Add
ACOR to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| ACOR > SEC Filings for ACOR > Form 10-Q on 10-Nov-2008 | All Recent SEC Filings |
10-Nov-2008
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.
In May 2007, we reached agreement with the FDA on a Special Protocol Assessment (SPA) for a second Phase 3 trial of Fampridine-SR in MS, MS-F204, and we initiated this trial in June 2007. In June 2008, the Company announced positive results from its second Phase 3 clinical trial of Fampridine-SR (MS-F204) on walking ability in people with multiple sclerosis (MS). 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. The FDA has agreed that this trial, together with our first Phase 3 trial, MS-F203, would be adequate to support a New Drug Application (NDA) for Fampridine-SR. We expect to submit an NDA for Fampridine-SR in the first quarter of 2009. 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 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. 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. Our preclinical programs also target MS and SCI, as well as other CNS disorders, including stroke and traumatic brain injury.
On February 1, 2008 the Company acquired certain assets of Neurorecovery, Inc., (NRI). These assets will enable Acorda to explore additional therapeutic indications for its investigational compound Fampridine-SR, as well as gain access to pre-clinical compounds that may have utility in nervous system disorders. Under the terms of the purchase agreement, Acorda was assigned two key licensing and research agreements relating to the use of aminopyridines in peripheral neuropathies and two early stage development candidates. Acorda also acquired NRI's pre-clinical and clinical data, regulatory filings (including Orphan Drug designations), copyrights, trademarks and domain names relating to the three products. Acorda issued 100,000 shares of its Common Stock as the purchase price for these assets which were valued at $26.86 per share. The transaction was accounted for as an acquisition of in-process research and development assets and, as such, resulted in a non-cash expense in the first quarter of 2008 of $2,686,000.
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 for the foreseeable future.
We have established our own specialty sales force in the United States, which consisted of 63 sales professionals as of September 30, 2008. This sales force has targeted neurologists and other prescribers who specialize in treating people with conditions that involve spasticity. Members of this sales force also 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.
Results of Operations
Three-Month Period Ended September 30, 2008 Compared to September 30, 2007
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 $13.7 million for the three-month period ended September 30, 2008, as compared to $11.5 million for the three-month period ended September 30, 2007. The increase is the result of an increase in prescriptions written for our products that we believe is the result of our expanding our sales force in 2006 and 2007 as well as an increase in our marketing efforts.
Discounts and Allowances
We recorded discounts and allowances of $1.2 million for the three-month period ended September 30, 2008 as compared to $1.1 million for the three-month period ended September 30, 2007. 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, 2008 consisted of $651,000 in fees for services payble to wholesalers, $449,000 in allowances for chargebacks and rebates, and $124,000 in cash discounts and patient program rebates. Discounts and allowances for the three-month period ended September 30, 2007 consisted of $480,000 in fees for services paid to wholesalers, $313,000 in allowances for chargebacks and rebates, and $275,000 in cash discounts.
Grant Revenue
Grant revenue for the three-month period ended September 30, 2008 was $23,000 compared to $20,000 for the three-month period ended September 30, 2007. 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 $2.7 million for the three-month period ended September 30, 2008 as compared to $2.2 million for the three-month period ended September 30, 2007. The increase was
primarily due to the increase in gross sales. Cost of sales for the three-month period ended September 30, 2008 consisted of $1.3 million in inventory costs 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. We expect Zanaflex cost of sales to be approximately 21% of gross sales for the remainder of 2008. Cost of sales for the three-month period ended September 30, 2007 consisted of $990,000 in inventory costs related to recognized revenue, $766,000 in royalty fees based on net product shipments, $389,000 in amortization of intangible assets, which is unrelated to either the volume of shipments or the amount of revenue recognized, and $36,000 in period costs related to packaging, freight, and stability testing. Payments to and interest expense related to our Paul Royalty Fund, or 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, 2008 were $8.7 million as compared to $5.6 million for the three-month period ended September 30, 2007, an increase of approximately $3.1 million, or 54%. Pre-clinical research contracts increased $1.1 million to $1.2 million for the three-month period ended September 30, 2008 due to the development of two of our preclinical pipeline products for potential IND filings in late 2009. This increase was partially offset by a decrease in MS clinical development program expense of $236,000 or 11% to $1.9 million for the three-month period ended September 30, 2008. This decrease was primarily due to an initial ramp up of expenses related to our second Phase 3 clinical trial of Fampridine-SR during the same period in 2007.
