ACORDA THERAPEUTICS INC – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
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
We are a biopharmaceutical company focused on developing therapies that restore
function and improve the lives of people with neurological disorders. We market
Inbrija (levodopa inhalation powder), which is approved in the
intermittent treatment of OFF episodes, also known as OFF periods, in people
with Parkinson's disease treated with carbidopa/levodopa. Inbrija is for as
needed use and utilizes our ARCUS pulmonary delivery system, a technology
platform designed to deliver medication through inhalation that we believe has
potential to be used in the development of a variety of inhaled medicines. We
also market branded Ampyra (dalfampridine) Extended Release Tablets, 10 mg.
Inbrija
Our New Drug Application, or NDA, for Inbrija was approved by the
Drug Administration
dose of 84 mg (administered as two capsules), which may be taken up to five
times per day. Inbrija became commercially available in the
2019
exception for approximately 96% of commercial health insurance plans and
approximately 27% of Medicare plan lives. Approximately one million people in
the
estimated that approximately 40% of people with Parkinson's in the
experience OFF periods. Net revenue for Inbrija was
ended
2020
COVID-19 pandemic and other factors, we are no longer able to provide projected
peak
will likely be lower and could be materially lower than our prior projected peak
sales range if, for example, disruptions to the healthcare system caused by the
COVID-19 pandemic or other prescribing challenges continue into 2022 and beyond.
In
our Marketing Authorization Application, or MAA, for Inbrija. The approved dose
is 66 mg (administered as two capsules) up to five times per day (per
Union
mg labelled dose in the
the intermittent treatment of episodic motor fluctuations (OFF episodes) in
adult patients with Parkinson's disease treated with a
levodopa/dopa-decarboxylase inhibitor. Following the ratification of the
Withdrawal Agreement between the
on
grandfathered Marketing Authorization (MA) by the Medicines and Healthcare
products Regulatory Agency (MHRA) in the
administrative process that was approved by the MHRA in
In July and
supply agreements with
and
agreement, we will receive a €5 million upfront payment, and we will receive
additional sales-based milestones. Under the terms of both the
supply agreements, we will receive a significant double-digit percent of the
selling price of Inbrija in exchange for supply of the product. Esteve will have
the exclusive distribution rights to Inbrija in
supply the product to Esteve for sale. Esteve expects to launch Inbrija in
in the fourth quarter of 2022, and in
with potential partners for commercialization of Inbrija in other jurisdictions
outside of the
Ampyra
Ampyra became subject to competition from generic versions of Ampyra starting in
late 2018 as a result of an adverse
invalidated certain Ampyra Orange Book-listed patents. We have experienced a
significant decline in Ampyra sales due to competition from several generic
versions of Ampyra. Additional manufacturers may market generic versions of
Ampyra, and we expect our Ampyra sales will continue to decline over time. Net
revenue for Ampyra was
and
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Convertible Notes
In
of
combination of approximately
newly-issued convertible senior secured notes due 2024 and
cash. The convertible senior secured notes due 2024 have an adjusted conversion
price of approximately
approximately
outstanding. On
convertible senior notes at their maturity date using cash on hand. More
information about the terms and conditions of the 2024 convertible notes is set
forth in Note 10 to our Consolidated Financial Statements included in this
report as well as in Financing Arrangements in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section of this
report.
Sale of
In
manufacturing operations to Catalent Pharma Solutions. Pursuant to the
transaction, Catalent paid us
us of approximately
settlement of customary post-closing adjustments. In connection with the sale of
the manufacturing operations, we entered into a long-term, global manufacturing
services agreement with a Catalent affiliate for the supply of Inbrija. As part
of the transaction, Catalent hired substantially all of our prior employees at
the
Massachusetts
operating expenses related to the operation of the manufacturing facility.
Financial Management
In
reduce costs, more closely align operating expenses with expected revenue, and
focus our resources on Inbrija. As part of the
reduced headcount by approximately 16% through a reduction in force (excluding
the employees that transferred to Catalent at the closing of the sale of our
annualized cost savings related to the
approximately
a reduction in force. Most of this reduction in force took place in
2021
to realize estimated annualized cost savings of approximately
the September corporate restructuring beginning in 2022. The Company estimates
that it will incur approximately
all of which are cash expenditures, for severance and other employee
separation-related costs in connection with the restructurings, approximately
30, 2021
In
offer and sell shares of our common stock having an aggregate value of up to
payable to H.C. Wainwright. If we elect to use the ATM agreement, H.C.
Wainwright would be obligated to use commercially reasonable efforts consistent
with its normal trading and sales practices and applicable law and regulations
to sell shares in accordance with our instructions (including as to price, time
or size limit or other parameters or conditions that we may impose). We have not
yet sold any shares under the ATM agreement.
On
exercise of our early termination option (the "Early Termination Option") under
our Lease dated as of
"Lease"). The Lease is for the Company's
which we believe is substantially larger than our needs for the foreseeable
future. Pursuant to the Early Termination Option, the Lease will terminate on
on the last business day before the Early Termination Date, we pay an early
termination fee of approximately
to the Early Termination Date, we are not in "Default" under the Lease beyond
applicable cure periods, and (c) as of the Early Termination Date, we have
complied with our end-of-term obligations.
