Q4 2021 Acorda Therapeutics Inc Earnings Call
I'm happy to report that we executed on all of those goals and these are summarized on this slide we strengthened our balance sheet, we minimized our expenses and maintain fiscal discipline, we increased and bridges trajectory we.
We executed two ex U S commercialization partnerships for launch embrasure in Spain and Germany.
We achieved the top of our guidance range for <unk> net sales in the face of generic competition and we made important additions and changes to our leadership team and the board and I will review those with you now in a bit more detail.
So.
Regarding strengthening <unk> balance sheet to do that we sold our manufacturing operations to Cadillac in early 2021 for approximately $74 million net of.
That in turn enabled us to pay the $69 million stub payment on our convertible debt, which was due in June and that removes a significant overhang.
We also received a $4 $2 million tax credit from the cares Act.
Looking ahead to 2022, we expect that the double digit royalty from Biogen on ex U S sales of fan pier will revert to a quarter in mid 2022.
Note that this royalty has continued to appear as revenue in our financials, but within accompanying expense as we passed on the payments to healthcare royalty partners with whom we do who we had sold the royalty stream in 2017, we expect that obligation to end around the middle of this year.
Year end to have it revert back to a quarter.
We also expect to receive revenue from ex U S sales of embrasure in 2022.
Regarding our fiscal discipline the sale of our manufacturing operations also reduced our operating expenses and in addition, we implemented headcount and other expense reductions that we expect will reduce the company's annual operating expenses by about <unk>.
$60 million in 2022 over what they were in 2020.
Based on our revenue and Opex projections, we aim to be cash flow neutral on a run rate basis by the end of 2022 and to be cash flow positive in 2023.
Now in November we announced an agreement with <unk> to commercialize <unk> in Germany, that's the largest pharmaceutical market in Europe , the fourth largest in the world.
<unk> received a $5 $9 million upfront payment will also receive a significant double digit percent of the selling price for supply of the product as well as additional milestone payments based on net sales and we also executed an agreement with a survey to.
<unk> and <unk> in Spain.
<unk> expects to launch <unk> in Germany in mid 2022 and in Spain in early 2023.
We're also in discussions quite actively with additional parties to commercialize embrasure in other territories in Europe , and the rest of the world.
Yes.
Moving to our leadership additions and changes.
John Varian was appointed to our quarters Board in January of this year. John is an experienced biotech veteran he's held both CEO and CFO roles and has experience on several biotech boards, Mike Guesser joined the quota as CFO in November Mike is.
Held senior finance positions at both large and small companies, including Allergan.
He is enhancing our ability to maintain our fiscal discipline to increase the efficiency of the organization and to continue to build shareholder value.
Neil Beloff also joined the quarter as General Counsel in November Aneel has extensive senior legal experience at Biopharma companies such as Celgene and he has also served as the Securities and Exchange Commission.
And Lauren Sabella move from Chief commercial officer to the role of Chief operating Officer, while carried claim who had served as EVP of sales and market access was named our Chief commercial officer.
Ill note that our ability to attract this high level of executive talent notwithstanding the company's current challenges is indicative of the opportunity that a quarter has to build shareholder value going forward.
So moving to our commercial performance.
<unk> net revenue for the full year 2021 was $29 $6 million, that's a 22% increase over 2020 for the fourth quarter net revenue was $10 4 million and Thats, a 12% increase over Q4 2020, we were encouraged to see these increases.
As in previous trajectory, particularly in light of the continuing impact of COVID-19 on our business during the year.
And Purion net revenue for the full year 2021 was $84 $6 million and for the fourth quarter net revenue was $22 $5 million we.
The top of our guidance range for <unk> sales in the face of ongoing generic competition.
Moving to a bit more detail on embrasure.
As a reminder, embrasure is inhaled levodopa, it's indicated to address the return of symptoms or what are called off periods that many people with Parkinson's experience in between doses of their regularly scheduled medication.
Now as I mentioned, the pandemic continued to pose headwinds for the launch in 2021 I'll give you some color on that.
It manifested in a number of ways in person patient visits to offices.
