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| ACOR > SEC Filings for ACOR > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.
Background
Since we commenced operations in 1995, we have devoted substantially all of our resources to the identification, development and commercialization of novel therapies that improve neurological function in people with multiple sclerosis (MS), spinal cord injury (SCI) and other disorders of the central nervous system (CNS). Our marketed drug, Zanaflex Capsules, is U.S. Food and Drug Administration (FDA)-approved for the management of spasticity.
We announced positive results from a Phase 3 clinical trial of our lead product candidate, Fampridine-SR, for the improvement of walking ability in people with MS in September 2006. A second Phase 3 trial of Fampridine-SR in MS, MS-F204, was initiated in June 2007 and favorable results from that study were released in June 2008. The objective of this study was to show that individuals treated with Fampridine-SR are significantly more likely to have consistent improvements in their walking than those treated with placebo. A Thorough QT cardiac study was initiated in September 2007 and favorable results from that study were released in January 2008. This study evaluated the potential of Fampridine-SR to cause an increase in the electrocardiographic QT interval. Fampridine-SR, at both therapeutic and supratherapeutic doses, was found to be no different than placebo.
On January 30, 2009, we announced the submission of a New Drug Application (NDA) to the FDA for Fampridine-SR. The Fampridine-SR NDA submission is based on data from a comprehensive development program assessing the safety and efficacy of Fampridine-SR, including two Phase 3 trials that involved 540 people with MS and were conducted under Special Protocol Assessments (SPAs) from the FDA. The safety and efficacy profile of Fampridine-SR was consistent across Phase 2 and Phase 3 trials. Overall, the NDA filing included more than 50 clinical studies of Fampridine-SR. As of June 30, 2009, 177 subjects from MS-F202 had been enrolled in an extension trial and 84, or approximately 47%, remained active in the trial, with duration of treatment of active patients ranging from 3.4 to 5.3 years. As of the same date, 269 patients from MS-F203 had been enrolled in a separate extension study and 180 of these, or approximately 66.9%, remained active, with duration of treatment of active patients ranging from 1.1 to 3.6 years. Also, as of this same date, 214 patients from MS-F204 had been enrolled in a third extension study and 176, or approximately 82%, remained active, with duration of treatment of active patients ranging from 14.3 months to 22.4 months. The total exposure to Fampridine-SR in our MS studies as of June 30, 2009, including both double-blind and open label studies, is approximately 1,750 patient-years.
We announced the receipt of a refuse to file letter (RTF) from the FDA on March 31, 2009 regarding our NDA for Fampridine-SR. The FDA raised what it termed "format issues" regarding the eCTD (electronic) submission, requesting that some of the data in the NDA be reformatted, as well as requesting that some additional supporting information and pharmacokinetic data from a fed/fasted study be included in the filing. The FDA did not request or recommend additional clinical or other studies.
We announced the resubmission of our NDA for Fampridine-SR to the FDA on April 23, 2009. On May 6, 2009, we announced that the FDA had accepted our NDA for filing, and had assigned it Priority Review and a Prescription Drug User Fee Act (PDUFA) date of October 22, 2009. The PDUFA date is the target date for the FDA to complete its review of the Fampridine-SR NDA.
We announced notification by the European Medicines Agency (EMEA) that Fampridine-SR is eligible to be submitted for a Marketing Authorization Application (MAA) via the Agency's
Centralized Procedure on June 8, 2009. The Centralized Procedure provides for a single, coordinated review that is conducted by the EMEA on behalf of all European Union (EU) member states. The EMEA also designated Fampridine-SR as a New Active Substance (NAS); if approved, compounds designated as an NAS receive a 10-year market exclusivity period in EU member states.
On October 14, 2009 the FDA Peripheral and Central Nervous System Drugs (PCNSD) Advisory Committee voted 12 to 1 that clinical data on Fampridine-SR 10 mg twice daily demonstrated substantial evidence of effectiveness as a treatment to improve walking in people with MS and voted 10 to 2 (1 abstention) that it is clinically meaningful and can be safe for use. The PCNSD Advisory Committee also recommended by a vote of 12 to 1 that we be required to evaluate the effects of doses lower than 10 mg twice daily, but by a 10 to 2 vote (1 abstention) that these studies not be required prior to approval. At the request of the FDA, the PCNSD Advisory Committee also discussed possible conditions for use, including for patients with renal impairment or history of seizure. Acorda has proposed a Risk Evaluation and Mitigation Strategy (REMS) program, which could include healthcare professional and patient education around appropriate use of Fampridine-SR. The FDA can seek the advice of an advisory committee such as the PCNSD Advisory Committee when evaluating a potential new treatment, but it is not required to follow its recommendation.