Operating expenses for clinical development, preclinical research and development and regulatory were $4.8 million for the three-month period ended September 30, 2008, compared to $2.8 million for the three-month period ended September 30, 2007, an increase of $2.0 million, or 70%. This increase was primarily attributable to an increase in regulatory expenses of $1.4 million for the preparation of an NDA for Fampridine-SR and related consulting fees and an increase in research and development staff and compensation of $700,000 to support pre-clinical research and development, Fampridine-SR long-term extension studies and NDA preparation.
Sales and Marketing
Sales and marketing expenses for the three-month period ended September 30, 2008 were $14.4 million compared to $7.9 million for the three-month period ended September 30, 2007, an increase of approximately $6.5 million or 82%. This increase was primarily attributable to an increase of $5.1 million attributable to pre-launch activities associated with the possible commercialization of Fampridine-SR, if approved, and an increase in sales and marketing staff and compensation of $1.4 million to support promotion of Zanaflex Capsules and Fampridine-SR pre-launch activities. Sales and marketing expenses are expected to continue to increase in 2008 and in 2009 primarily due to an increase in our expected pre-launch costs.
General and Administrative
General and administrative expenses for the three-month period ended September 30, 2008 were $5.9 million compared to $3.7 million for the three-month period ended September 30, 2007, an increase of approximately $2.2 million, or 60%. This increase was the result of an increase in staff and compensation and other expenses related to supporting the growth of the overall organization of $1.4 million, an increase in costs associated with medical affairs research and educational programs of $389,000, and an increase in legal fees of $318,000.
Other income was $398,000 for the three-month period ended September 30, 2008 compared to other income of $431,000 for the three-month period ended September 30, 2007, a decrease of approximately $33,000 or 8%. The decrease was primarily due to a decrease in interest income of $201,000 resulting from a lower average interest rate than for the same period in 2007. The decrease in interest income was partially offset by a $134,000 decrease in interest expense principally related to the PRF revenue interest agreement.
Nine-Month Period Ended September 30, 2008 Compared to September 30, 2007
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 $39.4 million for the nine-month period ended September 30, 2008, as compared to $30.8 million for the nine-month period ended September 30, 2007. The increase is the result of an increase in prescriptions written for our products that we believe is the result of our expanding our sales force in 2006 and 2007 as well as an increase in our marketing efforts.
Discounts and Allowances
We recorded discounts and allowances of $4.2 million for the nine-month period ended September 30, 2008 as compared to $2.6 million for the nine-month period ended September 30, 2007. Discounts and allowances are recorded when Zanaflex Capsules and Zanaflex tablets are shipped to wholesalers. Discounts and allowances for the nine-month period ended September 30, 2008 consisted of $1.6 million in fees for services payable to wholesalers, $1.5 million in allowances for chargebacks and rebates, and $1.1 million in cash discounts and patient program rebates. Discounts and allowances for the nine-month period ended September 30, 2007 consisted of $1.0 million in fees for services payable to wholesalers, $860,000 in allowances for chargebacks and rebates, and $692,000 in cash discounts.
Grant Revenue
Grant revenue for the nine-month period ended September 30, 2008 was $76,000 compared to $36,000 for the nine-month period ended September 30, 2007. 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 $8.5 million for the nine-month period ended September 30, 2008 as compared to $5.7 million for the nine-month period ended September 30, 2007. The increase was due to the increase in gross sales as well as an increase in amortization of intangible assets resulting from our achieving the final Elan sales milestone during the three-month period ended March 31, 2008. Cost of sales for the nine-month period ended September 30, 2008 consisted of $4.0 million in inventory costs related to recognized revenues, $2.5 million in royalty fees based on net product shipments, $1.8 million in amortization of intangible assets, which is unrelated to either the volume of shipments or the amount of revenue recognized, and $210,000 in period costs related to freight and stability testing. We expect Zanaflex cost of sales to be approximately 21% of gross sales for the remainder of 2008. Cost of sales for the nine-month period ended September 30, 2007 consisted of $2.7 million in inventory costs related to recognized revenue, $2.0 million in royalty fees based on net product shipments, $844,000 in amortization of intangible assets, which is unrelated to either the volume of shipments or the amount of revenue recognized, and $196,000 in period costs related to packaging,
freight, and stability testing. Payments to and interest expense related to our Paul Royalty Fund, or 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 nine-month period ended September 30, 2008 were $25.8 million as compared to $12.9 million for the nine-month period ended September 30, 2007, an increase of approximately $12.9 million, or 100%. The Company's acquisition of certain in-process research and development assets of NRI resulted in a non-cash expense of approximately $2.7 million during the three month period ended March 31, 2008 in accordance with SFAS No. 2 Accounting for Research and Development Expenses. Pre-clinical research contracts increased $2.6 million to $2.6 million for the nine-month period ended September 30, 2008 due to the development of two of our preclinical pipeline products for potential IND filings in late 2009. MS clinical development program expense increased $1.8 million or 36% to $6.9 million for the nine-month period ended September 30, 2008 primarily due to the continuation and completion of our second Phase 3 clinical trial of Fampridine-SR which began in June 2007.
