Acorda Gains, But Misses Estimates

Zacks

Acorda Therapeutics Inc. (NasdaqGS:ACOR - News) recorded adjusted earnings of 7 cents per share for the second quarter of fiscal 2011, compared with a loss of 18 cents in the year-ago period. The Zacks Consensus Earnings Estimate for the quarter was 12 cents per share.

Higher revenues during the quarter led to the surge in the company’s earnings.

Revenues

Quarterly revenues shot up 52.4% to $65.3 million, driven primarily by strong Ampyra sales. However, revenues marginally missed the Zacks Consensus Estimate of $67 million.

Second quarter revenues comprised $62.9 million (up 55.3%) in product sales and $2.4 million (flat year over year) in license and royalty revenue. Sales of Ampyra, which was launched in March 2010, came in at $51.8 million, reflecting a year-over-year increase of 85%.

Ampyra, aimed at improving walking speed in multiple sclerosis patients, has been developed by Acorda. The company has a licensing agreement with Biogen Idec (NasdaqGS:BIIB - News) for the development and commercialization of the drug outside the US. Further, Acorda has a supply agreement with Elan Corporation (NYSE:ELN - News) for manufacturing Ampyra.

Last month, the European Commission granted conditional approval to Fampyra (ex-US name of Ampyra), to be used as a treatment to improve walking in adult patients with multiple sclerosis.

However, Zanaflex capsules and tablets recorded sales of $11.1 million in the second quarter, down 11.2% from the year-ago figure. Revenues from Zanaflex capsules have been declining due to increasing managed care pressure on patients to opt for low-cost generic tizanidine tablets over the higher-cost Zanaflex capsules.

Expenses

Acorda’s research and development (R&D) expenses soared 127.3% to $15.0 million. The expenses mainly consisted of costs related to post-marketing studies and life cycle management programs of Ampyra and expenditure associated with the phase I trial of glial growth factor 2 (GGF2). GGF2 is being evaluated for the treatment of heart failure patients.

Selling, general and administrative (SG&A) expenses came in at $40.3 million, 18.2% higher than the year-ago figure. The increase in the SG&A spend was due to costs incurred in the sales and marketing of Ampyra and those related to Zanaflex’s patent infringement lawsuit.

2011 Guidance Reaffirmed

For 2011, the company expects Ampyra sales to range from $205 - $230 million.

Further, Acorda expects SG&A expenses for the year in the range of $130 million to $140 million, driven primarily by commercial and administrative costs related to marketing of Ampyra.

R&D expenses for 2011 are expected to lie in the range of $40 million to $45 million. The expenses will include costs related to post-marketing studies of Ampyra and other development expenses.

Both SG&A and R&D expenses guidance range for 2011 are exclusive of share-based compensation expense.

Our View

We currently have a Zacks #3 Rank (short-term Hold rating) on Acorda. We are pleased with the conditional approval of Fampyra in the European Union (:EU), which we believe will help add to the company’s revenues. Moreover, we expect investors to remain focused on the sales ramp-up of Fampyra.

Meanwhile, Acorda is looking to expand its portfolio by in-licensing products. The recent agreement with Medtronic, Inc. (NYSE:MDT - News) for AC105 is one such example. Acorda acquired the worldwide development and commercialization rights to AC105, and plans to study the candidate as an acute treatment for patients who have suffered neurological trauma, such as spinal cord injury and traumatic brain injury. We believe Acorda will be able to generate additional revenues if it is successful in entering into more such deals

Longer-term we have an Outperform recommendation on Acorda.

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