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Edited Transcript of ACOR earnings conference call or presentation 31-Oct-17 12:30pm GMT

Thomson Reuters StreetEvents

Q3 2017 Acorda Therapeutics Inc Earnings Call

HAWTHORNE Nov 1, 2017 (Thomson StreetEvents) -- Edited Transcript of Acorda Therapeutics Inc earnings conference call or presentation Tuesday, October 31, 2017 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Lawrence

Acorda Therapeutics, Inc. - Chief of Business Operations and Principal Accounting Officer

* Felicia Vonella

Acorda Therapeutics, Inc. - Director of IR & Corporate Communications

* Ron Cohen

Acorda Therapeutics, Inc. - Founder, CEO, President and Director

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Conference Call Participants

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* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* Kenneth Eugene Trbovich

Janney Montgomery Scott LLC, Research Division - Director of Specialty Pharmaceuticals

* Laura K. Chico

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Michael Jonathan Yee

Jefferies LLC, Research Division - Equity Analyst

* Paul Andrew Matteis

Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst

* Philip M. Nadeau

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Salveen Jaswal Richter

Goldman Sachs Group Inc., Research Division - VP

* Thomas Shrader

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* William Tanner

Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst

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Presentation

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Operator [1]

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Welcome to the Acorda Therapeutics Third Quarter 2017 Update. (Operator Instructions) Please be advised that this call is being taped at the company's request. I will now introduce your host for today's call, Felicia Vonella, Executive Director of Investor Relations at Acorda. Please go ahead.

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Felicia Vonella, Acorda Therapeutics, Inc. - Director of IR & Corporate Communications [2]

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Thank you. Before we begin, let me remind you that this presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts, regarding management's expectations, beliefs, goals, plans or prospects should be considered forward-looking.

These statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information on these and other risks, please refer to our filings with the SEC.

I will now hand the call over to Ron Cohen.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [3]

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Thanks, Felicia. Good morning, everyone. We reported AMPYRA net sales of $133 million for the third quarter 2017. That's an increase of 3% over $120 million that we reported in the same quarter of 2016. We are reiterating on AMPYRA 2017 revenue guidance of $535 million to $545 million. AMPYRA's prescription growth has been in line with our expectations year-to-date. It's in the low single digits. The difference in consensus between our actual and consensus to date were due to, somewhat, lower inventory levels and also some increases to our discounts and allowances.

We are vigorously pursuing our appeal of the U.S. District Court decision that overturned 4 of our AMPYRA patents. We filed our opening brief with the Federal Circuit Court of Appeals and the defendants have filed their opposing and cross-appeal brief. We expect reply briefs to be filed this month, November -- I'm sorry, this coming month, November 2017, followed by an oral argument, which we believe, most likely, would be scheduled for early 2018.

Both PhRMA and BIO have submitted amicus briefs in support of Acorda's appeal. This reflects the fact that our appeal raises issues going to the heart of the patent system's incentive to innovate and are critically important to biopharmaceutical innovation, in particular. We look forward to the opportunity to be heard by the appellate court.

Moving to our late stage pipeline. In August, we received a Refuse to File letter from the FDA regarding our NDA for INBRIJA. The letter specified 2 reasons for the RTF and also requested additional information that was not the basis for the RTF but which FDA indicated would have been raised as review questions in the ordinary review process.

We've since had constructive dialogue with the FDA, determined that we could resubmit the NDA without requesting a Type A meeting. We've taken time to strengthen the NDA with additional information that the FDA requested. We believe we have a strong package for a resubmission in the current quarter. Based on current guidelines, we would expect the FDA to notify us within 74 days of the submission -- of submission date regarding whether the submission has been deemed complete and accepted for full review.

Our commercial preparations for the launch for INBRIJA continue. We're also in discussions with potential partners regarding INBRIJA outside the U.S. Given our teams focus on the NDA submission or resubmission, we are revising the timing for our submission for the MAA or Marketing Authorization Application to the European Medicines Agency to the first quarter of 2018. We don't anticipate that, that change in time line will impact our ongoing partnering discussions or expectations for INBRIJA outside the U.S. And we remain confident in INBRIJA's promise as an important new therapy for people with OFF periods related to Parkinson's disease. We see tremendous long-term value in the solid clinical profile, strong IP and what we believe is more than $500 million peak net sales opportunity in the U.S. alone.

