Acorda Restructures, Cuts Jobs By 25% With No Deals, Big Debt On The Horizon
Executive Summary
Acorda is cutting jobs to save $21m annually and otherwise lowering expenses for a total of $60m in reduced costs in 2020 to focus on marketing Inbrija, but looming overhead is $345m in debt due in 2021. Meanwhile, ex-US partners and company buyers appear nowhere in sight.
Acorda Therapeutics Inc. is struggling to stay afloat as sales of Ampyra decline due to generic competition and while the company attempts to replace that revenue with its newly approved Inbrija. In the meantime, with $345m in debt due in two years, Acorda is reducing costs and cutting its workforce by 25% to lower its annual costs by $60m in 2020.
The company announced its restructuring plan after the stock market closed on 23 October and pre-reported its third quarter product sales ahead of its 4 November earnings conference call, including $37.6m for multiple sclerosis therapy Ampyra (dalfampridine) and $4.9m for Inbrija (levodopa inhalation powder), launched in February for the on-demand treatment of OFF episodes in Parkinson’s disease. Ampyra sales came in above analyst consensus while Inbrija sales fell slightly below expectations.
Acorda’s share price added $0.09 on October 24 to close 1.6% higher at $5.73. The stock traded as high as $5.97 early in the day, but moderated as investors tried to interpret the meaning of the new cost-saving strategy.
Jefferies analyst Michael Yee said in a 23 October note that an acquisition of the firm would be beneficial, since a larger pharmaceutical company would be in a better position to generate significant sales for Inbrija, but a buyout presumably is not anticipated by Acorda management in the near term given the company’s decision to restructure its operations.
Yee noted that AbbVie Inc. and Allergan PLC both have had interests in Parkinson's disease, but are unlikely candidate to buy Acorda, because the two companies are in the process of closing their $63bn merger. (Also see "AbbVie Pounces On Chance To Buy Revenues In $63bn Mega-Deal For Allergan" - Scrip, 25 Jun, 2019.) Also, he said, other newer Parkinson’s treatments have been slow to initiate and grow sales, such as Gocovri (extended-release amantadine) from Adamas Pharmaceuticals Inc., as payers prove tough negotiators for recently launched products. (Also see "Quite A Range: Adamas Ponders $10,000-$30,000 Price Tag For Gocovri" - Scrip, 25 Aug, 2017.)
“It also goes back to an industry question about why neuro M&A has been lackluster vs. oncology, etc., although we note [Alder BioPharmaceuticals Inc.] was recently acquired at $2bn, but is the only notable neuro M&A deal we've seen in a couple years,” Yee wrote. (Also see "Lundbeck CEO: Alder Buy Will Boost Pipeline" - Scrip, 16 Sep, 2019.)
Without an impending deal – either an acquisition of Acorda or an ex-US licensing agreement for Inbrija – the $345m in convertible debt that the company is due to repay by 2021 becomes a heavier burden.
“While cash preservation is critical, the convertible debt (due 2021) is a bigger issue requiring resolution,” WedBush Securities analyst Laura Chico said in a 24 October note.
More Than 100 Jobs Cut To Save $21m Annually
Acorda did not disclose how many people will lose their jobs through the company’s restructuring plan, but noted that the workforce reduction will save $21m in annual costs, although severance and other costs related to the layoffs will result in an $8m pre-tax charge.
Based on Acorda’s annual report for 2018, which said the company had 474 employees as of 21 February of this year, a 25% workforce reduction means that about 119 people will lose their jobs. Most of the layoffs will be immediate, but the reductions will continue into the first quarter of next year.
Employment-related and other cost cuts have Acorda lowering its full-year 2019 expenses from prior guidance for this year. The company said research and development costs will now be $55m-$60m versus guidance of $70m-$80m; sales, general and administrative (SG&A) expenses will be $185m-$190m versus the earlier expectation of $200m-$210m.
For next year, total non-GAAP operating expenses are projected to be $180m-$190m, including $20m-$25m in R&D costs and $160m-$165m in SG&A expenses, meaning that total costs in 2020 will be about $60m below 2019.
Acorda had $253m in cash at the end of September and expects to end 2019 with more than $225m. The company did not provide any guidance on Ampyra and Inbrija sales expectations for 2020 nor indicate how much cash it will have at the end of next year, creating uncertainty about whether or not it will have enough money to pay its debt due in 2021 or to justify a refinancing of the convertible notes.
WedBush’s Chico said Acorda’s restructuring plan “certainly appears warranted, as the disclosure of 3Q19 Inbrija revenue of $4.9m falls below our estimate of $5.5m, and also current consensus $6.9m. The results reinforce that gaining traction will likely remain challenging in the near term.”
Ampyra’s $37.6m in sales beat consensus of $33.9m and Wedbush’s $35.4m forecast, but “while the latter is most important for cash-flow generation, the Inbrija miss will keep investors on edge about the outlook,” Chico noted.
The loss of Ampyra patent exclusivity following a patent appeals court loss was a big blow for Acorda. The drug’s third quarter 2019 sales are now less than a third of Ampyra’s $137.8m sales in the third quarter 2018. (Also see "Timing Is Everything – Unfortunately For Acorda, Timing Couldn't Be Worse" - Scrip, 13 Sep, 2018.)
The company has struggled to recover from the initial patent court decision in favor of Ampyra generics makers in 2017 after which Acorda reduced its headcount by 20%. (Also see "Finance Watch: Second Quarter Begins With Solid Base For Biopharma VC, Shaky Ground For Acorda" - Scrip, 10 Apr, 2017.)
Acorda’s Parkinson’s disease focus shifted from tozadenant to Inbrija in November 2017 after the A2a receptor inhibitor ran into major safety concerns, including patient deaths, in late-stage clinical trials. (Also see "Acorda Decides Tozadenant Isn’t Salvageable, Moves Primary Focus To Inbrija" - Scrip, 20 Nov, 2017.) But following an initial rejection, Inbrija was approved in December of last year. (Also see "While You Were Out: News In Brief" - Scrip, 31 Dec, 2018.)