Continue to have declined overall from pre pandemic levels more patients did return to office visits after the initial precipitous decline in 2020.
But those levels of waxed and waned with each successive new wave of Covid, most recently with the <unk>.
In addition, many practices stopped accepting in person visits by salespeople that remains true now.
Till very recently, we were not able to hold patient or a physician speaker programs in person.
And they still remain substantially lower than pre pandemic levels. Although we are beginning to ramp back up within person programs and what we have found is that everything related to marketing and educating about embrasure is more effective in person, whether it's salespeople, calling on the doctor and the.
Office, or having speaker programs, where an actual physician can address group of patients.
Works better.
Also.
We learned that people with Parkinson's disease in particular, many of them reduce their activity significantly outside their homes during the pandemic because they are in very high risk group and thus they were less likely to report to their physicians their need for a therapy to treat <unk>.
Their off periods, if youre sitting at home watching TV, a lot rather than your usual outdoor activities. So thats, what youre going to do.
So I think the good news here is that we expect these factors to largely reverse as the pandemic. Finally subsides hopefully we are seeing that happening now.
We therefore see significant opportunities to accelerate the launch as that occurs and particularly as people with Parkinson's become eager to resume levels of activity exercise.
And so forth exercise of activity are one of the key ways that people with Parkinson's are encouraged to manage their PV and embrasure can be an important part of that for them as they re emerge from let's call. It the hybrid nation of the last two years.
And are looking to catch up on that activity and exercise.
Here are some additional metrics again, despite the COVID-19 headwinds our team was able to adapt creatively through digital means and otherwise and we continued to see growth in embrasure compared to 2020 as.
As I mentioned, we saw 22% annual growth in 2021 over 2020 with a 12% increase in net sales in the fourth quarter versus fourth quarter 2020, now bear in mind, the fourth quarter of 2020 had unusually large sales of our outsized.
Sales largely due to factors related to our moving from several specialty pharmacies at that time.
Merging all of that into a single one and during that transition we saw even more excess ordering than we normally would see in the fourth quarter.
We also saw a 14% increase in total prescriptions over Q4 of 2020 and I think the most important number here. The one that we follow the most closely is we had a 24% increase in organic growth that's measured by the actual number of car.
<unk> of embrasure that patients receive.
That most accurately reflects demand because patients can get anywhere from 1% to five cartons and a single prescription.
Note that in 2021, the average number of cartons per prescription actually went up from two five to two eight.
Moving to Antero.
Overall net sales for 2021 were down by approximately 15% over 2020, but we were pleased to see the curve continuing to flatten and if you look here you see the sales in 2002.
One stabilized quarter over quarter. They were essentially the same maybe a million or so apart from one quarter to the next.
So that curve was relatively flat during the year and while we continue to expect that there will be erosion over time in sales net revenue will continue to decrease over time. We believe we're seeing that decrease has begun to stabilize where the rate has begun to stabilize.
We believe that the durability of the product is due to a number of factors first our field sales team is continuing to call on Ms specialists.
Maintain strong relationships there, we support the product physicians and patients remain loyal to the brand.
And the support we provided earns that loyalty education.
We continue to provide for example, our first step program and which commercially insured patients get their first two months of Empire are free.
And then we mitigate their out of pocket co pay cost for commercially insured patients and we continue to provide physician and reimbursement support.
Now im going to turn this over to Mike Guesser, our CFO , who will provide you with an overview of the financials and 2022 guidance Mike.
Thank you Ron our financials are summarized in this table and in more detail in our press release and 10-K.
As previously noted we saw continued increase in our <unk> net revenue.
Percent fourth quarter over fourth quarter, and 22% year over year.
Volunteer net revenue decreased 11% fourth quarter over fourth quarter.
16% year over year.
R&D and SG&A expenses decreased as a result of restructuring to reduce cost and more closely align operating expenses with expected revenue.