Tozadenant is an oral adenosine A2a antagonist. It represents a potential first-in-class treatment for chronic maintenance therapy of Parkinson's disease in the U.S. In a Phase IIb trial, tozadenant reduced average daily OFF time by more than an hour relative to placebo and that was even in people already being treated with several other concurrent maintenance medications.

We expect results from the pivotal Phase III trial, in the first quarter of 2018. And as part of the Phase III program, we also have initiated an open-label, long-term safety study in the second quarter of 2017. Toz would be complementary to INBRIJA. And if it's approved, it represents a potential commercial opportunity in the U.S. that's greater than that of INBRIJA.

Dave will now review select financials for the quarter.

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David Lawrence, Acorda Therapeutics, Inc. - Chief of Business Operations and Principal Accounting Officer [4]

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Thanks, Ron, and good morning, everyone. I want to take a minute to comment on a few key items of note in our third quarter 2017 financial results. This morning, we announced a reduction to our 2017 SG&A expense guidance from $170 million to $180 million, down to $160 million to $170 million. This reduction is related to a combination of operating efficiencies and a change in timing of certain expenses, which will not be incurred in 2017.

The asset impairment charge we took in the third quarter is a noncash book adjustment to the carrying value of an intangible asset, Selincro, which was acquired as part of the Biotie acquisition. This impairment charge is a book adjustment only and has no impact on our operations or on our cash balance.

We ended the quarter in a strong cash position with cash and equivalents of over $192 million. We continue to project our 2017 year-end cash balance to be in excess of $200 million.

I'll now turn the call back over to Ron.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [5]

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Thanks, Dave. We're focused on 3 key priorities during the rest of this year and into 2018: first, advancing our late stage Parkinson's programs, INBRIJA and tozadenant toward approval and commercialization; second, maximizing the value of AMPYRA, which includes our vigorous prosecution of the appeal in the Federal Circuit; and third, generating value through business development initiatives, including monetization of existing royalty streams for AMPYRA and Selincro and exploring partnering and out-licensing opportunities across our pipeline.

We will now take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from the line of Philip Nadeau with Cowen and Company.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [2]

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Ron, a couple on the Refuse to File letter. I guess, first, could you give us some more details about exactly what were those issues that caused the FDA to issue the Refuse to File?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [3]

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Yes, Phil. We -- I think, we had put that out in a -- in the original press release with respect to what the issues were. The first one had to do with the date when the manufacturing side would be ready for inspection. And the second one was regarding the way in which the drug master production records were submitted, and their desire for something a bit different than what we've submitted.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [4]

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So I guess, I'm kind of asking on the second one. Was it simply formatting for the drug master file? Or was there missing information or questions about the actual content?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [5]

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Without going into tremendous detail. It was -- let me put it this way, it was additional information that they wanted, which we have and are putting in the resubmission. And we're highly confident that we have what they want.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [6]

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And then secondly on the issues that didn't lead to the Refuse to File but would have been review questions later. Can you give us some sense of what those topics concerned?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [7]

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Yes. No, because we have not gone into tremendous detail. These are review questions, as the agency indicated. Some of them -- I may -- I'll tell you some of them were of -- what we would call a technical nature, some of them were actually requests for questions about certain things. And there again, we are confident that we can respond adequately to their questions.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [8]

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Got it. Okay. And then just last question on this is, is the date when the manufacturing site was ready for inspection, was that simply they were looking for a date? Or is there something lost in translation between Acorda and the FDA in that question? It seems like almost it's certainly a reason to give a Refuse to File.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [9]

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Well, I'm not going to characterize the reason. I guess, what I'll say is that was an extremely simple item to fix.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [10]

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Got it. Okay. And then just last question from me on AMPYRA. You gave 2 reasons for the difference versus consensus inventory destocking and the change in discounts or allowances. Could you give us some sense of the impact of those 2 on the quarter?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [11]

