Acorda Therapeutics (Nasdaq: ACOR) – Giant steps for a new CNS company
“No man is worth his salt who is not ready at all times to risk his well-being, to risk his body, to risk his life, in a great cause.” - Theodore Roosevelt (1858-1919), 26th US President and, in my opinion, one of the great ones.One of the thinkers that has greatly impressed me over the years is Jim Collins, author of the classic management texts Built to Last and Good to Great. Collins has spent over two decades studying the reasons why some companies become truly great while others remain just average. One quality Collins identifies in companies making the journey from Good to Great is that they have ‘Big Hairy Audacious Goals’ towards which they are striving. For example, Sam Walton (1918-1992) opened his first ever dime store in Newport, Ar. with a goal of making the store ‘the best, most profitable in Arkansas within five years’. It was that kind of attitude which set Wal-Mart on the path to greatness it subsequently pursued, and made Sam a truly rich man. With this Blog post I would like to nominate Acorda Therapeutics (Nasdaq: ACOR), from the Westchester County suburb of Ardsley, NY, as a candidate for ‘Good to Great’ status because the Big Hairy Audacious Goal of this US$1.4bn company is to become a ‘a leading neurology company with a portfolio of innovative products’. The reason that this worthy aim is so big, hairy and audacious is that in recent years Big Pharma has been seen to be exiting out of neuroscience research. For example, GSK was in the news in early 2010 cutting back on its neuroscience effort (click here), while Novartis (click here) and AstraZeneca (click here) had similar stories told about them in late 2011 and early 2012. Why? Because coming up with new drugs for things like stroke recovery, spinal cord injury and cerebral palsy was considered just too hard. Acorda, by contrast, hasn’t been concerned about how tough the CNS field has traditionally been. What it sees is the enormous upside in terms of patient benefits and, ultimately, financial benefits for shareholders.
Acorda can have this confidence in part because it has already brought its first successful neurology product to market. In January 2010 it gained FDA approval for Ampyra, a drug that improves walking in patients with Multiple Sclerosis (MS). Ampyra is a voltage-dependent potassium channel blocker (click here for the paper which evaluates the mechanism of action). In Multiple Sclerosis the patient’s immune system starts attacking the myelin sheath that surrounds nerve fibres in the brain and spinal cord. This makes it difficult for nerve impulses to be transmitted and results in a wide range of neurological impairments. Part of the problem is that the voltage-gated potassium channels on nerve cells are exposed when the myelin is stripped away. Too much charged potassium flows into the cells, so they can’t properly conduct nerve impulses through their axons and into the next nerve cell. Blocking the potassium channels with Ampyra significantly improves conduction, allowing more nervous impulses to travel down to the legs so patients can walk better. Ampyra was great news for the MS community because it worked in all four types of MS, including the ‘secondary progressives’ for whom treatment options are limited. In the registration trials patients walking speed went up by an average 25%. Around half of all MS patients will have difficulty walking within 15 years of diagnosis, and perhaps 20-30% will start having difficulty within the first two years. If, like me, you’re a fan of the television series The West Wing you’ll recall that Martin Sheen plays a US President who has relapsing/remitting MS from the time he takes office. By the later seasons of the show the writers had the President getting around with a cane. If you want to see what Ampyra can partly rectify, check out Episode 133 from the final season, where there’s a ‘flash forward’ showing a visibly frail ex-President visiting his new library (click here).
The obvious patient benefits of Ampyra in a not-insubstantial market – there are 400,000 MS patients in the US alone – has made the drug a success for Acorda. Net Ampyra revenue in calendar 2012 for Acorda was US$266.1m, and in the June 2013 quarter it was US$77.8m, up 17% on the previous corresponding period. Biogen Idec has ex-US rights under a 2009 partnering deal and markets the product as Fampyra. Both companies have a lot of growth left in the MS market – only ~70,000 US patients had taken the drug by the end of 2012 – and after that the vast market for stroke recovery awaits, with clinical evidence now at hand that Ampyra can improve walking in people with post-stroke deficits. Ampyra is distributed in the US via a 90-person sales force calling on around 7,000 doctors, meaning that Acorda has the makings of a potential new specialty pharma company. What I like about this company is that it’s not playing it safe in terms of the next major drug it will put in the briefcases of those sales people. It’s swinging for the bleachers again.
Take, for a good example, the neuregulin GGF2. The neuregulins are class of growth factors similar to epidermal growth factor that promote recovery after neurological injury (GGF stands for glial growth factor). They’re also known to improve heart function, where is where Acorda is trying it out GGF2 first. Preclinically there’s evidence that GGF2 is involved in repairing cardiac muscle, and in a Phase I trial in heart failure patients GGF2 was able to raise Ejection Fraction (the percentage of the heart’s volume that moves with each pump) from ~29% to 40% in the 28 days mark. Acorda has just initiated a second Phase I for GGF2. This is the kind of drug that Big Pharma doesn’t tend to look at today, even though 2% of the US population has heart failure. It’s not that they don’t see the market opportunity. It’s just that their cardiology franchises ran out of steam in the 1990s and left all the action to the device guys with their pacemakers, defibrillators and LVADs. Acorda has no such hangup.
