Debunking the Acorda Therapeutics Merger Rumors

Acorda Therapeutics has popped the champaign, celebrating the decision by the U.S. Food & Drug Administration (FDA) to approve the marketing of Ampyra (dalfampridine), the first (and only) oral treatment indicated to improve walking in patients with multiple sclerosis (MS). Even before the company launches the drug in March, rumors are rampant that deeper-pocketed pharma companies looking to broaden the breadth of their own MS drug portfolios, such as Biogen Idec or Teva Pharmaceuticals, could move quickly to tender an all cash offer.

As framed by my collegue Trista Morrison in her column yesterday: Will the approval for Ampyra-which takes significant risks off the table-pave the way for a third-party buyout?
To the contrary, an analysis of recent regulatory filings with the SEC suggests Acorda Therapeutics (NASDQ:ACOR), has the liquidity, capital, and existing infrastructure available to launch Ampyra on its own:

Commenting on third-quarter results back in October, chief executive Ron Cohen said he expected to enter 2010 with cash on hand of about $250 million. This amount does not include milestone payments due from Biogen Idec, which purchased exclusive rights to market Ampyra in ex-stateside markets, such as Europe.
Contractual obligations coming due in one to three years, such as inventory purchase commitments and royalty fees (excluding Elan), total a manageable $17.4 million.
Available net-operating loss carry-forwards of approximately $216.5 million and R&R tax credit carryforwards of about $1.6 million (as of September 30), which are available to offset future taxable incomes -- in of themself -- are immaterial for deeper-pocketed companies earning billions in revenues.

When asked in an interview on the business channel CNBC today if Ampyra treatment would cost between $5,000 to $10,000 a year, as speculated by industry watchers, CEO Cohen deferred, hinting only that the cost would be a factor of demand and the invested cost to bring the drug to market. In other words, $10,000 - $15,000 a year is a more likely treatment cost, given the exclusivity of the drug. By comparison, the annual cost of Tysabri is an estimated $28,500 (administered 13 times a year).

Additionally, Ampyra has been designated an orphan drug by the FDA, allowing for seven years of market exclusivity in the U.S. The EMEA also designated Fampridine-SR as a New Active Substance, entitling the drug to 10 years of market exclusivity in Europe.

The company is positioned to jump out of the gate come March. At September 30, the company already had a specialty sales force of 73 sales professionals in place, salivating to call on high-volume (RX) prescribers and other influential neurologists who specialize in treating patients with neuromuscular disorders. Management has said it expects to have a sales force of approximately 100 reps trained and in place for an anticipated March launch.

Perhaps the primary reason why an acquisition -- unless hostile -- of Acorda would be unlikely: CEO Cohen and CFO David Lawrence would receive severance compensation packages valued at only $2.5 million and $1.3 million, respectively. With more than 400,000 MS sufferers in this country, of which up to 275,000 are estimated to be likely candidates for Ampyra treatment, the status quo looks more like a certainty for all vested insiders.

David Phillips

David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.

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