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Maybe the best thing I can do is point out that, if you look, let's say, at 1-week of inventory across the board, that's worth about $10 million in net sales right there. So if you had a 1-week contraction in inventory across the spectrum, that would be $10 million right there. So that gives you a sense of what the toggles are. So between the contraction that we actually did see, and it wasn't universal, there were certain pockets that were more than others and for various reasons who contracted their inventory across the year. So if you combine that with the adjustments in DNA that we saw, it's pretty easy to get to the shortfall that's relative to consensus that we saw. Now having said that, the fourth quarter is typically our biggest quarter for a number of reasons, not least of which is that toward the end of the quarter, we see that patients tend to take an extra prescription because they're heading into the new year, and they're going to reset the clock on their deductibles and their doughnut hole and so on. So you tend to see people kind of waking up and going, "Oh, my gosh, I've got to get another prescription at the end of the year." You also see the pharmacies, similar, looking ahead saying, "Well, there may be a price increase that's kind of typical. Let's get ahead of it and get more orders in." So typically we see more orders in the fourth quarter. And for that reason, based on -- best we can project, we're still looking at our original range of maintaining our guidance on the original range, even though we have had a shortfall because of the reasons that we pointed out.

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Operator [12]

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Your next question comes from the line of Tom Shrader with Stifel.

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Thomas Shrader, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [13]

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I wanted to ask a question about the amicus briefs that, I think, is vague enough that you can answer it. But these are huge issues and -- huge issues and they seem compelling. But if the courts were to take up this issue, is that good for you or bad for you, given that you lost the previous round? Does this freeze your case? Or just what would happen if one of these cases were taken up? And then along these lines, is this new work by BIO and PhRMA or have they filed these issues multiple times? Just your thoughts on what's going on here? And how different things would affect you?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [14]

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Okay. So, Tom, when you say, "If the courts take it up." I'm not quite sure we are going with that. Because, at least, in this case, where the court will consider it because it's part of our appeal. So it's -- we'll have an oral argument. And the appellate court, which will be a panel of 3 appellate judges will be reviewing all the arguments on both sides as they normally do. And then coming to a verdict on that. Obviously, we're aiming to get a verdict in our favor, which is that either they overturn the District Court verdict or they remand it back to the District Court for further consideration. What we're not aiming for, obviously, is that they uphold the verdict. With respect to the BIO and PhRMA briefs, I'm not aware that they have filed anything like this before. It's specific to the issues that have arisen, in our view, because of the District Court's verdict, in which -- well, I mean, you can read the brief. I don't want to characterize it, not being a lawyer. But the issues that are raised there go beyond our case alone. They actually go into the way in which patents and innovation or -- excuse me, patents are used to incentivize innovation. And then how people can get patents to reward their innovation and incentivize them to commercialize it. So those issues are closely tied up in there. Again, transcending just Acorda's case but going to the heart of these types of issues across the spectrum, meaning all biopharmaceutical companies would have an interest in the outcome of that appeal.

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Thomas Shrader, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [15]

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But would your case wait on that appeal? Or does that -- would it just be totally independent?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [16]

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The amicus briefs are specific to our appeal. So BIO and PhRMA have not -- they didn't file in a vacuum. They didn't file on their own. They're actually filing specifically in support of our arguments on appeal. So that's what they are doing. And so they're putting in their own briefs, essentially saying we're agreeing with Acorda's case here and arguments with respect to these issues. And let's -- we'll fill it out in our own way and give you our argument from the biotech industry's point of view and from the pharmaceutical industry's point of view.

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Operator [17]

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Your next question comes from the line of Cory Kasimov with JPMorgan.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [18]

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I have 2. One clinical one and then it's one follow up on the AMPYRA litigation. So first the clinical side with the Phase III toz data in the relative near term. Can you talk about what, in your mind, is key to demonstrate here from a, I guess, both a clinical meaningful standpoint but to also strategically best align the product with INBRIJA, assuming that both, ultimately, make it to market? And then I have the follow up.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [19]

