Acorda Therapeutics, Inc. (ACOR) on Q4 2021 Results - Earnings Call Transcript
Operator: Welcome to Acorda Therapeutics Fourth Quarter 2021 Financial and Business Update. Please be advised that this call is being taped at the company’s request. I will now introduce you to our host, Tierney Saccavino, Executive Vice President, Corporate Communications at Acorda. Please go ahead.
Tierney Saccavino: Thank you, Tania, and 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 filings. During today’s Q&A, we will first take calls from our analysts, and then we will take some questions that other investors have written in when they registered for the call. I will now pass the call over to our CEO, Ron Cohen. Ron?
Ron Cohen: Thank you, Tierney and welcome everyone. We will dive right in. At the beginning of 2021, we established goals to address the company’s challenges. And I’m happy to report that we executed on all of those goals, and these are summarized on this slide. We strengthened our balance sheet. We minimized our expenses and maintain fiscal discipline. We increased INBRIJA’s trajectory. We executed two ex-U.S. commercialization partnerships; launched INBRIJA in Spain and Germany, we achieved the top of our guidance for AMPYRA net sales in the face of generic competition, and we made important additions and changes to our leadership team and the Board, and I will review those with you now in a bit more detail. So regarding strengthening Acorda’s balance sheet. To do that, we sold our manufacturing operations to Catalent in early 2021 for approximately $74 million net. That in turn, enabled us to pay the $69 million stub payment on our convertible debt which was due in June, and that removed a significant overhang. We also received a $4.2 million tax credit from the CARES Act. Now looking ahead, 2022, we expect that the double-digit royalty from Biogen on ex-U.S. sales of FAMPYRA will revert to Acorda in mid-2022. Note that this royalty has continued to appear as revenue in our financials but with an accompanying expense as we passed on the payments to health care royalty partners with whom we – to whom we had sold the royalty stream in 2017, we expect that obligation to end around the middle of this year and to have it revert back to Acorda. We also expect to receive revenue from ex-U.S. sales of INBRIJA in 2022. Regarding our fiscal discipline, the sale of our manufacturing operations also reduced our operating expenses. And in addition, we implemented headcount and other expense reductions that we expect will reduce the company’s annual operating expenses by about $60 million in 2022 over what they were in 2020. Based on our revenue and OpEx projections, we aim to be cash flow neutral on a run rate basis by the end of 2022 and to be on cash flow positive in 2023. Now in November, we announced an agreement with ESTEVE to commercialize INBRIJA in Germany. That’s the largest pharmaceutical market in Europe, the fourth largest in the world. Acorda received a $5.9 million upfront payment, will also receive a significant double-digit percent of the selling price for supply of the product as well as additional milestone payments based on net sales. And we also executed an agreement with ESTEVE to commercialize INBRIJA in Spain. ESTEVE expects to launch INBRIJA in Germany in mid-2022 and in Spain in early 2023. We’re also in discussions quite actively with additional parties to commercialize INBRIJA in other territories in Europe and the rest of the world. Moving to our leadership additions and changes, John Varian was appointed to Acorda’s Board in January of this year. John is an experienced biotech veteran. He has held both CEO and CFO roles and has experience on several biotech boards. Mike Gesser joined Acorda as CFO in November. Mike has held senior finance positions at both large and small companies including Allergan. He is enhancing our ability to maintain our fiscal discipline to increase the efficiency of the organization and to continue to build shareholder value. Neil Belloff also joined Acorda as General Counsel in November. Neil has extensive senior legal experience at biopharma companies such as Celgene and he’s also served at the Securities and Exchange Commission. And Lauren Sabella moved from Chief Commercial Officer to the role of Chief Operating Officer, while Kerry Clem, who had served as EVP of Sales and Market Access was named our Chief Commercial Officer. I will note that our ability to attract this high level of executive talent notwithstanding the company’s current challenges is indicative of the opportunity that Acorda has to build shareholder value going forward. So moving to our commercial performance, INBRIJA net revenue for the full year 2021 was $29.6 million. That’s a 22% increase over 2020. For the fourth quarter, net revenue was $10.4 million, and that’s a 12% increase over Q4 2020. We were encouraged to see these increases in INBRIJA’s trajectory, particularly in light of the continuing impact of COVID-19 on our business during the year. AMPYRA net revenue for the full year 2021 was $84.6 