GAAP net loss decreased quarter over quarter Q4, 2020 included a $57 $9 million charge to write down assets held for sale to the fair value less cost to sell and that's referring to the Chelsea manufacturing facility.
non-GAAP net loss, which excludes the loss on assets held for sale noncash stock based compensation noncash interest expense and restructuring costs also decreased quarter over quarter due to the reduction in operating expenses.
Due to a modified payment schedule in our amended agreement with talent.
Fixed manufacturing charges were eliminated between Q3 of 2021 and Q2 of 2022, resulting in an improvement in cash by $5 3 million in 2021.
For 2022, a quarter expense and period net revenue to be in the range of $68 million to $78 million we.
We expect operating expenses to be in the range of a $110 million to $120 million.
And as we previously announced given the uncertainty about how long the pandemic will continue to impact in breach of revenues, we're not providing revenue guidance on a bridge at this time.
Now I'll turn it back to you Ron.
Thanks, Mike.
So.
Moving forward we.
We are focusing on building long term value at a quarter by executing on the key goals you see here.
Accelerating our breaches trajectory, obviously key to maintaining the strength of the <unk> brand.
Optimizing our financial structure and continuing to work on that including.
Looking at our long term debt staying close to our bondholders and devising the most optimal ways of dealing with that when it comes due three years or so from now.
We are looking at new opportunities for the ARCUS technology and I'll touch on each of those in more detail.
First in <unk>.
We believe that the receiving the pandemic.
As I said will presented us with significant opportunities first.
The return to pre tax pre pandemic routines for many patients and practices are going to increase our opportunities for impactful touch points with them.
Resuming a more a more normal schedule of in person office visits are reopening of practices to in person interactions with our sales representatives. The resumption of in person speaker programs all of that will enable us to educate more effectively about the potential benefits and the correct use.
Of embryos.
These will also enable physicians and other health care providers to provide in person training to their patients, which we know to be more effective.
We also hear from people with Parkinson's that they are eager to resume a more active lifestyle and being active as an important way that they help to combat their disease and we therefore expect them to be even more receptive to the benefits that <unk> can provide and addressing their off periods.
Throughout the pandemic. We've also continued to refine our digital targeting and outreach for patients their care partners and for health care providers.
We've added before and after videos to the embryo Dot Com website, which you can check out.
I think they compellingly demonstrate <unk> potential benefits for patients.
Our online ads have accumulated to this point millions of views and they resulted in hundreds of thousands of visits to our websites, but we're actually not abandoning that at all we are continuing to enhance these programs in 2022 as an important adjunct to the in person interactions.
We're also expanding our E prescribing platform nationally. This is something that we piloted in the second half of last year.
We're very excited about it because as a specialty drug.
There are certain.
Special ways that are required for prescribing embry shot.
A special form of prescription request form or Prs.
Many offices find those sorts of things.
Hi.
They imposed friction on the process because they are used for most drugs to just using their E. Prescribing platform. We are now able by working with a very good vendor who has figured out how to do this well we are able to provide them with the option of just using their regular E prescribing platform.
<unk>, which still will allow us to get the data we need to provide the patient support that.
Is so important for the product.
As I also mentioned previously <unk> plans to launch a region in Germany by mid year this year.
In Spain in early 2023, and we are continuing our discussions with several parties for additional territories in Europe and the rest of the world.
With regard to <unk> as you saw sales remained stable quarter over quarter throughout 2021, the rate of decline appears to be leveling off during the year and while we expect the brand to continue to decline against generics over time, we've been very pleased by its durability.
<unk> to date and it is providing us with vital revenue as we continue to work to accelerate the growth in the embrasure.
And our third key factor, we are continuing to exercise fiscal discipline and we are looking to achieve our goal of being cash flow neutral on a run rate basis by the end of 2022 and cash flow positive in 2023.
In addition to the 60 million reduct $60 million reduction in expenses that we made over 2020, we expect to realize new revenue sources and as I mentioned those include reversion of the royalties from Biogen on ex U S sales of Sam Keira back to a quarter.
Around mid year. These are double digit tiered royalties on net sales of ex U S. <unk> and so we expect that will be a significant addition, and we also expect to begin to receive revenue from our supply agreements with our survey this year by midyear for.