As of
approximately
related to the 6% semi-annual interest portion of the convertible senior secured
notes due 2024, which is payable in cash or stock. As further described in Note
10 to our Consolidated Financial
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Statements included in this report as well as in Financing Arrangements in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section of this report, if we are permitted under the notes indenture
and we elect to pay interest due in stock, a corresponding amount of restricted
cash equivalent will be released from escrow. We intend to pay the interest due
on
Reverse Stock Split
On
which effected, as of
reverse stock split of the shares of our outstanding common stock and
proportionate reduction in the number of authorized shares of our common stock
from 370,000,000 to 61,666,666. Our common stock began trading on a
split-adjusted basis on The Nasdaq Global Select Market commencing upon market
open on
"ACOR" after the reverse stock split became effective. The reverse stock split
applied equally to all outstanding shares of the common stock and did not modify
the rights or preferences of the common stock. The reverse stock split also
resulted in a corresponding adjustment to outstanding equity awards as well as
shares reserved for future issuance under our incentive compensation plans. All
figures in this report relating to shares of our common stock (such as share
amounts, per share amounts, and conversion rates and prices), including in the
financial statements and accompanying notes to the financial statements, have
been retroactively restated to reflect the 1-for-6 reverse stock split of our
common stock.
COVID-19 Pandemic
Our business and financial condition have been impacted by, and are subject to
risks resulting from, the COVID-19 (novel coronavirus) pandemic. The COVID-19
pandemic has caused significant disruptions in the healthcare industry. The
duration of the pandemic is difficult to predict, and it is likely to have
ongoing impacts as it continues. The travel restrictions, "shelter in place"
orders, quarantine policies, vaccine mandates and general concerns about the
spread of COVID-19 have disrupted the delivery of healthcare to patients, for
example making it more difficult for some patients to visit with their physician
and obtain pharmaceutical prescriptions. Also, healthcare office staffing
shortages may delay the administrative work, and particularly insurance-related
documentation, needed to obtain reimbursement for prescriptions. We believe
these factors contributed to volatility in new Inbrija prescriptions during 2020
and are continuing to impact prescriptions in 2021.
The COVID-related policies, restrictions, mandates, and concerns may disrupt our
operations and those of our customers and suppliers. Also, our operations could
be interrupted if we or our customers or suppliers lose the services of key
employees or consultants who become ill from COVID-19. These types of
disruptions could potentially affect any of our critical business functions, and
thus harm our business, including for example our manufacturing, sales and
marketing operations as well compliance and certain general and administrative
functions. The ultimate impact of the COVID-19 pandemic, or any other health
epidemic, is highly uncertain and subject to change. We do not yet know the full
extent of potential delays or impacts on our business, healthcare systems or the
global economy as a whole. As the pandemic continues, it may result in sustained
impacts on demand for our products and our ability to access capital on
reasonable terms, or at all.
Inbrija (levodopa inhalation powder)/Parkinson's Disease
Inbrija (levodopa inhalation powder) is the first and only inhaled levodopa, or
L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods,
in people with Parkinson's disease treated with carbidopa/levodopa regimen. Our
New Drug Application, or NDA, for Inbrija was approved by the
Administration
of 84 mg (administered as two capsules), which may be taken up to five times per
day. Inbrija became commercially available in the
Currently, Inbrija is available in the
exception for approximately 96% of commercial health insurance plans and
approximately 27% of Medicare plan lives. Net revenue for Inbrija was
million
quarter ended
potential future impacts of the COVID-19 pandemic and other factors, we are no
longer able to provide projected peak
peak
than our prior projected peak sales range if, for example, disruptions to the
healthcare system caused by the COVID-19 pandemic or other prescribing
challenges continue into 2022 and beyond.
In
our Marketing Authorization Application, or MAA, for Inbrija. The approved dose
is 66 mg (administered as two capsules) up to five times per day (per
27
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to the 84 mg labelled dose in the
the EU for the intermittent treatment of episodic motor fluctuations (OFF
episodes) in adult patients with Parkinson's disease treated with a
levodopa/dopa-decarboxylase inhibitor. The MAA approved Inbrija for use in what
were then the 27 countries of the EU, as well as
the
by the Medicines and Healthcare products Regulatory Agency (MHRA) in the
subject to completion of an administrative process that was approved by the MHRA
in
In July and
supply agreements with
and
agreement, we will receive a €5 million upfront payment, and we will receive
additional sales-based milestones. Under the terms of both the
supply agreements, we will receive a significant double-digit percent of the
selling price of Inbrija in exchange for supply of the product. Esteve will have
the exclusive distribution rights to Inbrija in
supply the product to Esteve for sale. Esteve expects to launch Inbrija in
in the fourth quarter of 2022, and in
with potential partners for commercialization of Inbrija in other jurisdictions
outside of the
We market Inbrija in the
marketing personnel. Our own neuro-specialty sales representatives work in
combination with sales representatives provided by a contract commercial
organization, and collectively they are currently focused on a priority list of
approximately 2,000 physicians who are high volume prescribers of
levodopa/carbidopa. Our field-based teams also include reimbursement and market
access specialists, who provide information to physicians and payers on our
marketed products, as well as market development specialists who work
collaboratively with field-sales teams and corporate personnel to assist in the
execution of our strategic initiatives. Our Inbrija field-based and marketing
activities are focused on physician awareness and market access as well as
patient awareness, education and training. Inbrija is distributed in the
primarily through: AllianceRx Walgreens Prime, or Walgreens, a specialty
pharmacy that delivers the medication to patients by mail; and
Healthcare, Inc.
We have established
sometimes refer to as the Inbrija hub.
to help patients navigate their insurance coverage and offer reimbursement
support services, when appropriate. Services fall into one of these categories:
insurance verification, to research patient insurance benefits and confirm
insurance coverage; prior authorization support, to identify prior authorization
requirements; and appeals support. For patients that may need assistance paying
for their medication,
options, including: a program that provides no cost medication to patients who
meet specific program eligibility requirements; co-pay support, which may help
commercially insured (non-government funded) patients lower their out-of-pocket
costs; and a bridge program, for federally-insured patients who experience a
delay in coverage determination. We have a no-cost sample program, available at
physician offices, to enable patients and their physicians to assess the value
of Inbrija before the patient incurs out-of-pocket co-pay or co-insurance costs.