million. And for the fourth quarter, net revenue was $22.5 million. We achieved the top of our guidance range for AMPYRA sales in the face of ongoing generic competition. Moving a bit more detail on INBRIJA. As a reminder, INBRIJA is inhaled levodopa. It’s indicated to address the return of symptoms, or what are called OFF periods that many people with Parkinson’s experience in between doses of their regularly scheduled medication. Now as I mentioned, the pandemic continued to pose headwinds for the launch in 2021 and I’ll give you some color on that. It manifested in a number of ways. In-person patient visits to offices continue to have declined overall from pre-pandemic levels. More patients did return to office visits after the initial precipitous decline in 2020, but those levels have waxed and waned with each successive new wave of COVID, most recently with the Omicron wave. In addition, many practices stopped accepting in-person visits by salespeople that remains true now. Until very recently, we were not able to hold patient or physician speaker programs in person, and they still remain substantially lower than pre-pandemic levels, although we are beginning to ramp back up with in-person programs. And what we have found is that everything related to marketing and educating about INBRIJA is more effective in person, whether it’s salespeople calling on the doctor in the office, or having speaker programs, where an actual physician can address a group of patients, it works better. Also, we learned that people with Parkinson’s disease, in particular, many of them reduced their activity significantly outside their homes during the pandemic because they’re in very high-risk group. And thus, they were less likely to report to their physicians, their need for a therapy to treat their OFF periods. If you’re sitting at home, watching TV a lot rather than your usual outdoor activities, that’s what you’re going to do. So I think the good news here is that we expect these factors to largely reverse as the pandemic finally subsides. Hopefully, we are seeing that happening now. We therefore see significant opportunities to accelerate the launch as that occurs and particularly as people with Parkinson’s become eager to resume levels of activity, exercise and so forth. Exercise and activity are one of the key ways that people with Parkinson’s are encouraged to manage their PD and INBRIJA can be an important part of that for them as they reemerge from, let’s call it, the hibernation of the last 2 years and are looking to catch up on that activity and exercise. Here, some additional metrics, again, despite the COVID headwinds, our team was able to adapt creatively through digital means and otherwise and we continue to see growth in INBRIJA compared to 2020. As I mentioned, we saw a 22% annual growth in 2021 over 2020 with a 12% increase in net sales in the fourth quarter versus fourth quarter 2020. Now bear in mind, the fourth quarter of 2020 had unusually large sales or outsized sales largely due to factors related to our moving from several specialty pharmacies at that time and merging all of that into a single one. And during that transition, we saw even more excess ordering than we normally would see in the fourth quarter. We also saw a 14% increase in total prescriptions over Q4 2020. And I think the most important number here, the one that we follow the most closely is we had a 24% increase in organic growth. That’s measured by the actual number of cartons of INBRIJA that patients receive. That most accurately reflects demand because patients can get anywhere from 1 to 5 cartons in a single prescription. Note that in 2021, the average number of cartons per prescription actually went up from 2.5 to 2.8. Moving to AMPYRA, overall net sales for 2021 were down by approximately 15% over 2020. But we were pleased to see the curve continuing to flatten. And if you look here, you see that sales in 2021 stabilized quarter-over-quarter. They were essentially the same, maybe $1 million or so of part from 1 quarter to the next. So that curve was relatively flat during the year. And while we continue to expect that there will be erosion over time and sale – net revenue will continue to decrease over time, we believe we’re seeing that the decrease has begun to stabilize or the rate has begun to stabilize. We believe that the durability of the product is due to a number of factors. First, our field sales team is continuing to call on MS specialists. They have maintained strong relationships there. We support the product, physicians and patients remain loyal to the brand and the support we provided earns that loyalty education. We continue to provide, for example, our First Step Program in which commercially insured patients get their first 2 months of AMPYRA free. And then we mitigate their out-of-pocket co-pay cost for commercially insured patients, and we continue to provide physician and reimbursement support. Now I’m going to turn this over to Mike Gesser, our CFO, who will provide you with an overview of the financials and 2022 guidance. Mike?
