with us? Is there any movement on perhaps restarting your clinical pipeline programs?
Ron Cohen: Thanks, Muz. It's one step before the other, right. So the entire focus right now is to get INBRIJA where we absolutely believe it should be. And ultimately, we believe it will be. In terms of being a standard of care for people with OFF periods in the field, there is nothing we have seen that changes that evaluation about the fundamental benefits of this drug to people with Parkinson's. So we need to get that straight. We need some more time to see the trends that we believe we're going to see. And then we can turn our attention to investment in the rest of the pipeline. Now having said that, we have assets in the pipeline right now, and one in particular that we continue to be very excited about but we just are not able to spare the cash to invest in it currently. And that would be our GGF2 asset initially for heart failure. We have human data on that that we talked about in the past. We think it's a very exciting opportunity. And that's something that -- once we get to a point where we're able to branch out and broaden our focus in addition to INBRIJA, that's something we very much want to get back into a substantial Phase 2 trial. And then --
Muzamil Saleem: Great. Thanks for the color. And in terms of the marketing and education efforts, particularly to the Parkinson's patients, are you thinking about evolving past the Web initiatives and perhaps going into apps or something else of that nature?
Ron Cohen: Yes. So actually, we already have been going back -- as the pandemic has allowed, we've already been going back to what we think is the single most effective thing. And that is in-person speaker programs, where you actually get 10, 20 people or more in a room, patients and their care partners. And it's a three dimensional thing, right? You have that drug device, you can demonstrate in front of them, you can talk directly to it, they can talk to each other. We found that that is a much more effective means and we're doing that now. So we have -- as conditions have allowed, we have been getting back to those in-person programs in addition to the digital programs. Our digital team is exploring apps. We don't have anything specific to say about that yet, but we are exploring that as well.
Muzamil Saleem: All right, excellent. I appreciate you taking our questions.
Ron Cohen: Thanks, Muz.
Operator: Thank you, Mr. Saleem. I'll now pass it to Tierney Saccavino for written questions.
Tierney Saccavino: Thanks, Bethany. So this quarter, we gave investors the opportunity to write in some questions to the management team when they register. Thank you to everyone who participated. We had several questions on similar topics, so I have them combined into the following question. First question, you reported a not good quarter. Why should investors believe that the performance of this company is going anywhere but down? You can't keep hiding behind COVID as a reason for poor sales? What are you going to do to improve the stock price?
Ron Cohen: We appreciate straightforward questions, and that's a very straight question. I think I addressed most of this at the end of the formal remarks, but I'll address them in the context of the question. Look, we agree. We're not happy. I'm not happy with the quarter. There were the mitigating factors I discussed. But the quarter is what it is. I think we need to be clear about what the data say. There's no question that COVID has impacted the launch. It is not an excuse. It is a reality. And we have to deal with it. And it continued to do so into the beginning parts of this quarter. People with Parkinson's are generally older. They can be immune compromised. They've stayed at home during the pandemic. They've not gone to regular doctor visits. Even when they have, the pandemic has added layers of complexity to even managing them, which makes it more challenging to get messages in. And if you look, there are a number of other Parkinson's drugs, not all of them, but there are a number of other Parkinson's drugs that have also experienced these issues for various reasons that are related to this. Importantly, I think I want to emphasize again that you're looking at the net sales. Gross sales were essentially flat quarter one to quarter one of last year versus this year. Now flat is also not what we're going for, but it's not as dramatic as what the net sales look like. And the net sales were affected largely by those D&A issues, which are estimates that are put in and then trued up later. And it just happened that the D&A line was substantially higher this quarter than it was in 2021. Again, I do want to point in addition to what was disappointing. I think we need to also assess what is encouraging. And what I find truly very encouraging is that consistent with our thesis, consistent with what we believe the data are telling us, we saw an 85% jump, a rebound in March. And then it continued to increase through April in net sales of INBRIJA. That tells you something, right? We find that encouraging. We don't like January and February, but it does say that our thesis about the patients not having been refilling while they were sequestering and then coming back and beginning to do that again is sound and intact. So I think just like the whole society and the whole world has been dealing with the challenges and the negatives of this pandemic for the last two plus years. We're dealing with it as well. I think the commercial team that has launched INBRIJA, I'll just point out, is largely the same one and certainly the leadership is largely the same as the one that launched AMPYRA which way, way blew through people's expectations. So our team didn't just lose their ability to that. It's a matter of adapting to these conditions and also, frankly, to adapting to a different disease state, a different mindset and a different set of algorithms that these healthcare professionals use on their patients, and educating them on how to marry that to this new modality of an on-demand therapy that empowers the patient to address their OFF periods in real time, not just based on tweaking their daily regimen, which is also important. So all of that considered, I am optimistic based on what we're seeing as long as we are going to be coming out of this pandemic set of challenges.