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Yes. So with respect to INBRIJA, we see it as completely complementary. That's one of the most attractive things about the way we use this as development to build that portfolio, assuming it works, obviously. Because you would then have 2 products in the bag for the sales force where you go and you provide a range of solutions that complement each other. In one case, you're providing, in the case of toz, a novel mechanism, a new maintenance therapy that provides significant reductions in OFF time, even in people who are already taking multiple maintenance medications and are still having issues, which is very frequent, as you know, in Parkinson's disease. So that in itself is attractive. Then you have INBRIJA which -- for people who still have OFF periods no matter what you do, you reduce the OFF periods, but they still have some OFF periods. Now you have the ability to give them a -- an ON demand, as it were a -- when they're going into an OFF period. When they're in an OFF period, they have the ability to take that to supplement their daily maintenance therapy. And hopefully, get out of the OFF period quickly and then move on with their day. So those are complementary. With respect to toz, typically in the field, the benchmark is around an hour of additional placebo-adjusted OFF time reduction. So that, that's typically the benchmark. Now is 0.9 hours acceptable? Yes, probably. But it's about an hour and that's typically what you see for most of the daily maintenance drugs that are out there in their clinical trials. To the extent that you are above an hour, and remember that's an average, right? So that means some people are getting 1.5 hours, some people are getting 2 hours, some people are getting 0.5 hour, but that's an average. To the extent that you're above an hour, the more you are above an hour, the better off you are. So that if you're at, let's say, 1.3 hours or above, now you're talking about a message that will distinguish not just by mechanism but by actual outcome in the clinical trials. And that would be great, if you saw that. Now what we saw in the Phase IIb for the 120-milligram dose was 1.1 hours of placebo-adjusted reduction in OFF time. And we'll see what we see in a larger trough.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [20]

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Okay. That's helpful. And quickly with the follow-up on the next steps for the AMPYRA litigation. I'm just curious, is there a precedence or how long would you expect it to take for a verdict to be reached, post the oral arguments?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [21]

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My understanding is, we don't know. Because it entirely depends on the court's docket at the time, how much they delve into the case, how much time they want to devote to reading the briefs and deliberating and all that. So it really is a mixed bag. Typically, you would be thinking about months after, but whether it's 3 months or 6 months or 8 months, we don't know.

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Operator [22]

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Your next question comes from the line of Paul Matteis with Leerink.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [23]

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The first one, Ron, is I just wanted to clarify something about AMPYRA guidance. The fourth quarter is usually the best quarter, as you said. And -- but we were looking back at it. In the last couple of years, the year-over-year quarterly growth was 11% and 8%. They hit the bottom end of the guidance. This year, it's around 20%. So can you just comment are there any specific kind of one-time items you're expecting this quarter that you think are going to be a tailwind that will let you meet your guidance? And then I have a couple of quick follow-ups.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [24]

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Yes, so -- that is accurate, your characterization is accurate. Our view is that there will be increased demand this year in the fourth quarter for various reasons. If you think about it, the inventory contractions that we saw. Our inventory management, historically, was pretty tight anyway. It averaged about 2 weeks. It contracted below that in several places over the course of the year-to-date. And there were various reasons for that, we believe. And we believe that those reasons -- that based on those reasons, we expect to see them make up for it, in essence, this quarter. So we do expect more than one normally would, as a bounce back from that inventory contraction. Now again, projections are what they are. That's the best protection we have based on all of our analysis to-date. And we'll see if we are correct. But based on the analysis of those data and those trends, we still believe that we can hit the range.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [25]

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And then just second on the write-down of the Selincro royalty. Why did you decide to write-down the value of that now? And does that have anything to do or correspond with ongoing discussion surrounding monetizing it? And then just lastly on CVT-301, I was wondering if you can comment on your expectations regarding whether or not there's going to be an FDA advisory committee?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [26]

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Okay. I'm going to let Dave take your question on the adjustment. And then I'll come back on the other one.

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David Lawrence, Acorda Therapeutics, Inc. - Chief of Business Operations and Principal Accounting Officer [27]

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Yes, so when we looked at the asset, we take a bunch of assumptions and do a reevaluation of it. So it's -- the reassessed market valuations that drive it based on the license source, plans for the asset. As you know, we generate royalties on what they sell. So as we looked at it and their future plans changed and the market conditions and some other factors. We just decided it was the right time to take the write-down.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [28]

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Yes. And any other conversation on that. We can't comment on an ongoing partnering or excuse me -- licensing discussions, obviously. I mean, we're in the middle of those discussions now. With respect to an ad comm, we -- I get asked that a fair amount. We have had -- this goes under the heading of absence of evidence is not a evidence of absence. We've had 0 indication in all of our conversations and correspondence with the agency that there would be an ad comm. On the other hand, they wouldn't necessarily -- it wouldn't necessarily have come up, based on where we are in the process. So it's really pure speculation on our part at this point. I will tell you, we -- based on what we know of the history of ad comms and when people -- when the FDA has ad comms, we are not sure we see why there would be an ad comm. But having said that, it's the FDA's prerogative, and it's very hard to speculate on that.