Mike Gesser: Thank you, Ron. Our financials are summarized in this table and in more detail in our press release and 10-K. As previously noted, we saw a continued increase in our INBRIJA net revenue 12% fourth quarter over fourth quarter and 22% year-over-year, while AMPYRA net revenue decreased 11% fourth quarter over fourth quarter and 16% year-over-year. R&D and SG&A expenses decreased as a result of restructuring to reduce costs and more closely aligned operating expenses to the expected revenue. GAAP net loss decreased quarter-over-quarter Q4 2020 included a $57.9 million charge to write down assets held for sale to the fair value less cost to sell. And that’s referring to the Chelsea manufacturing facility. Non-GAAP net loss, which excludes the loss on assets held for sale, non-cash stock-based compensation, non-cash interest expense and restructuring costs also decreased quarter-over-quarter due to the reduction in operating expenses. Due to a modified payment schedule in our amended agreement with Catalent, fixed manufacturing charges were eliminated between Q3 of 2021 and Q2 of 2022, resulting in improvement in cash by $5.3 million in 2021. For 2022, Acorda expects AMPYRA net revenue to be in the range of $68 to $78 million. We expect operating expenses to be in the range of $110 million to $120 million. And as we previously announced, given the uncertainty about how long the pandemic will continue to impact INBRIJA revenues, we’re not providing revenue guidance on INBRIJA at this time. Now I’ll turn it back to you, Ron.
Ron Cohen: Thanks Mike. So moving forward, we are focusing on building long-term value at Acorda by executing on the key goals you see here. Accelerating INBRIJA’s trajectory, obviously key, maintaining the strength of the AMPYRA brand, optimizing our financial structure and continuing to work on that, including looking at our long-term debt, staying close to our bondholders and devising the most optimal ways of dealing with that when it comes due 3 years or so from now. We are looking at new opportunities for the ARCUS technology, and I’ll touch on each of those in more detail. First, INBRIJA. We believe that the receding of the pandemic, as I said, will present us with significant opportunities. First, the return to pre-pandemic routines for many patients and practices are going to increase our opportunities for impactful touch points with them, the resuming of a more normal schedule of in-person office visits, reopening of practices to in-person interactions with our sales representatives, the resumption of in-person speaker programs. All of that will enable us to educate more effectively about the potential benefits and the correct use of INBRIJA. These will also enable physicians and other health care providers to provide in-person training to their patients, which we know to be more effective. We also hear from people with Parkinson’s that they are eager to resume a more active lifestyle and being active is an important way that they help to combat their disease. And we, therefore, expect them to be even more receptive to the benefits that INBRIJA can provide in addressing their OFF periods. Throughout the pandemic, we’ve also continued to refine our digital targeting and outreach for patients, their care partners and for healthcare providers. We’ve added before and after videos to the inbrija.com website, which you can check out. I think they compellingly demonstrate INBRIJA’s potential benefits for patients. Our online ads have accumulated to this point, millions of views and they have resulted in hundreds of thousands of visits to our websites but we’re actually not abandoning that at all. We are continuing to enhance these funds in 2022 as an important adjunct to the in-person interactions. We’re also expanding our e-prescribing platform nationally. This is something that we piloted in the second half of last year. We’re very excited about it because as a specialty drug, there are certain special ways that are required for prescribing INBRIJA. There is a special form of prescription request form or PRF. Many offices find those sorts of things. They impose friction on the process because they are used for most drugs to just using their e-prescribing platform. We are now able by working with a very good vendor who has figured out how to do this well, we are able to provide them with the option of just using their regular e-prescribing platform, which still will allow us to get the data we need to provide the patient support that is so important for the product. As I also mentioned previously, ESTEVE plans to launch INBRIJA in Germany by midyear this year, in Spain in early 2023, and we are continuing our discussions with several parties for additional territories in Europe and the rest of the world. With regard to AMPYRA, as you saw, sales remained stable quarter-over-quarter throughout 2021. The rate of decline appeared to be leveling off during the year. And while we expect the brand to continue to decline against generics over time, we’ve been very pleased by its durability to date and it is providing us with vital revenue as we continue to work to accelerate the growth of INBRIJA. And our third key factor, we are continuing to exercise fiscal discipline, and we are looking to achieve our goal of being cash flow neutral on a run rate basis by the end of 2022 and cash flow positive in 2023. In addition to the $60 million reduction in expenses that we made over 2020, we expect to realize new revenue sources. And as I mentioned, those include reversion of the royalties from Biogen on ex-U.S. sales of FAMPYRA back to Acorda around midyear. These are double-digit tiered royalties on net sales of ex-U.S. FAMPYRA, and so we expect that will be a significant addition. And we also expect to begin to receive revenue from our supply agreements with ESTEVE this year by midyear for Germany and then in 2023 for Spain. I also note that Acorda’s convertible debt will become due in December 2024. And as I alluded to earlier, we have maintained open lines of communication with our bondholders, our leadership team and Board have been exploring and are continuing to consider various options for optimally addressing the debt at the appropriate time. And our fourth key goal is to build on a significant asset that the company has. And that’s the ARCUS technology platform for delivering medications via the lung. That technology has now been validated by the approval of INBRIJA in both the U.S. and the EU. We are discussing collaborations with several other companies that have expressed interest in formulating their novel molecules for pulmonary delivery. And in fact, we’ve already been performing feasibility studies on some of those opportunities. So that completes our year-end report, and we will now open the call for your questions.
