ACOR & BIIB Team Up on MS Drug

This morning, Acorda Therapeutics (ACOR - Analyst Report) announced that it has entered into an exclusive collaboration and licensing agreement to develop and commercialize Fampridine-SR, the company's therapy to improve walking ability in patients with multiple sclerosis (MS), with Biogen Idec (BIIB - Analyst Report) for territories outside the U.S. These territories include Europe, Canada and Australia, among others, and relate to all current and future aminopyridine products.

Biogen will pay Acorda an upfront payment of $110 million in cash as part of the transaction. Acorda can earn an additional $400 million in regulatory and sales related milestones, plus a tiered double-digit royalty on sales of the drug. Biogen will handle all regulatory and commercialization activities outside the U.S. In June 2009, Acorda received feedback from the European Medicines Agency (EMEA) that the marketing authorization application (MAA) in Europe is eligible to be filed under the centralized procedure.

In addition to the tiered double-digit royalties that Biogen will pay Acorda, Biogen will also assume Acorda's sub-royalty responsibility to Elan Corp. (ELN - Snapshot Report) on Fampridine-SR. Acorda will pay Elan a sub-license fee of 7% ($7.7 million) on all upfront and future milestone payments received from Biogen. Elan will continue to manufacture the commercial supply for Fampridine-SR.

We view the deal as very positive for both companies. Acorda has partnered up with the worldwide leader in MS to commercialize its drug in Europe and other markets outside the U.S. Biogen already promotes its MS drugs -- Avonex and Tysabri -- in these markets, and under Biogen's marketing and promotion arm we see Fampridine-SR ramping to  $275 million ex-U.S. by 2013. Biogen exited the first quarter with $2.5 billion in cash and a slowing top-line outside the U.S. where Avonex has matured and Tysabri is slowed by continued fears over PML. Therefore, the deal is a natural fit and should benefit both companies in the long run.

Fampridine-SR is currently under U.S. FDA priority review with an action date set for October 22, 2009. The product has also been designated an orphan drug by the FDA, allowing for seven years of market exclusivity. We expect Acorda to commercialize Fampridine-SR on its own in the U.S. through a ramp of existing infrastructure, currently promoting Zanaflex capsules for the management of spasticity.

If approved, we expect the company to double its exitsing sales force to 120 - 130 representatives by the end of the year. The $110 million upfront payment from Biogen will help Acorda fund this expansion. We see $375 million in U.S. Fampridine-SR sales in 2013. We have Buy ratings on both Acorda and Biogen Idec.