Operating expenses for clinical development, preclinical research and development and regulatory were $12.1 million for the nine-month period ended September 30, 2008, compared to $6.4 million for the nine-month period ended September 30, 2007, an increase of $5.7 million, or 90%. This increase was primarily attributable to an increase in regulatory expenses of $4.1 million for the preparation of an NDA for Fampridine-SR and related consulting fees and an increase in research and development staff and compensation of approximately $1.9 million.
Sales and Marketing
Sales and marketing expenses for the nine-month period ended September 30, 2008 were $36.3 million compared to $22.0 million for the nine-month period ended September 30, 2007, an increase of approximately $14.3 million or 65%. This increase was primarily attributable to an increase of $9.6 million attributable to pre-launch activities associated with the possible commercialization of Fampridine-SR, if approved, an increase in sales and marketing staff and compensation of $2.4 million, an increase in other selling related expenses of $1.1 million and an increase of $1.0 million in Zanaflex Capsules sales and marketing initiatives. Sales and marketing expenses are expected to continue to increase in 2008 and in 2009 primarily due to an increase in our expected pre-launch costs.
General and Administrative
General and administrative expenses for the nine-month period ended September 30, 2008 were $17.4 million compared to $12.6 million for the nine-month period ended September 30, 2007, an increase of approximately $4.8 million, or 39%. This increase was primarily the result of an increase in staff and compensation and other expenses related to supporting the growth of the overall organization of $2.4 million, an increase in costs associated with medical affairs research and educational programs of $1.3 million and an increase in legal fees of $1.2 million primarily related to the Apotex patent infringement litigation.
Other Income (Expense)
Other expense was $1.5 million for the nine-month period ended September 30, 2008 compared to other income of $641,000 for the nine-month period ended September 30, 2007, an increase of approximately $2.1 million or 327%. The increase was primarily due to an increase in interest expense of $2.8 million. This increase was the result of a $1.4 million increase in interest expense under the PRF revenue interest agreement as a result of increased shipments and the impact of a $1.4 million out-of-period adjustment made during the second quarter of 2008 to correct an error identified in the previously recorded effective interest expense related to the November 2006 amended revenue interests
assignment agreement with PRF. This out-of-period adjustment did not increase the total interest expense associated with this agreement. The increase in interest expense was partially offset by a $701,000 increase in interest income as a result of the investment of net proceeds from our follow-on public offerings in February and August 2008.
Liquidity and Capital Resources
We have incurred annual operating losses since inception and, as of September 30, 2008, we had an accumulated deficit of approximately $324.1 million. We have financed our operations primarily through public offerings of our common stock, private placements of our securities and, to a lesser extent, from loans, government grants and our financing arrangement with PRF.
We completed a follow-on public offering in July 2007 in which approximately 4.2 million shares of our common stock were sold, resulting in proceeds to us of approximately $72.2 million, net of issuance costs.
We completed a follow-on public offering in February 2008 in which approximately 3.7 million shares of our common stock were sold, resulting in proceeds to us of approximately $74.6 million, net of issuance costs.
We completed a follow-on public offering in August 2008 in which approximately 4.6 million shares of our common stock were sold, resulting in proceeds of approximately $126.6 million, net of issuance costs.
Financing Arrangements
In January 1997, Elan International Services, Ltd. (EIS) loaned us an aggregate of $7.5 million pursuant to two convertible promissory notes to partly fund our research and development activities. On December 23, 2005, Elan transferred these promissory notes to funds affiliated with Saints Capital. As of September 30, 2008, $5.0 million of these promissory notes were outstanding. In January 2005, we entered into a $6.0 million senior secured term loan, which is collateralized by all of our personal property and fixtures, other than the property that secures our revenue interests assignment arrangement with PRF, which has been repaid during the three-month period ended March 31, 2008.