Following the PCNSD Advisory Committee meeting on Fampridine-SR, we submitted additional information on our proposed Risk Evaluation and Mitigation Strategy (REMS) program, which could include healthcare professional and patient education around appropriate use of Fampridine-SR. The FDA accepted this submission as a solicited major amendment to the Fampridine-SR NDA. The FDA has the option to extend the PDUFA date when a sponsor submits a major amendment that provides a substantial amount of new data not previously reviewed by the FDA. On October 21, 2009 the FDA extended the PDUFA date for its review of the NDA for Fampridine-SR to January 22, 2010.
On June 30, 2009, we entered into a Collaboration and License Agreement (Collaboration Agreement) with Biogen Idec International GmbH (Biogen Idec), a Swiss subsidiary of Biogen Idec Inc. Under the Collaboration Agreement, Acorda and Biogen Idec have agreed to collaborate on the development and commercialization of products containing aminopyridines, including Fampridine-SR, initially directed to the treatment of multiple sclerosis. The Collaboration Agreement includes a sublicense of our rights under an existing license agreement with Elan. We have also entered into a related supply agreement (Supply Agreement) pursuant to which we will supply Biogen Idec with its requirements for the licensed products through our existing supply agreement with Elan. Biogen Idec Inc. has guaranteed the performance of Biogen Idec's obligations under the Collaboration Agreement and the Supply Agreement.
Under the Collaboration Agreement, Biogen Idec, itself or through its affiliates, has the exclusive right to commercialize licensed products in all countries outside of the United States, while we retain the right to commercialize licensed products in the United States. Each party will have the exclusive right to develop licensed products for its commercialization territory, although the parties may also decide to jointly carry out mutually agreed future development activities under a cost-sharing arrangement. If Biogen Idec does not participate in the development of licensed products for certain indications or forms of administration, it may lose the right to develop and commercialize the licensed products for such indication or form of administration. Biogen Idec may sublicense its rights to certain unaffiliated distributors. During the term of the Collaboration Agreement and for two years after the Collaboration Agreement terminates, neither party nor its affiliates may, other than pursuant to the Collaboration Agreement, research, develop, manufacture or commercialize any competing product, defined as one that contains aminopyridine or any other compound that acts at least in part through direct interaction with potassium channels to improve neurological function in multiple sclerosis, spinal cord injury or other demyelinating conditions, except that we may exploit the licensed products anywhere in the world following termination of the Collaboration Agreement.
In consideration for the rights granted to Biogen Idec under the Collaboration Agreement, we were entitled to a non-refundable upfront payment of $110.0 million as of June 30, 2009, which was received on July 1, 2009. Also, as a result of such payment to us, a payment of $7.7 million became payable by us to Elan. We currently estimate the revenue recognition period to be approximately 12 years. The Company recognized $2.4 million in license revenue related to the $110.0 million received from Biogen Idec and $165,000 in cost of license revenue related to the $7.7 million paid to Elan during the three-month period ended September 30, 2009. We are also eligible to receive up to $400 million from Biogen Idec should specified regulatory and sales milestones be met. There can be no guarantee that any such milestones will in fact be met.
Under the Collaboration Agreement, we will also be entitled to receive double-digit tiered royalties on sales of licensed products by Biogen Idec, its affiliates or certain distributors outside of the United States. Such royalties for products combining a licensed compound with at least one other clinically active therapeutic, prophylactic or diagnostic ingredient are determined based on the contribution of the licensed compound to the overall sales or value of the combination product. Biogen Idec may offset against the royalties payable to us a portion of certain royalties which it may need to pay to third parties. In addition, Biogen Idec will pay us, in consideration for its purchase and sale of the licensed products, any amounts due to Elan for ex-U.S. sales, including royalties owed under the terms of our previous agreements with Elan.
Biogen Idec will exclusively purchase all of Biogen Idec's, its affiliates' and its sublicensees' requirements of the licensed products from us. The purchase price paid by Biogen Idec for licensed products under the Collaboration Agreement and Supply Agreement reflects the prices owed to our suppliers under our supply arrangements with Elan or other suppliers.