For Germany, and then in 2023 for Spain.
I'll also note that accordance convertible debt will become due in December 2024, and as I alluded to earlier, we have maintained open lines of communication with our bondholders our leadership team and board have been exploring and are continuing to consider various options for optimally addressing the debt.
Appropriate time.
And our fourth goal is to build on our significant asset that the company has and that's the ARCUS technology platform for delivering medications via the lungs that technology has now been validated by the approval of embrasure in both the U.
U S and the EU.
<unk> discussing collaborations with several other companies that have expressed interest in formulating their novel molecules for pulmonary delivery and in fact, we've already been performing feasibility studies on some of those opportunities.
So with that that completes our year end report.
And we'll now open the call for your questions.
The first question over in the line of Matt <unk>.
As most Oems.
C wainright.
Your line is now open. Please go ahead.
Mr. <unk> your line is open.
Can you hear me okay.
Yeah, Hi, there I can hear you now.
Excellent Thanks, Ron and thanks.
For taking my questions Im representing Ram <unk> H C Wainwright.
First of all regarding the <unk> launch in Germany in Spain. We were just wondering why the Spanish launches happening after that adjustment despite being negotiated.
Yeah.
<unk>.
You may recall.
The German GBA authority did not require a reimbursement dossier to be submitted for embryo, which was very good news because that cuts through a lot of the time that otherwise would be consumed in submitting and then negotiating and so on so.
<unk> is able to launch at will and Theyre just putting in the.
The preparations on the commercial launch.
They will they will select the price and they will move forward.
My understanding is that in Spain. There are there are just more i's to dot.
So that it's a bit it's a.
A bit after but theres still expecting it in early 2023.
I appreciate the granularity there.
Glad to see the durable.
Sales.
We were wondering if your strategy.
<unk> two free months of the drug for commercially insured patients.
In person marketing to MS specialists will remain the same.
Are you going to change the strategy going forward.
We don't have immediate plans to change under the theory that if it Ain't broke don't fix it.
We think that.
That has been very helpful. In.
Emphasizing to both patients and their physicians our commitment to them are ongoing we've always been very committed to the Ms patient community.
We are continuing to demonstrate that.
Every way that we that we reasonably can.
Okay excellent. Thank you for taking our questions and congratulations on the quarter.
Thank you for that I appreciate it.
Thank you.
I'll now pass the conference over to <unk>.
Any thoughts around that.
Thank you.
So this quarter, we gave our investors the opportunity to write in question to the management team.
And thanks to all those who participated and read the questions that have been written on an ask that decline to respond.
We have several questions on a similar topic, which I had combined into the following question.
Why do you want to use equity to pay the debt interest on the stock prices to Pat will you consider establishing a minimum stock price before you can use that to repay the debt interest.
Yeah. So let me let me be the first to say that we certainly do not want to.
We are all all of US here are shareholders.
So our interests are aligned with those of all the shareholders. So we're very acutely aware that particularly at the current but we would regard as depressed valuation that paying in stock is dilutive and it's much more dilutive than we were.
Optimally like we have to balance all of that at any given time with our need for cash in the company and the longer term goals and the longer term goal here and the most important goal is to restore the company to a cash flow positive footing and be able to.
Grow from there.
And grow shareholder value.
Ultimately.
If we keep our eye on that ball and we execute and we succeed in that in that goal.
Yes, we will have had some dilution along the way, but one hopes that the in the.
The increase in shareholder value that we can achieve over time will more than make up for that now again, we are not.
Eager to pay these interest payments and stock, it's something that the board and the leadership team review every time, we have a payment coming due we look at it versus the cash on hand in the company, where we are in our trajectory where we are in achieving the long term.
Term goals of the company and we make determinations based on what we believe is in the best long term interest of shareholders.
Thank you. The next question is.
Around the same topic, but.
Okay, and then are you aware of the increase in short interest ahead of every debt interest payment over the last few years.
And manipulative effect it has on the determination of the amount of shares issued in connection with the payment.
The way, we've managed expenses being counted in the necessity of paying the debt and cash.