In addition, we have a first dispense zero-dollar copay program for
commercially-insured patients (which has replaced our previous free trial
program) to enable those patients to assess the value of Inbrija before
incurring out-of-pocket co-pay or co-insurance costs.
Parkinson's disease is a progressive neurodegenerative disorder resulting from
the gradual loss of certain neurons in the brain. These neurons are responsible
for producing dopamine and that loss causes a range of symptoms including
impaired movement, muscle stiffness and tremors. The standard baseline treatment
of Parkinson's disease is oral carbidopa/levodopa, but oral medication can be
associated with wide variability in the timing and amount of absorption and
there are significant challenges in creating a regimen that consistently
maintains therapeutic effects. As Parkinson's progresses, people are likely to
experience OFF periods, which are characterized by the return of Parkinson's
symptoms that result from low levels of dopamine between doses of oral
carbidopa/levodopa. OFF periods are often highly disruptive to people with
Parkinson's. Approximately one million people in the
Europeans are diagnosed with Parkinson's; it is estimated that approximately 40%
of people with Parkinson's in the
Inbrija is for as needed use and utilizes our ARCUS platform for inhaled
therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we
believe has potential to be used in the development of a variety of inhaled
medicines. The ARCUS platform allows systemic delivery of medication through
inhalation, by transforming molecules into a light, porous dry powder. This
allows delivery of substantially higher doses of medication than can be
delivered via conventional dry powder technologies. We acquired the ARCUS
technology platform as part of our 2014 acquisition of
have worldwide rights to our ARCUS drug delivery technology, which is protected
by extensive
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know-how and trade secrets and various
patents that protect the Inbrija dry powder capsules beyond 2030. We have
several patents listed in the Orange Book for Inbrija, including patents
expiring between 2022 and 2032, and Inbrija is entitled to three years of new
product exclusivity, through
have patents in
European patents, EP 3090773B, has been opposed by an unnamed party. Inbrija
also has 10 years of market exclusivity in
FDA and
program that included approximately 900 people with Parkinson's on a
carbidopa/levodopa regimen experiencing OFF periods. The Phase 3 pivotal trial
for Inbrija - SPAN-PD - was a 12-week, randomized, placebo controlled, double
blind study evaluating the effectiveness of Inbrija in patients with mild to
moderate Parkinson's experiencing OFF periods. In
that The Lancet Neurology published results from the SPAN-PD clinical trial.
The SPAN-PD trial met its primary endpoint, with patients showing a
statistically significant improvement in motor function at the week 12 visit, as
measured by a reduction in Unified Parkinson's Disease Rating Scale (UPDRS) Part
III score for Inbrija 84 mg (n=114) compared to placebo (n=112) at 30 minutes
post-dose (-9.83 points and -5.91 points respectively; p=0.009). Onset of action
was seen as early as 10 minutes. Maintenance of effect continued to 60 minutes
post-dose, which is the longest time point assessed in the trial. UPDRS III is a
validated scale, which measures Parkinson's disease motor impairment.
The most common adverse reactions with Inbrija (at least 5% and greater than
placebo) in the pivotal trial were cough (15% vs. 2%), upper respiratory tract
infection (6% vs. 3%), nausea (5% vs. 3%) and discolored sputum (5% vs. 0%).
Inbrija was also studied in a Phase 3 long-term, active-controlled, randomized,
open-label study (N=398) assessing safety and tolerability over one year. This
study showed the average reduction in FEV1 (forced expiratory volume in 1
second) from baseline was the same (-0.1 L) for the Inbrija and observational
cohorts. Patients with chronic obstructive pulmonary disease (COPD), asthma, or
other chronic respiratory disease within the last five years were excluded from
this study.
Inbrija is not to be used by patients who take or have taken a nonselective
monoamine oxidase inhibitor such as phenelzine or tranylcypromine within the
last two weeks.
It is not known if Inbrija is safe or effective in children.
Ampyra
Ampyra was approved by the FDA in
multiple sclerosis. To our knowledge, Ampyra is the first drug approved for this
indication. Efficacy was shown in people with all four major types of MS
(relapsing remitting, secondary progressive, progressive relapsing and primary
progressive). Ampyra became subject to competition from generic versions of
Ampyra starting in late 2018 as a result of an adverse
court ruling that invalidated certain Ampyra Orange Book-listed patents. We have
experienced a significant decline in Ampyra sales due to competition from
several generic versions of Ampyra. Additional manufacturers may market generic
versions of Ampyra, and we expect our Ampyra sales will continue to decline over
time. Net revenue for Ampyra was
30, 2021
License and Collaboration Agreement with Biogen
Ampyra is marketed as Fampyra outside the
Biogen, under a license and collaboration agreement that we entered into in
2009
the
commercial launch options in that country. Under our agreement with Biogen, we
are entitled to receive double-digit tiered royalties on net sales of Fampyra
and we are also entitled to receive additional payments based on achievement of
certain regulatory and sales milestones. In
million
Partners
receive these Fampyra royalties up to an agreed-upon threshold. Until this
threshold is met, we will not receive Fampyra royalties although we retained the
right to receive any potential future
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milestone payments. The HCRP transaction is accounted for as a liability, as
described in Note 9 to our Consolidated Financial Statements included in this
report.
Ampyra Patent Update
There are no patents listed in the Orange Book for Ampyra. Ampyra became subject
to competition from generic versions of Ampyra starting in late 2018 as a result
of an adverse
Orange Book-listed patents.
There are two European patents, EP 1732548 and EP 2377536, with claims directed
to use of a sustained release dalfampridine composition (known under the trade
name Fampyra in the
multiple sclerosis. Both European patents are set to expire in 2025, absent any
additional exclusivity granted based on regulatory review timelines. Nullity
actions have been filed in
derived from EP 1732548 and EP 2377536 by ratiopharm
manufacturer affiliated with Teva. Fampyra had 10 years of market exclusivity in
the
We will vigorously defend our intellectual property rights.