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Operator [29]

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Your next question comes from the line of Michael Yee with Jefferies.

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Michael Jonathan Yee, Jefferies LLC, Research Division - Equity Analyst [30]

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A couple of questions on the partnership comments, can you maybe talk a little bit about what type of partnership, or broadly, would it consider both INBRIJA plus the potential for toz? And if that's the case, if you are interested in that, do you need to wait for the data? Maybe just talk a little bit about the scenario trees with the potential partnership and how that might play out? And then as it relates to the INBRIJA development's next steps, have you actually had the Type B meeting, I guess, you said it was not Type A. But maybe I'm assuming it's Type B. I wished you had that meeting and walked through everything. And therefore, that's why you're confident you can file by the end of the quarter? Maybe just talk a little bit about that as well.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [31]

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Great, Mike. Let me take the second question first. We've not had a Type A or Type B or Type C. We have been in dialogue with the division. And based on that dialogue with the division, we are -- we determined that we did not need a Type A or Type B meeting, and we did not need to take the time to get that scheduled and move the time lines back as a result because the communications were, we believe, clear and specific and gave us the guidance we needed with respect to what we need to put in the resubmission. So no formal meeting of that kind -- of those -- no type meeting. So that's one. So with respect to partnering scenarios, that's harder to talk to. I would say that, at this point, we're engaging in discussions to get a sense of, in essence, the lay of the land, primarily for -- well, for ex U.S. Our intention is to keep -- in fact, is to keep North America. And so this would be ex North America commercialization where, at this point, it would be much more difficult or challenging for us to try to go it alone in ex North American territories. Now a deal could take many forms, obviously, and it could leave flexibility so that, ultimately, we could potentially have a piece of that and get into some of the more attractive markets, like, in the EU. But we have not -- we're not frozen in a rigid framework. We're exploring interest in a variety of frameworks. So we're -- it's all in the exploratory phase of discussion. With respect to toz, I'm speculating here, but I think it's safe to say that we're so close to the data, relatively speaking, that you could envision coming to terms, in principal, but then needing to actually have the data in order to finalize an agreement based on that.

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Operator [32]

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Your next question comes from the line of Laura Chico with Raymond James.

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Laura K. Chico, Raymond James & Associates, Inc., Research Division - Senior Research Associate [33]

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I've got 2. First, on INBRIJA and the MAA that you're filing in the first quarter in '18. I'm just wondering if you could elaborate a little bit here. Was this really driven by partnering discussions or was this also, perhaps, after interactions with regulators, just a little clarify there? And also if you could help us frame perhaps ex U.S. revenue expectations? I know you've been pretty clear about what you expect in the U.S., but kind of helping us understand what is the broader opportunity outside the U.S?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [34]

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Okay. So with -- if I'm understanding your question correctly, and correct me if I'm not. The move of the time line by a quarter from fourth quarter to first quarter '18 for the MAA submission has been driven entirely by the need to focus on the NDA resubmission here and the fact that we just need the resources on that. And then, we couldn't have the resources on both at the same time. So that's what's driving that. It's not being driven by anything new with respect to conversations with EMA or anything of the kind. We've had those discussions and nothing has changed there. So that's not influencing at all. With respect to the ex U.S. markets, we have not commented on that yet because we ourselves have more work to go there. And frankly, we believe we will learn a lot in the ongoing conversations with potential ex U.S. partners who live in those markets, know those markets really well and are providing very useful information that we add to our own projections. So we don't have projections ready to be publicized yet.

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Laura K. Chico, Raymond James & Associates, Inc., Research Division - Senior Research Associate [35]

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Okay. That's helpful. And if I could just ask one quick follow up. I think, in previous years, you provided forward guidance for the company in January. I guess, should we expect this to continue this year. And perhaps, if you could offer any color, directionally, at least in terms of how the operating expenses might move?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [36]

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Okay. Well, so the best I can tell you is what we said earlier, which is, but I'll call them our key piece of information, at least from our perspective is, what does the balance sheet look like at the end of next year? And under our scenario, under our current projections, it's over $200 million, exclusive of any of the monetizing activities we've been talking about. So just based on ordinary operations that -- and sales, we believe we'll have over $200 million at the end of next year. And that is assuming, we don't win the appeal. So that assumes that AMPYRA goes generic in August of 2018. So if we do win the appeal or it's remanded and there's a delay, then that changes quite significantly on the upside. I think that's pretty much it. But...