The Collaboration Agreement will terminate upon the expiration of Biogen Idec's royalty payment obligations, which occurs, on a licensed product-by-licensed product and country-by-country basis, upon the latest of expiration of the last-to-expire patent covering a licensed product, fifteen years following first commercial sale of such licensed product, the expiration of regulatory exclusivity and the existence of certain levels of sales by competing products. The Collaboration Agreement and the Supply Agreement will automatically terminate upon the termination of our license agreement with Elan in its entirety or with respect to all countries outside of the United States. We cannot terminate our license agreement with Elan without Biogen Idec's prior written consent under certain circumstances. Biogen Idec may terminate the Collaboration Agreement in its entirety or on a country-by-country basis at any time upon 180 days' prior written notice, subject to our right to accelerate such termination. The Collaboration Agreement may also be terminated by either party if the other party fails to cure a material breach under the agreement, which termination will be limited to a particular country or region under certain circumstances. However, if Biogen Idec has the right to terminate the Collaboration Agreement due to our material uncured breach, Biogen Idec may instead elect to keep the agreement in effect, but decrease the royalty rates they pay us by a specified percentage. We may also terminate the Collaboration Agreement if Biogen Idec does not commercially launch a licensed product within a specified time period after receiving regulatory approval for such licensed product or otherwise fails to meet certain commercialization obligations. In addition, we may terminate the Collaboration Agreement under certain circumstances if (i) Biogen Idec, its affiliates or its sublicensees challenge certain of our patents or (ii) there is a change in control of Biogen Idec or its parent company or certain dispositions of assets by Biogen Idec, its parent or its affiliated companies, followed by a change in the sales and marketing personnel responsible for the licensed products in Biogen Idec's territory of more than a specified percentage within a certain period of time after such change in control or disposition. The Supply Agreement may be terminated by either party if the other party fails to cure a material breach under the Supply Agreement. In addition, the Supply Agreement will terminate automatically upon termination of the Collaboration Agreement, and the Collaboration Agreement will terminate automatically if the Supply Agreement is terminated for any reason other than for a material breach that we are responsible for. To the extent permitted by law, each party may
terminate the Collaboration Agreement and the Supply Agreement if the other party is subject to bankruptcy proceedings.
If the Supply Agreement is terminated by Biogen Idec for an uncured material breach, we will waive our right for Elan to exclusively supply the licensed products to us solely to permit Biogen Idec to negotiate terms with Elan for the supply of licensed products to Biogen Idec. If the Supply Agreement is otherwise terminated, Biogen Idec will not have any future obligations to purchase licensed products from us and we will not have any future obligations to supply Biogen Idec with licensed products. If the Collaboration Agreement is terminated, Biogen Idec will assign to us all regulatory documentation and other information necessary or useful to exploit the licensed products in the terminated countries and will grant us a license under Biogen Idec's and its affiliates' relevant patent rights, know-how and trademarks to exploit the licensed products in the terminated countries. Such assignment and license will be at no cost to us unless the Collaboration Agreement is terminated by Biogen Idec for a material uncured breach that we are responsible for, in which case the parties will negotiate a payment to Biogen Idec to reflect the net value of such assigned and licensed rights.
Neither party may assign the agreements without the prior written consent of the other, except to an affiliate or, in certain cases, to a third party acquirer of the party.
In connection with the entry into the Collaboration Agreement, Acorda, Biogen Idec and Elan entered into a consent agreement (the Consent). Under the Consent, Elan consented to our sublicense of rights to Biogen Idec, and Acorda, Biogen Idec and Elan agreed to set up a committee to coordinate activities under the agreements between Acorda and Elan with respect to the development, supply and commercialization of the licensed products for Biogen Idec's territory. The Consent also amends our agreements with Elan by, among other things, permitting us to allow Biogen Idec to grant sublicenses to certain unaffiliated distributors, permitting us to allow Biogen Idec to package the licensed products and requiring Elan to facilitate the qualification of an alternate supplier of the licensed products under certain circumstances.
Biogen, which is responsible under the Collaboration Agreement for the filing of the MAA, has announced that it plans to file with the EMEA in early 2010.
We believe Fampridine-SR is the first potential therapy in late-stage clinical development for MS that seeks to improve the function of damaged nerve fibers and, if approved, could be complementary to existing drugs used to treat MS. To our knowledge, there are no current therapies indicated to improve walking ability in people with MS.