Operator: The first question is from the line of Muzamil Saleem with H.C. Wainwright. Your line is now open. Please go ahead. Mr. Saleem, your line is open.
Muzamil Saleem: Can you hear me okay?
Ron Cohen: Yes. Hi, there. I can hear you now.
Muzamil Saleem: Excellent. Thanks, Ron and thanks, Tierney for taking my questions. I’m representing Ram Selvaraju at H.C. Wainwright. So first of all, regarding the INBRIJA launch in Germany and Spain, we were just wondering why the Spanish launch is happening after that of Germany despite being negotiated first?
Ron Cohen: The – you may recall the German NDA authority did not require a reimbursement dossier to be submitted for INBRIJA, which is very good news because that cuts through a lot of the time that otherwise would be consumed in submitting and then negotiating and so on. So ESTEVE is able to launch at will, and they are just putting in the preparations on the commercial launch and they will select the price and they will move forward. My understanding is that in Spain, there are just more eyes to dot so that it’s a bit after, but they are still expecting it in early 2023.
Muzamil Saleem: I appreciate the granularity there. Glad to see the durable AMPYRA sales. We were wondering if your strategy of offering 2, 3 months of the drug for commercially insured patients and in-person marketing to MS specialists will remain the same or are you going to change this strategy going forward?
Ron Cohen: We don’t have immediate plans to change under the theory that if it ain’t broke, don’t fix it. We think that, that has been very helpful in emphasizing to both patients and their physicians, our commitment to them are ongoing. We’ve always been very committed to the MS patient community and we are continuing to demonstrate that in every way that we reasonably can.
Muzamil Saleem: Okay, excellent. Thank you for taking our questions and congratulations on quarter.
Ron Cohen: Thank you, Saleem. Appreciate it.
Operator: Thank you. I will now pass the conference over to Tierney Saccavino for any additional remarks.
Tierney Saccavino: Thank you, Tania. So this quarter, we gave our investors the opportunity to write in questions to the management team when they registered and thanks to all those who participated. I’m going to read the questions that have been written in and ask Dr. Cohen to respond. We had several questions on a similar topic, which I have combined into the following question. Why do you want to use equity to pay the debt interest when the stock price is depressed? Will you consider establishing a minimum stock price before you can use stock to repay the debt interest?
Ron Cohen: Yes. So let me be the first to say that we certainly do not want to. We are all – all of us here are shareholders, and so our interests are aligned with those of all the shareholders. So we are very acutely aware that, particularly at the current what would regard as depressed valuation that paying in stock is dilutive, and it’s much more dilutive than we would optimally like. We have to balance all that at any given time with our need for cash in the company and the longer term goals. And the longer term goal here and the most important goal is to restore the company to a cash flow positive footing and be able to grow from there and grow shareholder value. And ultimately, if we keep our eye on that ball and we execute and we succeed in that goal, yes, we will have had some dilution along the way, but one hopes that the increase in shareholder value that we can achieve over time will more than make up to that. Now again, we are not eager to pay these interest payments in stock. It’s something that the Board and the leadership team review every time we have a payment coming due, we look at it versus the cash on hand in the company, where we are in our trajectory, where we are in achieving the long-term goals of the company, and we make the termination based on what we believe is in the best long-term interest of shareholders.
Tierney Saccavino: Thank you. The next question is around the same topic but a different focus. It says, are you aware of the increased insured interest ahead of every debt interest payment over the last 2 years and the manipulative effect it has on the determination of the amount of shares issued in connection with the payment? Has the way you have managed expenses resulted in the necessity of paying the debt interest in shares?