ARCUS Product Development
We have been exploring opportunities for other proprietary products in which
inhaled (pulmonary) delivery of medicine using our ARCUS drug delivery
technology can provide a significant therapeutic benefit to patients. We believe
there are potential opportunities with central nervous system, or CNS, as well
as non-CNS, disorders.
Our ARCUS development had previously been focused on a program for acute
treatment of migraine. We had been evaluating therapeutic candidates for their
suitability to move forward with this program. Due to several corporate
restructurings since 2017 and associated cost-cutting measures, including the
corporate restructurings we announced in January and
consideration of further investment into potential new ARCUS applications in
migraine or any other indication pending additional progress with the Inbrija
commercial launch in the
ARCUS programs, we are discussing potential collaborations with other companies
that have expressed interest in formulating their novel molecules for pulmonary
delivery with ARCUS, and feasibility studies are ongoing for a number of these
opportunities.
Should we decide to proceed with any ARCUS development programs, we would be
reliant on Catalent or another third party supplier for the manufacture of
product for that program. Our global supply agreement with Catalent does not
provide for the terms and conditions under which Catalent would supply any
product or product candidate other than Inbrija. We would be unable to advance
the development of any ARCUS inhaled therapeutic candidate unless Catalent is
willing to manufacture the candidate for us on commercially reasonable terms, or
we could identify another third party manufacturer that would be capable and
willing to manufacture the candidate for us on commercially reasonable terms.
Also, due to reductions in force, employee attrition and the 2021 sale of our
for, and would need to hire replacements before continuing with, this research
and development work.
Financial Guidance for 2021
We are providing the following guidance with respect to our 2021 financial
performance:
• Net revenue from the sale of Ampyra in 2021 is expected to range from $75
million to $85 million .
• Operating expenses in 2021 are expected to range from $130 million to
$140 million . This is a non-GAAP projection that excludes restructuring
costs and share-based compensation charges, as more fully described
below.
The projected range of operating expenses in 2021 specified above was not
prepared in accordance with accounting principles generally accepted in
United States
share-based compensation charges. Due to the forward looking nature of this
information, the amount of compensation charges needed to reconcile this measure
to the most directly comparable GAAP financial measure is dependent on future
changes in the market price of our common stock and is not available at this
time. Non-GAAP financial measures are not an alternative for financial
30
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measures prepared in accordance with GAAP. However, we believe that the
presentation of this non-GAAP financial measure, when viewed in conjunction with
actual GAAP results, provides investors with a more meaningful understanding of
our ongoing and projected operating performance because it excludes (i) expenses
that pertain to corporate restructurings that are not routine to the operation
of our business, and (ii) non-cash charges that are substantially dependent on
changes in the market price of our common stock. We believe this non-GAAP
financial measure helps indicate underlying trends in our business and is
important in comparing current results with prior period results and
understanding expected operating performance. Also, our management uses this
non-GAAP financial measure to establish budgets and operational goals, and to
manage our business and to evaluate its performance.
Results of Operations
Three-Month Period Ended
Net Product Revenues
Inbrija
For the three-month period ended
of Inbrija following receipt of product by companies in our distribution
network, which primarily includes specialty pharmacy providers and
Healthcare, Inc.
completed the transition from a network of several specialty pharmacies to
AllianceRx Walgreens Prime, or Walgreens, as the sole specialty pharmacy for
our business. We recognized net revenue from the sale of Inbrija of
and
respectively, an increase of
revenue was due to an increase in net volume of
discount and allowance adjustments of
ended
Discounts and allowances which are included as an offset in net revenue consist
of allowances for customer credits, including estimated chargebacks, rebates,
returns and discounts. Discounts and allowances are recorded following shipment
of our products to our customers. Adjustments are recorded for estimated
chargebacks, rebates, and discounts. Discounts and allowances also consist of
discounts provided to Medicare beneficiaries whose prescription drug costs cause
them to be subject to the Medicare Part D coverage gap (i.e., the "donut hole").
Payment of coverage gap discounts is required under the Affordable Care Act, the
health care reform legislation enacted in 2010. Discounts and allowances may
increase as a percentage of sales as we enter into new managed care contracts in
the future.
We believe that first and fourth quarter revenue for our products is subject to
certain recurring seasonal factors relating to the commencement of a new
calendar year. For example, some patients refill their prescriptions earlier
ahead of the new year, in the fourth quarter, in anticipation of the year-end
reset of health plan deductibles and the Medicare donut hole, or a year-end
switch of their insurance plans or pharmacy benefit providers. Also, we believe
that AllianceRx Walgreens Prime, the specialty pharmacy that we use for Inbrija
distribution, may increase their Inbrija stock, within contractual limits, in
anticipation of the holidays and new year. These factors may seasonally have a
positive impact on fourth quarter revenues and a negative impact on first
quarter revenues. Also, discounts and allowances typically are highest in the
first quarter, and lowest in the fourth quarter, and when this occurs this
increases fourth quarter revenues, and decreases first quarter revenues, on a
relative basis.
Ampyra
We recognize product sales of Ampyra following receipt of product by companies
in our distribution network, which primarily includes specialty pharmacy
providers. We recognized net revenue from the sale of Ampyra of
and
respectively, a decrease of
due primarily to a decrease in net volume of
discount and allowance adjustments of
ended
Discounts and allowances which are included as an offset in net revenue consist
of allowances for customer credits, including estimated chargebacks, rebates,
returns and discounts. Discounts and allowances are recorded following shipment
of our products to our customers. Adjustments are recorded for estimated
chargebacks, rebates, and discounts. Discounts and
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allowances also consist of discounts provided to Medicare beneficiaries whose
prescription drug costs cause them to be subject to the Medicare Part D coverage
gap (i.e., the "donut hole"). Payment of coverage gap discounts is required
under the Affordable Care Act, the health care reform legislation enacted in
2010. Discounts and allowances may increase as a percentage of sales as we enter
into managed care contracts in the future.