AC105 for spinal cord injury represents another adventurous project from Acorda. Spinal cord injury is something that happens 12,000 times year in America, but at the moment there’s nothing much the doctors can do for you. AC105, a new magnesium formulation, could change all that. We’ve known for a while now that magnesium gets depleted from the site of nerve damage, contributing to tissue injury and lesion development. AC105 would put the magnesium back in a way that regular magnesium salts can’t. Preclinically AC105 has been shown to be neuroprotective and improve locomotor function in animal models, so long as the animals got the drug within a few hours of injury. Uncle Sam has liked what he has seen so far - Acorda took this drug into Phase II in September 2013 with the help of a US$2.67m grant from the US Department of Defense. The DoD wants this drug, or anything like it, because 1% of its combat casualties in Iraq and Afghanistan have involved spinal cord injuries (click here).
Probably the most exciting thing Acorda has in the pipeline right now is rHIgM22, a remyelinating antibody. That’s right – there’s a monoclonal antibody in clinical development that, by targeting myelin and oligodendrocytes (the myelin producing cells), seems to promote new myelin growth and effectively reverse some of the damage in MS and related disorders (click here). This antibody, discovered at the Mayo Clinic, entered Phase I under Acorda’s aegis in April 2013. If this thing works it’ll be the biggest breakthrough in MS since Teva’s Copaxone gave the world the first non-immunosuppressive mechanism of action for an MS drug.
So how come Acorda has been allowed to get away with all this risk taking? That’s what you can do if you don’t have a Big Pharma background. Acorda’s CEO, Dr Ron Cohen, ran a tissue engineering start-up before founding Acorda. Ron and his colleagues now face a challenge. I reckon the market is looking at Acorda the way people would have looked at Amgen back in the early 1990s. The argument would be ‘okay, they got lucky with their first drug, but can they do it again?’ GGF2, AC105 and rHIgM22 are at too early a stage to give a definitive ‘yes’ answer to that question. But you can’t fault Acorda for being adventurous, and it is adventurousness that ultimately yields the big bucks in this game. Worthy of some homework.
Stuart Roberts, Australian Life Sciences consultant, with global focus
+61 (0)447 247 909
Twitter @Biotech_buzz
About Stuart Roberts. I started as an equities analyst at the Sydney-based Southern Cross Equities in April 2001, focused on the Life Sciences sector from February 2002. Southern Cross Equities was acquired by Bell Financial Group (ASX: BFG) in 2008 and I continued at Bell Potter Securities until June 2013. Over the twelve years to 2013 I built a reputation as one of Australia's leading biotech analysts. I am currently consulting to the Australian biotech industry. Before joining Southern Cross Equities I wrote for The Intelligent Investor, probably the most readable investment publication in Australia. I have a Masters Degree in Finance from Finsia. My hobbies are jazz, cinema, US politics and reading patent applications filed by biotechnology and medical device companies.
Previous Australian Biotechnology Buzz posts:
Acorda Therapeutics (Nasdaq: ACOR), 10 October 2013.
Advanced Cell Technology (OTCBB: ACTC), 4 September 2013
Alcobra Pharma (Nasdaq: ADHD), 17 September 2013
Amicus Therapeutics (Nasdaq: FOLD), 22 September 2013
Aradigm (OTCBB: ARDM), 8 September 2013
BioSpecifics Technologies (Nasdaq: BSTC), 26 September 2013
Celldex Therapeutics (Nasdaq: CLDX), 9 November 2013
Cellular Dyamics (Nasdaq: ICEL), 3 September 2013
ImmunoCellular Therapeutics (NYSE MKT: IMUC), 27 August 2013
Immunomedics (Nasdaq: IMMU), 21 August 2013
Inovio Pharmaceuticals (NYSE MKT: INO), 24 August 2013
Merrimack Pharmcaceuticals (Nasdaq: MACK), 26 August 2013
Novavax (Nasdaq: NVAX), 3 October 2013
Oncolytics Biotech (Nasdaq: ONCY), 22 August 2013
Pharmacyclics (Nasdaq: PCYC), 2 September 2013
Regulus Therapeutics (Nasdaq: RGLS), 23 August 2013
SIGA Technologies (Nasdaq: SIGA) - 30 September 2013
Sunshine Heart (Nasdaq: SSH), 28 August 2013
Synta Pharmaceuticals (Nasdaq: SNTA), 1 September 2013
TrovaGene (Nasdaq: TROV), 15 September 2013
Verastem (Nasdaq: VSTM), 5 September 2013
Disclaimer. This is commentary, not investment research. If you buy the stock of any biotech company in Australia, the US or wherever you need to do your own homework, and I mean, do your own homework. I'm not responsible if you lose money.
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