Ron Cohen: Okay. So I think there are a couple of pieces there. So let me take the last part of that first since the first part is more speculative. As I believe I indicated in the presentation, we have been assiduous and laser-focused on managing expenses here. And if you look at comparables and other companies who also have products and are commercializing and have a need to invest in that commercialization in order to grow the products to where they need to be, I think you’ll find that we match up quite favorably. We have cut about third of our operating expenses over the last 2 years, $60 million. And beyond a certain point, you can only cut so far before you’re cutting into bone. And you don’t want to be there. You want to have a balance where you’re able to invest in what you need to invest in order to grow the company, in order to grow the revenue stream over time and to get the company where it needs to be as a healthy and vibrant and growing cash flow positive organization. With regard to what people do before those interest payments come up, we can – unfortunately, we cannot control the market. We can only control what we are doing in the company. And as I said, we are – whenever these interest payments are going to come up, we look very carefully together with the Board at what unbalance the best option is. So I will tell you, we do not have a preconceived notion about how we’re going to handle the next payment or the next payment after that. We deal with it as it comes, and we do it based on an assessment of where the company is relative to its goals and its cash position.
Tierney Saccavino: Thank you. Here is the next question, says I have been an investor for the last 3 years and management has done a good job coping with the epidemic headwinds and the loss of the AMPYRA patent. On the other hand, your market cap is far below and comparable company in terms of revenues. Management has said that by the end of 2022, you aim to be cash flow neutral on a run rate basis. It’s time to change momentum and declare a stock buyback plan. Is this something you consider?
Ron Cohen: So I guess I would observe that stock buybacks have their place. It’s very much similar to the answer I gave on the last question, which is, right now, cash is king for the company. And we need the cash to be able to get to a cash flow positive state, where we’re not burning cash, right? I don’t believe, but currently, the best use of that cash is to buy back stock to look for what usually is a temporary bump in stock price. To me, the real prize is building real value in the company and looking at a trajectory that will take us to long-term value building. I think it’s worth also noting that the – that one of the key factors that is different from us, let’s say, given the type of revenue, the level of revenue we have relative to certain other companies you might compare us to is that we do have that long-term convertible debt overhang. And that is a large part of the issue on the current valuation. And as I indicated, we’re obviously well aware of it, and the Board and the leadership team are keeping close to our bondholders and working on a number of options that we can consider for dealing with that debt. And again, it’s not due until the end of 2024, but we are already working on and off.
Tierney Saccavino: Great. Thank you. The next question is – says, INBRIJA sales and trajectory have been very disappointing and COVID can no longer be used as an excuse. What are you doing to get INBRIJA sales to a $100 million annual run rate this year?
Ron Cohen: Well, it’s hard to know how to answer that question as opposed. I think we have answered it in the presentation in multiple ways. So I would guide the questioner to what the points we’ve made about what we are doing. I will say that I do not believe that the pandemic is an excuse for where we are. And in fact, as I noted, I think the fact that we saw a 22% growth year-over-year is quite something, considering the pandemic and all of the factors that I pointed to, those are real. There is – I wish they weren’t real. I don’t believe in making excuses, but I also believe you have to see reality for what it is or you cannot solve the problems that are being thrown at you. So that’s really it. We’ve laid out what our plan is to grow sales. It is a terrific drug. The patients who are on it, love it. We hear from them all the time about what it has been doing for them and how grateful they are. I just got – 2 weeks ago, I just got a big box of homemade treats from one grateful patient, which I shared with my colleagues. We are working on it. And I think to the extent that we are hopefully seeing the pandemic getting to a very livable state, we’re going to reap the benefits of that in the trajectory of INBRIJA going forward.
Tierney Saccavino: Great. Thanks very much. That was the last question that came in by the time we started the call. So again, thanks to all investors who participated in sending in some questions, and we look forward to continuing the dialogue question, next quarter. Ron, I’m going to turn it over to you to close the call.
Ron Cohen: Thank you for joining. Thank you, Tierney, and thank you all for joining us and watch your space. We look forward to updating you at our coming calls.
Operator: That concludes the Acorda Therapeutics fourth quarter 2021 financial and business update. Thank you for your participation. You may now disconnect your lines.