We have three preclinical programs focused on novel approaches to repair damaged components of the CNS. We believe all of our preclinical programs-neuregulins, remyelinating antibodies and chondroitinase-have broad applicability and have the potential to be first-in-class therapies. While these programs have initially been focused on MS and SCI, we believe they may be applicable across a number of CNS disorders, including stroke and traumatic brain injury, because many of the mechanisms of tissue damage and repair are similar. In addition, we believe that these programs may have applicability beyond the nervous system, including in such fields as cardiology, oncology, orthopedics and ophthalmology. In 2008, we began to work with a contract manufacturer to develop larger scale manufacturing and purification processes for one of the neuregulins, GGF2, under good manufacturing practices (cGMP) in preparation for a potential future Investigational New Drug (IND) application to support human clinical trials for the treatment of congestive heart failure (CHF). Acorda and the FDA held a pre-IND meeting to discuss an IND filing for CHF. Based on feedback from the FDA, we now expect to file an IND in early 2010 pending final results of animal toxicology and other preclinical activities. If we are able to establish a proof of concept for treatment of CHF through human clinical studies, we believe that this may enable us to enter into a partnership with a cardiovascular-focused company, and that such a partnership, if achieved, could more efficiently move GGF2 forward in a cardiac indication, while potentially providing us the capital to support our work on GGF2 in neurological indications. We have also begun work with contract manufacturers to scale up
manufacturing and purification processes for one of the remyelinating antibodies (rHIgM22) under cGMPs for preparation for a future IND application.
Our marketing efforts are focused on Zanaflex Capsules, which we launched in April 2005. Zanaflex tablets lost compound patent protection in 2002 and both Zanaflex Capsules and Zanaflex tablets compete with 12 generic tizanidine products. Although we currently distribute Zanaflex tablets, we do not, and do not intend to, actively promote Zanaflex tablets. As a result, prescriptions for Zanaflex tablets have declined and we expect that they will continue to decline. Our goal is to convert as many sales of Zanaflex tablets and generic tizanidine tablets to sales of Zanaflex Capsules as possible. We believe that sales of Zanaflex Capsules will constitute a significant portion of our total revenue until we begin to generate sales of Fampridine-SR, if approved. Zanaflex Capsules and tablets commercial operations were cash flow positive in 2008. A slight downward trend in prescriptions was observed over the first three quarters of 2009.
We are conducting prelaunch activities to prepare for the commercialization of Fampridine-SR, if approved.
We also are conducting activities to provide disease state education and awareness programs to health-care providers and consumers about mobility and walking impairment issues for people with MS. For health-care providers, these activities include a disease state awareness booth at major medical meetings, a physician direct mail campaign and advertisements in medical publications. For consumers, these activities include a booth at consumer events, an online website (moveoverms.org), and advertisements in publications.
In August 2007, we received a Paragraph IV Certification Notice from Apotex Inc. advising that it filed an Abbreviated New Drug Application (ANDA) with the FDA for generic versions of each of the three Zanaflex Capsules dosage strengths marketed by us. In response to the filing of the ANDA, in October 2007, we filed a lawsuit against Apotex Corp. and Apotex Inc. (collectively, Apotex) in the United States District Court for the District of New Jersey asserting infringement of our U.S. Patent No. 6,455,557 relating to multiparticulate tizanidine compositions, including those sold by us as Zanaflex Capsules. The patent expires in 2021. The defendants have answered our complaint, asserting patent invalidity and non-infringement and counterclaiming, seeking a declaratory judgment of patent invalidity and non-infringement. We have denied those counterclaims. If the ANDA were approved by the FDA and Apotex were successful in challenging the validity of the patent, Apotex could be permitted to sell a generic tizanidine hydrochloride capsule in competition with Zanaflex Capsules.
In March 2008, Apotex filed a motion, which we opposed, for partial judgment on the pleadings dismissing our request for relief on the ground that the case is "exceptional" under U.S.C. §§ 271(e)(4) or 285. The court ruled in our favor and denied Apotex's motion in December 2008. Fact discovery in the case has been completed. The court has also determined that a Markman hearing on the construction of certain terms contained in the patent will be held, and the parties have completed related depositions and submission of the briefs to the Court. The hearing was set for November 18, 2009 but the Court has postponed it without yet setting a new date. Apotex has filed a motion to exclude certain evidence from consideration at the hearing, which we have opposed.
We have established our own specialty sales force in the United States, which consisted of 73 sales professionals and account management as of September 30, 2009, including approximately 52 sales representatives. This sales force has targeted neurologists and other prescribers who specialize in treating people with conditions that involve spasticity. We also employ an internal and field-based team who call on managed care organizations, pharmacists and distribution customers. In addition, we retain TMS Professional Markets Group, LLC to provide a small, dedicated sales force of pharmaceutical telesales professionals who contact primary care, specialist physicians and pharmacists. We expect to double our sales representatives to approximately 100 people, in anticipation of and in time for the launch of Fampridine-SR, if approved.