We believe that first and fourth quarter revenue for our products is subject to
certain recurring seasonal factors relating to the commencement of a new
calendar year. For example, some patients refill their prescriptions earlier
ahead of the new year, in the fourth quarter, in anticipation of the year-end
reset of health plan deductibles and the Medicare donut hole, or a year-end
switch of their insurance plans or pharmacy benefit providers. Also, we believe
specialty pharmacies may increase their Ampyra stock in anticipation of the
holidays and new year. These factors may seasonally have a positive impact on
fourth quarter revenues and a negative impact on first quarter revenues. Also,
discounts and allowances typically are highest in the first quarter, and lowest
in the fourth quarter, and when this occurs this increases fourth quarter
revenues, and decreases first quarter revenues, on a relative basis.
Other Product Revenue
We recognized negligible revenue from the sale of other products for the
three-month period ended
three-month period ended
98.6%.
Milestone Revenue
We recognized
three-month periods ended
Royalty Revenue
We recognized
three-month periods ended
of
Cost of Sales
We recorded cost of sales of
2021
recognized revenues and
shipments. Cost of sales for the three-month period ended
consisted primarily of
revenues and
Amortization of intangibles
We recorded amortization of intangible asset related to Inbrija of
for the three-month periods ended
Research and Development
Research and development expenses for the three-month period ended
2021
ended
The decrease was primarily due to reductions in Civitas spending of
due to the commercialization of Inbrija, reductions of
restructuring and decrease in several programs to shift focus on Inbrija launch,
partially offset by an increase of
expenses.
Selling, General and Administrative
Sales and marketing expenses for the three-month period ended
were
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decrease was primarily due to a decrease in marketing related spending of
million
and benefits of
departmental costs from general and administrative expenses of
to a change in the overhead expense allocation method.
General and administrative expenses for the three-month period ended
30, 2021
ended
The decrease was primarily due to an increase in legal expenses of
and an increase of
decrease in overall salaries and benefit costs of
Civitas spending of
manufacturing operations, and a decrease in other departmental spending of
million
Change in Fair Value of Derivative Liability
A derivative liability was recorded in
of the 6.00% Convertible Senior Secured Notes due 2024. The derivative liability
is measured at fair value on a quarterly basis and changes in the fair value are
recorded in the consolidated statement of operations. We recorded income of
million
three-month period ended
Changes in Fair Value of Acquired Contingent Consideration
As a result of the original spin out of Civitas from Alkermes, part of the
consideration to Alkermes was a future royalty to be paid to Alkermes on
Inbrija. Acorda acquired this contingent consideration as part of the Civitas
acquisition. The fair value of that future royalty is assessed quarterly. We
recorded a loss pertaining to changes in the fair value of our acquired
contingent consideration of
period ended
contingent consideration were primarily due to updates to certain revenue and
expense forecast assumptions.
Other Expense, Net
Other expense, net was
30, 2021
Benefit/(Provision) from Income Taxes
For the three-month periods ended
recorded a benefit from income taxes of
million
three-month periods ended
respectively.
The variance in the effective tax rates for the three-month period ended
2020
benefit of net operating loss carryback under the CARES Act recorded at 21% to
recover taxes paid at the previous statutory rate of 35%.
The Company continues to evaluate the realizability of its deferred tax assets
on a quarterly basis and will adjust such amounts in light of changing facts and
circumstances including, but not limited to, future projections of taxable
income, tax legislation, rulings by relevant tax authorities, the progress of
ongoing tax audits and the regulatory approval of products currently under
development. Any changes to the valuation allowance or deferred tax assets and
liabilities in the future would impact the Company's income taxes.
The Company has ongoing state examinations in
cover multiple years. There have been no proposed adjustments at this stage of
the examination.
The
no changes.
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Nine-Month Period Ended
Net Product Revenues Inbrija
We recognize product sales of Inbrija following receipt of product by companies
in our distribution network, which primarily includes specialty pharmacy
providers and
sale of Inbrija of
ended
increase in net volume of
allowance adjustments of
30, 2021
Discounts and allowances which are included as an offset in net revenue consist
of allowances for customer credits, including estimated chargebacks, rebates,
returns and discounts. Discounts and allowances are recorded following shipment
of our products to our customers. Adjustments are recorded for estimated
chargebacks, rebates, and discounts. Discounts and allowances also consist of
discounts provided to Medicare beneficiaries whose prescription drug costs cause
them to be subject to the Medicare Part D coverage gap (i.e., the "donut hole").
Payment of coverage gap discounts is required under the Affordable Care Act, the
health care reform legislation enacted in 2010. Discounts and allowances may
increase as a percentage of sales as we enter into managed care contracts in the
future.
We believe that first and fourth quarter revenue for our products is subject to
certain recurring seasonal factors relating to the commencement of a new
calendar year. For example, some patients refill their prescriptions earlier
ahead of the new year, in the fourth quarter, in anticipation of the year-end
reset of health plan deductibles and the Medicare donut hole, or a year-end
switch of their insurance plans or pharmacy benefit providers. Also, we believe
that AllianceRx Walgreens Prime, the specialty pharmacy that we use for Inbrija
distribution, may increase their Inbrija stock, within contractual limits, in
anticipation of the holidays and new year. These factors may seasonally have a
positive impact on fourth quarter revenues and a negative impact on first
quarter revenues. Also, discounts and allowances typically are highest in the
first quarter, and lowest in the fourth quarter, and when this occurs this
increases fourth quarter revenues, and decreases first quarter revenues, on a
relative basis.