Okay. So I think there are a couple of pieces. There. So let me take the last part of that first since the first part is more speculative.
As I believe I indicated in the presentation.
We have been.
Assiduous and laser focused on managing expenses here and if you look at Comparables and other companies, who also have products and are commercializing and have a need to invest in that commercialization in order to grow the products to where they need to be.
I think you'll find that we match up quite favorably we have cut.
A third of our operating expenses over the last two years $60 million.
And beyond a certain point you can only cut so far before youre cutting into bone.
And you don't want to be clear you want to have a balance where you are able to invest in what you need to invest in order to grow the company in order to grow the revenue stream over time and to get the company, where it needs to be as a healthy and vibrant and growing the cash flow positive organization.
With regard to what people do.
Before those interest payments come up.
Unfortunately, we cannot control the market, we can only control what we are doing in the company.
And as I said, we are.
Whenever these interest payments are going to come up we look very carefully at together with the board at what on balance. The best option is so I will tell you. We do not have a preconceived notion that about how we're going to handle the next payment or the next payment after that.
We deal with it as it comes and we do it based on an assessment of.
Where the company is relative to its goals in its cash position.
Thank you.
The next question I have been an investor with Avastin.
And management has done a good job coupled with the academic headwinds and the loss of the impairment on the other hand your market cap is far below any comparable company in terms of revenue.
Management has talked about by the end of 2022 and to be cash flow neutral on a run rate basis.
And to change momentum and declare a stock buyback plan is this something you consider.
Okay.
So.
I guess I would observe that stock buybacks.
Have their place.
It's very much similar to the answer I gave on the last question, which is right now cash is king for the company.
And we need the cash to be able to get to a cash flow positive state, but we're not burning cash right.
I don't believe that currently the best use of that cash is to buyback stock, but look for what usually is a temporary.
Bump and stock price to me the real prize is building real value in the company and looking at a trajectory that will take us to long term.
<unk> building I think it's worth also noting that the.
One of the key factors that is different from us, let's say given the type of revenue the level of revenue we have.
Relative to certain other companies you might compare us too is that we do have that long term convertible debt overhang and that is.
A large part of the issue on the current valuation and as I indicated, we're obviously well aware of it and the board and the leadership team are.
Keeping close to our bondholders and working on a number of options that we can consider for dealing with that debt and again, it's it's not due until the end of 2024, but we are already working on.
Yes.
Great. Thank you.
The next question in English.
In Asia sales and therefore have been David pointing in Covid can no longer be used as an excuse.
What are you doing to get Indonesia sales to 800 million annual run rate this year.
Okay.
Well, it's hard to know how to answer that question is posed.
I think we have answered it in the presentation in multiple ways. So.
Guy.
A question or two.
The points, we've made about what we're doing.
I will say that I do not believe that the pandemic is an excuse for.
Where we are and in fact as I as I noted.
I think the fact that we saw 22% growth year over year.
Is quite something considering the pandemic and all of the factors that I pointed to those are real there is I wish they werent real I don't believe in making excuses, but I also believe you have to see reality for what it is or you cannot solve the problems that are that are being thrown at us.
So that's.
That's really what we've laid out what our plan is to grow sales.
He is a terrific drug to patients who are on it love It we hear from them all the time.
About what it has been doing for them and how grateful they are.
I just got two weeks ago I, just got a big box of homemade treats from one grateful patients, which I shared with my colleagues.
We are working on it and I think to the extent that we are hopefully seeing the pandemic get.
Getting to a very livable state.
We're going to reap the benefits of that.
And the trajectory of <unk> going forward.
Great.
Thanks, very much part of the last question that came in by the time I will turn the call.
Thanks to all investors who.
Participating on the answering questions and they will fall into continuing the dialogue and the question and next quarter.
Turn it over to <unk>.
To close our call.
Thank you for joining thank you Tony and thank you all for joining us and watch this space. We look forward to updating you at our coming calls.
That concludes the Quanta therapeutics fourth quarter, 2021 financial and business update.
Thank you for your participation you may now disconnect your lines.
Yeah.