We recently initiated coverage on commercial-stage biopharmaceutical company Acorda Therapeutics, Inc. with a Neutral recommendation and a target price of $25.00.
Ardsley, New York based Acorda is focused on the development and commercialization of novel treatments that improve neurological function in people suffering from multiple sclerosis, spinal cord injury and other nervous system disorders.
The January 2010 FDA approval of Ampyra was a major achievement for Acorda. According to the company, Ampyra is the first and only product approved for the improvement of walking in multiple sclerosis patients. Ampyra is the key growth driver at Acorda. The company expects net Ampyra revenue in the range of $255 million to $275 million in 2012. Ampyra has the potential to be approved for additional indications as well. Acorda is currently studying Ampyra in phase II proof-of-concept studies for cerebral palsy (results by year end) and post-stroke deficits (results in early 2013).
We are positive on Acorda’s June 2009 agreement with Biogen Idec (BIIB - Analyst Report) for the development and commercialization of Fampyra (ex-US trade name of Ampyra) in ex-US markets. In addition to receiving an upfront payment of $110 million, Acorda is entitled to receive milestone payments as well as double-digit tiered royalties. Given Biogen’s expertise and strong presence in the multiple sclerosis market, we believe Biogen is a suitable partner for Acorda.
While we are pleased with the approval of Ampyra, we remain concerned about the company’s dependence on the product for growth. Zanaflex, another marketed product in Acorda’s portfolio, is facing generic competition and will remain a negligible contributor to sales. Moreover, Ampyra sales have not really lived up to expectations. Sales were disappointing in the first quarter of 2012. Although performance improved in the second quarter of 2012, it remains to be seen whether the same is sustainable. Unfavorable reimbursement and pricing issues in the EU could also affect Fampyra royalties.
Besides being concerned about the company’s over-dependence on Ampyra, we remain concerned about the early-stage nature of the pipeline. Although the company has some interesting candidates in its pipeline, it will be several years before any of these candidates are close to commercialization.
We prefer to remain on the sidelines until we see a sustained improvement in Ampyra sales. Acorda carries a Zacks #3 Rank (short-term ‘Hold’ rating).