Ampyra
We recognize product sales of Ampyra following receipt of product by companies
in our distribution network, which primarily includes specialty pharmacy
providers. We recognized net revenue from the sale of Ampyra of
and
respectively, a decrease of
due primarily to decreased net volume of
discount and allowance adjustments of
Ampyra decreased for the nine-month period ended
the nine-month period ended
versions of Ampyra as a result of the invalidation of certain of our Ampyra
patents in 2017.
Discounts and allowances which are included as an offset in net revenue consist
of allowances for customer credits, including estimated chargebacks, rebates,
returns and discounts. Discounts and allowances are recorded following shipment
of our products to our customers. Adjustments are recorded for estimated
chargebacks, rebates, and discounts. Discounts and allowances also consist of
discounts provided to Medicare beneficiaries whose prescription drug costs cause
them to be subject to the Medicare Part D coverage gap (i.e., the "donut hole").
Payment of coverage gap discounts is required under the Affordable Care Act, the
health care reform legislation enacted in 2010. Discounts and allowances may
increase as a percentage of sales as we enter into managed care contracts in the
future.
We believe that first and fourth quarter revenue for our products is subject to
certain recurring seasonal factors relating to the commencement of a new
calendar year. For example, some patients refill their prescriptions earlier
ahead of the new year, in the fourth quarter, in anticipation of the year-end
reset of health plan deductibles and the Medicare donut hole, or a year-end
switch of their insurance plans or pharmacy benefit providers. Also, we believe
specialty pharmacies may increase their Ampyra stock in anticipation of the
holidays and new year. These factors may seasonally have a positive impact on
fourth quarter revenues and a negative impact on first quarter revenues. Also,
discounts and allowances typically are highest in the first quarter, and lowest
in the fourth quarter, and when this occurs this increases fourth quarter
revenues, and decreases first quarter revenues, on a relative basis.
34
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Other Product Revenues
We recognized negligible revenue from the sale of other products for the
nine-month period ended
nine-month period ended
Milestone Revenue
We recognized
periods ended
Royalty Revenue
We recognized
nine-month periods ended
ex-
Cost of Sales
We recorded cost of sales of
2021
recognized revenues,
shipments, idle capacity costs of
related to expired inventory, freight, stability testing, and packaging. Cost of
sales for the nine-month period ended
in royalty fees based on net product shipments.
Amortization of intangibles
We recorded amortization of intangible asset related to Inbrija of
for the nine-month periods ended
Research and Development
Research and development expenses for the nine-month period ended
2021
ended
The decrease was due primarily to reductions in Civitas spending of
due to the commercialization of Inbrija, reductions of
restructuring and decrease in several programs to shift focus on Inbrija launch,
and reductions of
Selling, General and Administrative
Sales and marketing expenses for the nine-month period ended
were
decrease was attributable primarily to a decrease in overall salaries and
benefits of
decrease in marketing for Ampyra of
reclassification of departmental costs from general and administrative expenses
of
General and administrative expenses for the nine-month period ended
30, 2021
ended
primarily due to an increase in legal expenses of
restructuring costs of
departmental spending, partially offset by a decrease in overall salaries and
benefit costs of
due to the sale of the
Change in Fair Value of Derivative Liability
A derivative liability was recorded in
of the 6.00% Convertible Senior Secured Notes due 2024. The derivative liability
is measured at fair value on a quarterly basis and changes in the fair value
35
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are recorded in the consolidated statement of operations. We recorded income of
the nine-month period ended
Changes in Fair Value of Acquired Contingent Consideration
As a result of the original Civitas spin out of Alkermes, part of the
consideration to Alkermes was a future royalty to be paid to Alkermes on
Inbrija. Acorda acquired this contingent consideration as part of the Civitas
acquisition. The fair value of that future royalty is assessed quarterly. We
recorded an income pertaining to changes in the fair-value of acquired
contingent consideration of
consideration were primarily due to updates to certain product revenue and
expense forecast assumptions.
Other Expense, Net
Other expense, net was
30, 2021
30, 2020
property and equipment of
expense of
Benefit from Income Taxes
For the nine-month periods ended
recorded a benefit of
taxes, respectively. The effective income tax rates for the Company for the
nine-month periods ended
respectively. The variance in the effective tax rates for the nine-month period
ended
30, 2020
assets for which no tax benefit can be recognized, forfeitures of equity based
awards and the benefit recorded on the net operating loss carryback under the
CARES Act recorded at 21% to recover taxes paid at the previous statutory rate
of 35%.
The Company continues to evaluate the realizability of its deferred tax assets
on a quarterly basis and will adjust such amounts in light of changing facts and
circumstances including, but not limited to, future projections of taxable
income, tax legislation, rulings by relevant tax authorities, the progress of
ongoing tax audits and the regulatory approval of products currently under
development. Any changes to the valuation allowance or deferred tax assets and
liabilities in the future would impact the Company's income taxes.
The Company has ongoing state examinations in
cover multiple years. There have been no proposed adjustments at this stage of
the examination.
The
no changes.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily from: private
placements and public offerings of our capital stock; borrowing money through
loans and the issuance of debt instruments; payments received under our
collaboration and licensing agreements; revenue from sales of Ampyra, Fampyra,
and Inbrija, as well as our former products, Zanaflex and Qutenza; royalty
monetizations and our revenue interest financing arrangement; and, to a lesser
extent, funding from government grants. Also, in
additional capital from the sale of our
At
compared to
cash equivalents balance does not include restricted cash, currently held in
escrow under the terms of our convertible senior secured notes due 2024, further
described below under Financing Arrangements, which may potentially be released
from escrow if we pay interest on those notes using shares of our common stock.
