Earnings Beat for Acorda

Acorda Therapeutics Inc.’s (NasdaqGS:ACOR - News) fourth quarter earnings (including share-based compensation charges) of 32 cents per share were way above the Zacks Consensus Estimate of 17 cents and the year-ago earnings of 9 cents per share. Fiscal year 2011 earnings (including share-based compensation charges) of 64 cents per share were also higher than the Zacks Consensus Estimate of 62 cents per share and the year-ago loss of 31 cents per share. The company reported earnings (excluding share-based compensation charges) of 45 cents and $1.13 per share for the fourth quarter of 2011 and fiscal year 2011, respectively.

Quarterly revenues increased 8.7% to $72.6 million, beating the Zacks Consensus Estimate of $69 million. In fiscal year 2011, revenues increased a whopping 53.0% to $292.2 million. Revenues came in above the Zacks Consensus Estimate of $285 million.

Quarter in Detail

Product sales consisted mainly of Ampyra, which has patent protection till 2027. Ampyra sales came in at $57.2 million, reflecting a year-over-year increase of 9.4%.

Acorda has a licensing agreement with Biogen Idec (NasdaqGS:BIIB - News) for the development and commercialization of Ampyra outside the US. Further, Acorda has a supply agreement with Elan Corporation (NYSE:ELN - News) for manufacturing Ampyra. In July 2011, Biogen received conditional approval for Fampyra (ex-US trade name of Ampyra) in the EU, as a treatment for improving walking in adult patients with multiple sclerosis.

Zanaflex capsules and tablets recorded sales of $11.8 million in the fourth quarter, down 2.5% from the year-ago figure. We expect sales to decline further given the launch of generic versions of the product by privately-held Canadian generic firm, Apotex Inc. Apotex launched its generic version of Zanaflex in early Feb 2012. Acorda also launched an authorized generic version of Zanaflex at the same time in collaboration with Watson Pharmaceuticals (NYSE:WPI - News).

Acorda’s research and development (R&D) expenses increased 28.8% to $10.3 million. The expenses mainly consisted of costs related to post-marketing studies and life cycle management programs of Ampyra and expenditure associated with the initiation of a proof-of-concept study of Ampyra for cerebral palsy and the phase I trial of glial growth factor 2 (GGF2). GGF2 is being evaluated for heart failure.

Selling, general and administrative (SG&A) expenses came in at $35.7 million, 14.2% lower than the year-ago figure.

Acquisition Announcement

On February 15, 2012, Acorda entered into an agreement to acquire Neuronex, Inc., a privately-held company. Neuronex is preparing to submit a 505(b)(2) type new drug application (:NDA) for diazepam nasal spray for management of seizure in certain epilepsy patients. As per the terms of the agreement, Acorda paid $2 million upfront and $500,000 of research funding to prepare for a pre-NDA meeting. The research funding can go up to $1.2 million including the amount already paid.

Acorda has an option to complete the Neuronex acquisition after the pre-NDA meeting. In case Acorda exercises its option, it will have to pay an additional $6.8 million and will be responsible for future development and regulatory programs for diazepam nasal spray. The company expects these expenses to be less than $8 million in 2012.

On acceptance of the NDA, Acorda will have to pay $1 million to Neuronex and other parties. Regulatory approval in the US and EU will trigger payments of up to $25 million. Acorda will also pay royalties on net sales to Neuronex.

Guidance for 2012

Along with the fourth quarter and fiscal year 2011 results, Acorda provided its sales and operating expenses projection for 2012. The company forecasts revenues of $255 million to $275 million from Ampyra alone in 2012. Royalties from Fampyra sales, royalties from sales of the generic version of Zanaflex capsules and revenues from branded Zanaflex capsules combined together are expected to be at least $25 million.

Acorda expects SG&A expenses in the range of $145 million – $160 million, driven primarily by commercial and administrative costs related to the marketing of Ampyra.

R&D expenses for 2012 are expected to lie in the range of $50 million – $60 million. This includes costs related to post-marketing studies of Ampyra, proof-of-concept studies of Ampyra in cerebral palsy and chronic stroke and other development expenses.

Both SG&A and R&D guidance for 2012 are exclusive of share-based compensation expense and Neuronex acquisition.

Our Recommendation

We currently have a Neutral recommendation on Acorda, which is supported by a Zacks #3 Rank (short-term Hold rating). We are pleased with the conditional approval of Fampyra in the EU and believe it will boost revenues further. We expect investor focus to remain on the sales ramp-up of Ampyra.

Meanwhile, the upcoming Neuronex acquisition is in line with the company’s strategy of expanding its portfolio by in-licensing a development or commercialization stage neurology product.

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