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Operator [37]

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Your next question comes from the line of Ken Trbovich with Janney.

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Kenneth Eugene Trbovich, Janney Montgomery Scott LLC, Research Division - Director of Specialty Pharmaceuticals [38]

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Ron, I was wondering if you could maybe address the issue on expectations for EMEA and sort of the path there from a regulatory review time line perspective. It just seems there's been a lot of noise associated with Brexit and the potential that, that moving of the headquarters could delay review of applications. Can you give us a sense as to whether or not that's a concern as you proceed with the efforts to out-license ex U.S?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [39]

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Yes. We're following that, Ken, as you are. And it's a developing story. I would say that it's fair to say that, at this point, I'm not aware that anyone in the industry has fully gotten their hands around it because the information just isn't there. It's -- so much of it is in flux. So I'd have to say it is a potential concern that depending on how things go over there, there could be widespread delays in their process. I believe that -- I mean, the MAA leadership is clearly aware of that and not MAA -- I'm sorry, the EMA leadership is clearly aware of that. And they're doing their best to make sure that they have ongoing operations without disruption. It's a month-by-month thing at this point. All we can do is control with what we control, which is to submit the MAA on schedule and then hope that they prosecute it according to the usual time lines.

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Kenneth Eugene Trbovich, Janney Montgomery Scott LLC, Research Division - Director of Specialty Pharmaceuticals [40]

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Sure. And just one quick follow up on the outlook for '18. Are we -- should we be factoring in channel inventory contraction in the first half from the channel just in light of the July date for the AMPYRA litigation?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [41]

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Yes. So 2018, obviously, is going to be an unusual year because of the litigation and the prospect of losing exclusivity at the end of July. That really is going to change a lot of the dynamics for next year. So I don't have, at this point, anything specific to tell you about that. I can tell you that as a result of all of those variables that are coming up in '18, the internal projections that we have made are based on what we believe to be the most conservative possible projections. So our belief is that if anything were to change, it would be more likely that it would be on the upside than not, based on the way we've done our projections. So that's the best we can do at this point because it's going to be an unusual year with respect to inventories and respect to sales and respect to everything, right? Just because of that uncertainty that's looming at the end of July.

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Operator [42]

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Your next question comes from the line of Salveen Richter with Goldman Sachs.

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Salveen Jaswal Richter, Goldman Sachs Group Inc., Research Division - VP [43]

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Can you quantify the impact to AMPYRA inventory levels in 3Q? Was it 1 week or more? And will these increases to discounts and allowances carry forward into 4Q? And then as it relates to the upcoming toz Phase III results, maybe you could just comment here, how your molecule is differentiated from the prior A2a receptor antagonist studies that failed in pivotal trials? And what gives you confidence here in your program?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [44]