We incurred a net loss of
period ended
Our future capital requirements will depend on a number of factors, including:
• the amount of revenue generated from sales of Inbrija and Ampyra;
36
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• our ability to manage operating expenses;
• the amount and timing of purchase price, milestone or other payments
that we may owe or have a right to receive under collaboration, license,
asset sale, acquisition, or other agreements or transactions; and the
extent to which the terms and conditions of our convertible senior
secured notes due 2024 restrict or direct our use of proceeds from such
transactions;
• our ability to make required payments relating to our convertible senior
secured notes due 2024 (the "2024 Notes"), as described below under
Financing Arrangements, using shares of our common stock rather than
cash;
• the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims and other intellectual property
rights; and
• capital required or used for future acquisitions, to in-license new
products, programs or compounds, or for research and development
relating to existing or future acquired or in-licensed programs or
compounds.
Our ability to meet our future operating requirements, repay our liabilities,
and meet our other obligations are dependent upon a number of factors, including
our ability to generate cash from product sales, reduce planned expenditures,
and obtain additional financing. If we are unable to generate sufficient cash
flow from the sale of our products, we may be required to adopt one or more
alternatives, subject to the restrictions contained in the indenture governing
our 2024 Notes, such as further reducing expenses, selling assets, restructuring
debt, or obtaining additional equity capital on terms that may be onerous and
which are likely to be highly dilutive. Also, our ability to raise additional
capital and repay or restructure our indebtedness will depend on the capital
markets and our financial condition at such time, among other factors. In
addition, financing may not be available when needed, at all, on terms
acceptable to us or in accordance with the restrictions described above.
Financing Arrangements
Convertible Senior Secured Notes Due 2024
On
million
Notes due 2021 (the "2021 Notes") for a combination of newly-issued 6.00%
Convertible Senior Secured Notes due 2024 (the "2024 Notes") and cash. For each
principal amount of the 2024 Notes and made a cash payment of
"Exchange"). In the aggregate, the Company issued approximately
aggregate principal amount of the 2024 Notes and paid approximate
in cash to participating holders. The Exchange was conducted with a limited
number of institutional holders of the 2021 Notes pursuant to Exchange
Agreements dated as of
The 2024 Notes were issued pursuant to an Indenture, dated as of
2019
(along with any domestic subsidiaries acquired or formed after the date of
issuance, the "Guarantors"), and
trustee and collateral agent (the "2024 Indenture"). The 2024 Notes are senior
obligations of the Company and the Guarantors, secured by a first priority
security interest in substantially all of the assets of the Company and the
Guarantors, subject to certain exceptions described in the Security Agreement,
dated as of
Trust, National Association
The 2024 Notes will mature on
accordance with their terms prior to such date. Interest on the 2024 Notes is
payable semi-annually in arrears at a rate of 6.00% per annum on each
cash or shares of the Company's common stock, subject to the satisfaction of
certain conditions. If the Company elects to pay interest in shares of common
stock, such common stock will have a per share value equal to 95% of the daily
volume-weighted average price for the 10 trading days ending on and including
the trading day immediately preceding the relevant interest payment date. In
of the interest payable to holders of the 2024 Notes on
connection with this stock-based interest payment approximately
accrued interest was released from restricted case and became available to the
Company for other purposes.
37
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The 2024 Notes are convertible at the option of the holder into shares of common
stock of the Company at any time prior to the close of business on the second
scheduled trading day immediately preceding the maturity date. The adjusted
conversion rate for the 2024 Notes is 47.6190 shares of the Company's common
stock per
conversion price of approximately
conversion rate was adjusted to reflect the 1-for-6 reverse stock split effected
on
circumstances as described in the 2024 Indenture.
The Company may elect to settle conversions of the 2024 Notes in cash, shares of
the Company's common stock or a combination of cash and shares of the Company's
common stock. Holders who convert their 2024 Notes prior to
than in connection with a make-whole fundamental change) will also be entitled
to an interest make-whole payment equal to the sum of all regularly scheduled
stated interest payments, if any, due on such 2024 Notes on each interest
payment date occurring after the conversion date for such conversion and on or
before
2024 Notes then outstanding to be converted automatically if the volume-weighted
average price per share of the Company's common stock equals or exceeds 130% of
the adjusted conversion price for a specified period of time and certain other
conditions are satisfied.
Holders of the 2024 Notes will have the right, at their option, to require the
Company to purchase their 2024 Notes if a fundamental change (as defined in the
2024 Indenture) occurs, in each case, at a repurchase price equal to 100% of the
principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the applicable repurchase date. If a
make-whole fundamental change occurs, as described in the 2024 Indenture, and a
holder elects to convert its 2024 Notes in connection with such make-whole
fundamental change, such holder may be entitled to an increase in the adjusted
conversion rate as described in the 2024 Indenture.
Subject to a number of exceptions and qualifications, the 2024 Indenture
restricts the ability of the Company and certain of its subsidiaries to, among
other things, (i) pay dividends or make other payments or distributions on their
capital stock, or purchase, redeem, defease or otherwise acquire or retire for
value any capital stock, (ii) make certain investments, (iii) incur indebtedness
or issue preferred stock, other than certain forms of permitted debt, which
includes, among other items, indebtedness incurred to refinance the 2021 Notes,
(iv) create liens on their assets, (v) sell their assets, (vi) enter into
certain transactions with affiliates or (vii) merge, consolidate or sell of all
or substantially all of their assets. The 2024 Indenture also requires the
Company to make an offer to repurchase the 2024 Notes upon the occurrence of
certain asset sales.
The 2024 Indenture provides that a number of events will constitute an event of
default, including, among other things, (i) a failure to pay interest for 30
days, (ii) failure to pay the 2024 Notes when due at maturity, upon any required
repurchase, upon declaration of acceleration or otherwise, (iii) failure to
convert the 2024 Notes in accordance with the 2024 Indenture and the failure
continues for five business days, (iv) not issuing certain notices required by
the 2024 Indenture within a timely manner, (v) failure to comply with the other
covenants or agreements in the 2024 Indenture for 60 days following the receipt
of a notice of non-compliance, (vi) a default or other failure by the Company to
make required payments under other indebtedness of the Company or certain
subsidiaries having an outstanding principal amount of
(vii) failure by the Company or certain subsidiaries to pay final judgments
aggregating in excess of
insolvency and (ix) the commercial launch in
determined by the
event of default arising from certain events of bankruptcy or insolvency with
respect to the Company, all outstanding 2024 Notes will become due and payable
immediately without further action or notice. If any other event of default
occurs and is continuing, the trustee or the holders of at least 25% in
aggregate principal amount of the then outstanding 2024 Notes may declare all
the notes to be due and payable immediately.
