Acorda Therapeutics: Profitable Biotech With Deep Pipeline

Acorda Therapeutics (ACOR) represents a rare opportunity in biotech: a profitable company with multiple marketed products, a deep and diverse pipeline and ample cash. However, its shares have lagged on growth concerns for lead product Ampyra (dalfampridine) for multiple sclerosis (MS) and this year’s launch of a generic version
of Zanaflex (tizanidine) for spasticity. Sales growth could re-inspire confidence in its future prospects, while pipeline news expected in H113 may provide an opportunity\ for a re-rating of the shares.

Ampyra leads the way
Acorda’s lead drug, Ampyra, is the only drug shown to aid walking function in MS patients. It achieved Q312 sales of $70m, up 28%, quieting growth concerns for now. Perhaps more significantly, Acorda is exploring Ampyra’s application in two other indications, cerebral palsy and post-stroke deficit, where there is also potential for improving motor function.

Pipeline is deep and advancing
Data from Phase II trials in both indications are expected in Q213. Beyond Ampyra, Acorda is also advancing several other pipeline candidates, including AC105 for acute spinal cord injury (a Phase II trial is expected in 2013), GGF2 for heart failure (Phase I data expected by year end) and rHIgM22 for MS (preclinical). In addition, a nasal spray formulation of diazepam (for seizures) is at a pre-NDA stage.

Plenty of dry powder
Acorda finished Q312 with $319m in cash, with management reaffirming its willingness to pursue both small and large product acquisitions (particularly for assets that are at, or close to, commercial stage). Furthermore, recent management moves suggest that Acorda will also begin to focus more on ex-US business development opportunities (although perhaps not imminent).

Valuation: Pipeline news could be a catalyst for share gains
Acorda has an EV of $1.3bn, implying a 4.3x EV/sales multiple for FY12. Upside could come from pipeline successes, particularly if Phase II data in Q213 for Ampyra in CP or stroke are positive, which could be significant share price catalysts.

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