Results of Operations
Three-Month Period Ended September 30, 2009 Compared to September 30, 2008
Gross Sales
We recognize product sales using a deferred revenue recognition model where shipments to wholesalers are recorded as deferred revenue and only recognized as revenue when end-user prescriptions of the product are reported. We recognized revenue from the sale of Zanaflex Capsules and Zanaflex tablets of $14.5 million for the three-month period ended September 30, 2009, as compared to $13.7 million for the three-month period ended September 30, 2008. The increase was due to a 10% price increase effective January 1, 2009. A slight downward trend in prescriptions was observed over the first three quarters of 2009.
Discounts and Allowances
We recorded discounts and allowances of $1.6 million for the three-month period ended September 30, 2009 as compared to $1.2 million for the three-month period ended September 30, 2008. Discounts and allowances are recorded when Zanaflex Capsules and Zanaflex tablets are shipped to wholesalers. Discounts and allowances for the three-month period ended September 30, 2009 consisted of $785,000 in fees for services payable to wholesalers, $597,000 in allowances for chargebacks and rebates and $225,000 in cash discounts and patient program rebates. Discounts and allowances for the three-month period ended September 30, 2008 consisted of $651,000 in fees for services payable to wholesalers, $449,000 in allowances for chargebacks and rebates, and $124,000 in cash discounts and patient program rebates.
Grant Revenue
We earned no grant revenue for the three-month period ended September 30, 2009 compared to $23,000 for the three-month period ended September 30, 2008. Grant revenue is recognized when the related research expenses are incurred and our performance obligations under the terms of the respective contract are satisfied.
Cost of Sales
We recorded cost of sales of $2.6 million for the three-month period ended September 30, 2009 as compared to $2.7 million for the three-month period ended September 30, 2008. Cost of sales for the three-month period ended September 30, 2009 consisted of $1.4 million in inventory costs primarily related to recognized revenues, $878,000 in royalty fees based on net product shipments, $321,000 in amortization of intangible assets, which is unrelated to either the volume of shipments or the amount of revenue recognized, and $50,000 in period costs related to freight and stability testing. Cost of sales for the three-month period ended September 30, 2008 consisted of $1.3 million in inventory costs primarily related to recognized revenues, $741,000 in royalty fees based on net product shipments, $596,000 in amortization of intangible assets, which is unrelated to either the volume of shipments or the amount of revenue recognized, and $44,000 in period costs related to packaging, freight, and stability testing. Payments to and interest expense related to our Paul Royalty Fund (PRF) transaction discussed below in the section titled "Liquidity and Capital Resources" do not impact our cost of sales.
Research and Development
Research and development expenses for the three-month period ended September 30, 2009 were $8.2 million as compared to $8.7 million for the three-month period ended September 30, 2008, a decrease of approximately $500,000, or 5%. The decrease was primarily attributable to a decrease in
regulatory expenses relating to Fampridine-SR of $762,000 or 33% to $1.5 million as well as a decrease in MS clinical development program expense of $823,000 or 42% to $1.1 million.
These decreases were offset by an increase in research and development expense of $573,000 or 29% to $2.6 million primarily related to work on one of our preclinical pipeline products, GGF2, including an increase in staff and compensation to support this initiative. This overall increase in expense was primarily associated with animal toxicology expenses and the development of larger scale manufacturing and purification processes for GGF2, under cGMP, in preparation for a potential future IND application to support human clinical trials. The overall decrease in research and development expense was also offset by an increase in clinical and regulatory staff and compensation of $451,000 to support the overall growth of the organization and manufacturing and stability fees for Fampridine-SR of $108,000.
Sales and Marketing
Sales and marketing expenses for the three-month period ended September 30, 2009 were $15.6 million compared to $14.4 million for the three-month period ended September 30, 2008, an increase of approximately $1.1 million or 8%. This increase was primarily attributable to an increase of $1.3 million in disease state education and awareness programs and pre-launch activities associated with the possible commercialization of Fampridine-SR, if approved.
General and Administrative
General and administrative expenses for the three-month period ended September 30, 2009 were $7.7 million compared to $5.9 million for the three-month period ended September 30, 2008, an increase of approximately $1.8 million, or 29%. This increase was the result of an increase in costs . . .
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