The 2021 Notes received by the Company in the Exchange were cancelled in
accordance with their terms. Accordingly, upon completion of the Exchange,
million
The Company assessed all terms and features of the 2024 Notes in order to
identify any potential embedded features that would require bifurcation. As part
of this analysis, the Company assessed the economic characteristics and risks of
the 2024 Notes, including the conversion, put and call features. The Company
concluded the conversion features required bifurcation as a derivative. The fair
value of the conversion feature derivative was determined based on the
difference between the fair value of the 2024 Notes with the conversion options
and the fair value of the 2024 Notes without the conversion options using a
binomial model. The Company determined that the fair value of the derivative
upon issuance of the 2024 Notes was
derivative liability with an offsetting amount as a debt discount as a reduction
to the carrying value of the 2024 Notes on the closing date, or
2019
issuance, did not meet the conditions for equity classification. As a
38
--------------------------------------------------------------------------------
result, these features were aggregated together and recorded as the derivative
liability conversion option. The conversion feature is measured at fair value on
a quarterly basis and the changes in the fair value of the conversion feature
for the period will be recognized in the consolidated statements of operations.
The Company received stockholder approval on
number of authorized shares of the Company's common stock from 13,333,333 shares
to 61,666,666 shares. As a result of the share approval, the Company determined
that multiple embedded conversion options met the conditions for equity
classification. The Company performed a valuation of these conversion options as
of
securities registration obligations. The resulting fair value of these
conversion options was
presented in the statement of stockholder's equity as of
of the
as it continues to meet the conditions for equity classification. The Company
performed a valuation of the derivative liability related to certain embedded
conversion features that are precluded from equity classification. The fair
value of these conversion features was calculated to be
representing a change of
statement of operations for the nine-month period ended of
The outstanding 2024 Note balance as ofSeptember 30, 2021 consisted of the following: (In thousands) September 30, 2021 Liability component: Principal $ 207,000 Less: debt discount and debt issuance costs, net (59,553 ) Net carrying amount $ 147,447 Equity component $ 18,257 Derivative liability-conversion Option $ 325
Convertible Senior Notes Due 2021
In
1.75% Convertible Senior Notes due 2021 (the "2021 Notes"). On
2019
principal amount of then-outstanding 2021 Notes for a combination of
newly-issued 6.00% Convertible Senior Secured Notes due 2024 and cash.
Accordingly, upon completion of the exchange,
remained outstanding. On
balance of the 2021 Notes at their maturity date using cash on hand.
Non-Convertible Capital Loans
Non-convertible capital loans were granted by Business Finland (formerly Tekes),
with an adjusted acquisition-date fair value of
and a carrying value of
composed of fourteen non-convertible loans. The loans bear interest based on the
greater of 3% or the base rate set by
(1) percentage point. The maturity dates for these loans range from eight to ten
years from the date of issuance, however, according to certain terms and
conditions of the loans, the Company may repay the principal and accrued and
unpaid interest of the loans only when the consolidated retained earnings of
Biotie is sufficient to fully repay the loans.
Research and Development Loans
Research and Development Loans ("R&D Loans") were granted by Business Finland
with an acquisition-date fair value of
carrying value of
interest based on the greater of 1% or the base rate set by
of Finance minus three (3) percentage points. The repayment of these loans began
in
5 year period, which ended
39
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Cash, Cash Equivalents and Investments
At
million
consist of highly liquid investments with original maturities of three months or
less at date of purchase and consist of investments in a
fund. Also, we maintain cash balances with financial institutions in excess of
insured limits. We do not anticipate any losses with respect to such cash
balances. Our
include restricted cash, currently held in escrow under the terms of our
convertible senior secured notes due 2024, further described above under
Financing Arrangements, which may potentially be released from escrow if we pay
interest on those notes using shares of our common stock.
Net cash used in operations was
acquired contingent consideration obligation of
revenue of
other non-current liabilities of
liability of
expense of
of
accounts payable, accrued expenses and other current liabilities of
million
inventory of
of
Net cash used in investing activities for the nine-month period ended
30, 2021
equipment and intangible assets of
Net Cash Provided by Financing
Net cash provided by financing activities for the nine-month period ended
from the sale of the
repayment of Convertible Senior Notes due in
repayment of loans payable of
Contractual Obligations and Commitments
A summary of our minimum contractual obligations related to our material
outstanding contractual commitments is included in Note 13 of our Annual Report
on Form 10-K for the year ended
obligations include commitments and estimated purchase obligations entered into
in the normal course of business.
Under certain agreements, we are required to pay royalties or license fees and
milestones for the use of technologies and products in our research and
development activities and in the commercialization of products. The amount and
timing of any of the foregoing payments are not known due to the uncertainty
surrounding the successful research, development and commercialization of the
products. As of
commitments of approximately
minimum purchase commitments for Inbrija through the expiration of the agreement
on
commitment to Catalent was
annually each year thereafter.
Critical Accounting Policies and Estimates
Our critical accounting policies are detailed in our Annual Report on Form 10-K
for the year ended
adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes" (Topic 740).
Other than the adoption of the new accounting guidance, our significant
accounting policies have not changed materially from
40
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PROTECTIVE LIFE INSURANCE CO – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
The National Security Group, Inc. Releases Financial Results
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