Tierney Saccavino: Thank you. The next question is related. And it says, I'd like to know if the internal evaluations of these assets are aligned with public market valuations. If not, what is the management team doing to address this dislocation? Keeping your head down and executing a strategy is not enough. As we've seen over the past three years, COVID and the broader market weaknesses are not valid excuses for the lack of INBRIJA growth and the current stock price?
Ron Cohen: Well, I guess there are a couple of things to unpack there. We can talk more offline, whoever that was, on COVID and broader market weaknesses being valid excuses or not, it's not an excuse, it's data. And there is no question if you look at the data that both of those factors do affect the INBRIJA growth and/or stock price. Now having said that, I've already talked about where I think we are and what we need to do and what we are doing to address those challenges. We believe that INBRIJA is -- we still believe it is a very valuable product. It is an excellent product. Again, it is the number one prescribed on-demand treatment for all periods with all the issues and challenges, it still is. And we believe that AMPYRA has real value, even though it will decline over time. And that ARCUS is actually a superb platform technology that can be adapted to a number of different drugs and indications. So we're working to exploit that value -- to realize that value. Look, I appreciate the frustration. I'm also frustrated. I'm a shareholder. We're all -- all of us here are shareholders. So our interests, as they should be, are aligned. I think as long -- I am repeating myself, but I think I'll close by saying as long as we see the daylight at the end of the tunnel or the light at the end of the tunnel on the change in behaviors of Parkinson's patients based on the pandemic, as long as we get them to continue, and they already are. They're already coming out of their shells to a certain degree. As long as that continues, I believe it actually gives us a unique opportunity to educate and to message with respect to that issue, actually turn the challenge on its head and educate them to say, look, you've been in hibernation for over two years. We know you want to be active. Your doctor tells you to be active. You want to be active. You haven't been active. That impacts just your whole health, your whole emotional well being, everything. And OFF periods prevent you from being active. And the ability to address your OFF periods when they occur is something that can be even more welcome for you as you are getting back to the kind of activity level, the kind of life that you would like ideally to live. So that's where we're going with this. And again, as I said, I'm optimistic.
Tierney Saccavino: Thank you. The next question is, has the company made any decisions on the June interest payment? Will you use cash or stock? Why is it consistent we use equity to pay the debt interest?
Ron Cohen: Well, here again, we're all shareholders. I'm a large shareholder. The whole leadership team and Board are shareholders. Our interests are aligned here. When we're looking at how to pay these interest payments, what we have to do is consider impact on shareholders, ourselves included, and we have to consider all of the other factors that go into these decisions. We need to consider the strategy, the long-term goals, how we get there, cash position, anticipated cash, and a myriad of other details? We put that all together, we discuss it heavily and we look to make the best possible decision in the circumstances with respect to the ultimate goal, which is getting a healthy, vibrant, growing company with growing assets. So I think that's the best I can say at this time, except to say that we are all shareholders. I absolutely understand and I'm very empathetic with the notion of dilution when we pay in stock. We also have to consider the impact of what is the ideal or optimal use of that cash at any given time? So we take all of that into account.
Tierney Saccavino: Okay. Thank you. And the final question that has been written in is will the company conduct a strategic review to sell itself?
Ron Cohen: I think the answer to that is that we need to always be prepared to consider any realistic and legitimate way of maximizing shareholder value, maximizing value of the company to our stakeholders. So if acquisition or sale of the company turns out to be that way that is something that we must do. So we are open to whatever means makes the most sense of maximizing the company's value. So I think I'll leave it at that.
Tierney Saccavino: Okay. Thank you. That is the end of the written questions.
Ron Cohen: All right. Well, thank you all for joining us. And I'll close on the high note of this third major deal for INBRIJA and look forward hopefully to having more positive things to tell you in the coming quarters. Have a great week, everyone.
Operator: This concludes the Acorda Therapeutics first quarter 2022 financial and business update. Thank you for your participation. You may now disconnect your line.