On December 23, 2005, we entered into a revenue interests assignment agreement with PRF, a dedicated healthcare investment fund, pursuant to which we assigned to PRF the right to a portion of our net revenues (as defined in the agreement) from Zanaflex Capsules, Zanaflex tablets and any future Zanaflex products. To secure our obligations to PRF, we also granted PRF a security interest in substantially all of our assets related to Zanaflex. Our agreement with PRF covers all Zanaflex net revenues generated from October 1, 2005 through and including December 31, 2015, unless the agreement terminates earlier. In November 2006, we entered into an amendment to the revenue interest assignment agreement with PRF. Under the terms of the amendment, PRF paid us $5.0 million in November 2006 and an additional $5.0 million in February 2007 as our net revenues during the fiscal year 2006 exceeded $25.0 million. Under the terms of the amendment, we are required to pay PRF $5.0 million on December 1, 2009 and an additional $5.0 million on December 1, 2010.
Under the agreement and the amendment, PRF is entitled to the following portion of Zanaflex net revenues:
º •
º with respect to Zanaflex net revenues up to and including
$30.0 million for each fiscal year during the term of the agreement,
15% of such net revenues;
º •
º with respect to Zanaflex net revenues in excess of $30.0 million but
less than and including $60.0 million for each fiscal year during the
term of the agreement, 6% of such net revenues; and
Notwithstanding the foregoing, once PRF has received and retained payments under the agreement that are at least 2.1 times the aggregate amount PRF has paid us under the agreement, PRF will only be entitled to 1% of Zanaflex net revenues. In connection with the transaction, we have a liability recorded, referred to as the revenue interest liability, of approximately $19.2 million in accordance with EITF 88-18, Sales of Future Revenues. We impute interest expense associated with this liability using the effective interest rate method and record a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the life of the arrangement. The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of Zanaflex sales. We currently estimate that the imputed interest rate associated with this liability will be approximately 5.9%. Payments made to PRF as a result of Zanaflex sales levels reduce the accrued interest liability and the principal amount of the revenue interest liability.
Investment Activities
At September 30, 2008, cash and cash equivalents and short-term investments were approximately $263.2 million, as compared to $95.1 million at December 31, 2007. As of September 30 2008, our cash and cash equivalents consist of highly liquid investments in a Treasury money market fund. Our cash and cash equivalents were $79.8 million as of September 30, 2008, as compared to $16.8 million as of December 31, 2007. Our short-term investments consist of US Treasuries, commercial paper and corporate debt securities with remaining maturities from one month to less than one year. The balance of these investments was $183.4 million as of September 30, 2008, as compared to $78.3 million as of December 31, 2007.
Net Cash Used in Operations
Net cash used in operations was $32.2 million and $15.8 million for the nine-month periods ended September 30, 2008 and 2007, respectively. Cash used in operations for the nine-month period ended September 30, 2008 was primarily attributable to a net loss of $54.1 million, amortization of the discount on short-term investments of $2.4 million, an increase in inventory held by others of $416,000, a decrease in Zanaflex tablets deferred product revenues of $142,000, and a gain on our put/call liability of $50,000. Cash used in operations for the nine-month period ended September 30, 2008, was partially offset by an increase in accounts payable, accrued expenses, and other current liabilities of $7.6 million, a non-cash share-based compensation expense of $7.1 million, a decrease in inventory held by the Company of $2.8 million, a non-cash expense for the acquisition of NRI assets of $2.7 million, depreciation and amortization of $2.5 million, an increase in Zanaflex Capsules deferred product revenues of $1.7 million, a decrease in accounts receivable of $249,000, and a decrease in prepaid expenses and other current assets of $236,000. Net cash used by operations for the nine-month period ended September 30, 2007 was primarily attributable to a net loss of $24.2 million, amortization of the discount on short-term investments of $1.9 million, a decrease in Zanaflex tablets deferred product revenues of $1.3 million, an increase in prepaid expenses and other current assets of $1.1 million, an increase in inventory held by the Company of $774,000, and an increase in inventory held by others of $182,000. Cash used in operations for the nine-month period ended September 30, 2007, was partially offset by a non-cash stock compensation expense of $5.9 million, an increase in accounts payable, accrued expenses, and other current liabilities of $5.3 million, depreciation and amortization of $1.5 million, a decrease in accounts receivable of $583,000, and a decrease in Zanaflex Capsules deferred product revenue of $392,000.
Net cash used in investing activities for the nine-month period ended September 30, 2008 was $107.9 million, primarily due to $229.5 million in purchases of short-term investments, a $5.0 million payment to Elan for the . . .
|
|