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Well, that's a lot, Salveen, in one bite. Let's see. Let me start with the AMPYRA inventory. What can I say about that, that we haven't already said. The -- it is our view that the inventory issues will bounce back in the fourth quarter. So that the contractions that we saw will be made up for in the fourth quarter. That is our view. The reference that we gave was just to illustrate what a week, let's say, of inventory means. A week of inventory means $10 million, approximately. So that's just to give you a reference point for how much of a toggle do we need to make up the numbers. The second piece on DNA, there were some unusual items this year. We don't expect them to carry over into the fourth quarter. So that -- now the second question, I think, you had was on tozadenant. Yes, we have discussed this. The -- it's obviously a different molecule, but it is the same mechanism. You may -- I think you are referring to preladenant. And frankly, the other molecule that's out there is istradefylline, which is HKH's (sic) [KHK] drug, which they've recently announced that they are going to submit an NDA for, they have it approved in Japan. I think if you look at the track record, it is not a track record of relentless failure. It is a mixed track record. There have been trials across all these drugs that have been successful. And there have been other trials that have not been successful. And, in fact, for istradefylline, theirs were successful enough in Japan that they got it approved in Japan. And now apparently based on talking to the FDA, they're going to spin an NDA here. The preladenant trial with Merck was the subject of an extensive postmortem review in JAMA that the authors and the clinical investigators put together. We found it persuasive. Their conclusion was that the molecule was active and that the conduct of the trial had certain very serious flaws. And I won't go into all the detail now. You can read the paper. And we're happy to send it to you. But that was persuasive. And we were impressed that the Biotie team and their advisors put together a trial that took into account all of those findings from the preladenant study and built-in features into the trial design and management and oversight of the trial to address those issues. Now, how successful will that be? We'll find out in the first quarter. But I will say that if you just look at the tozadenant Phase IIb data, it is a compelling data set. And I don't think there's any way around that, you've got 4 different dose arms versus placebo. There is clear evidence of a dose effect. And essentially, all of the outcome measures worked on a placebo-adjusted basis. So -- plus you had 1.1 hours of placebo-adjusted reduction in OFF time at the 120-milligram dose, which is the best that -- by a good margin, that's the best that's been reported for any of the drugs in this class. So put it all together, we think it is a very strong profile for a Phase III product. And we'll, obviously, in a few months, we'll find out exactly how it turns out.

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Salveen Jaswal Richter, Goldman Sachs Group Inc., Research Division - VP [45]

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And then if I could just follow up for INBRIJA given the device component, should we expect a deviation from a normal FDA review cycle?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [46]

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I wouldn't expect it. We're expecting a 10-month review cycle.

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Operator [47]

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(Operator Instructions) And your next question comes from the line of Bill Tanner with Cantor Fitzgerald.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [48]

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Ron, I have a few. Maybe I'll just do them sequentially so that I don't dump them all on you. As it relates to the AMPYRA appeal, you talked about potentially being overturned, being remanded. Just to be clear, if it goes against Acorda, have you exhausted all the opportunities?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [49]

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Theoretically, you could take it to the Supreme Court. Or I don't know, if you could ask for an en banc -- you can probably ask for an en banc review, which would be the entire appellate court not just the 3 judges. So we could -- those are available those are available routes. So first -- I think, first, typically people ask for an en banc and then if they lose the en banc, then they have the option of petitioning the Supreme Court, if it's an important enough case.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [50]

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Got it. Okay. And then as it relates to 301 OUS. I mean, it sounds is it fair to characterize that the company is in very early stages of engaging potential partners. And I'm just curious then if that's the case. And I'm assuming that the RTF is not -- has not really been a gating factor. I mean, clearly, any sophisticated company could be looking at the data and whatnot and it could...

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [51]

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Correct. It is not been gating, whatsoever.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [52]

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Okay. And then, I guess, a convention would be for potentially a partner, maybe to want to file the regulatory application. When you talk about an MAA in the first quarter, I guess that's presupposing that Acorda would likely file. It seems like it would be a stretch may be to have something done by then such that a partner could actually do the filing?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [53]

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Yes. Again I'm speculation here. If this -- if conversations got to a point where they were really serious. And you had a serious partner who said "Hey, we want to do this." Obviously, we would have to take that into account. And we would come back and tell everyone. But that's speculating at this point. So we're pursuing parallel tracks. On the one hand, we have to move forward as a company regardless of whether or not we might have a partnership and that means we need to prepare to file an MAA in a timely way. If partnership discussions advance to a point where they look real and attractive for the company, then, obviously, we will take that into account.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [54]

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Yes. And then, I guess, final question. So you'll see that the toz data in the first quarter, could you just remind us then assuming that the data are good, what lies along sort of the critical path, thereafter?

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [55]

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So we started an open-label safety study in the second quarter. And we need to accumulate sufficient safety experience in data from that. So that is going to require some time. At the moment, I don't have it in my head though so I'll need to get that for you in terms of what we've said publicly on that. But that's going to be -- obviously, the Phase III, if it's successful, it's not the gating factor because we still have -- it's at least a year, as far as I know. It's at least a year to accumulate the experience that we need there.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [56]

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It's just more I see as guideline related stuff.

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Ron Cohen, Acorda Therapeutics, Inc. - Founder, CEO, President and Director [57]

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Correct.

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Operator [58]

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There are no further questions. And this concludes today's conference call. You may now disconnect.