SEC Form 10-Q filed by Acorda Therapeutics Inc.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-31938

 

ACORDA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware		13-3831168
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

2 Blue Hill Plaza, 3rd Floor, Pearl River, New York		10965
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (914) 347-4300

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class		Trading Symbol		Name of each exchange on which registered
	Common Stock $0.001 par value per share		ACOR		Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class		Outstanding at November 9, 2023
Common Stock, $0.001 par value per share		1,242,098 shares

 

 

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ACORDA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	1
	Consolidated Statements of Operations (unaudited) for the Three- and Nine-month Periods Ended September 30, 2023 and 2022	2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three- and Nine-month Periods Ended September 30, 2023 and 2022	3
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three- and Nine-month Periods Ended September 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows (unaudited) for the Nine-month Periods Ended September 30, 2023 and 2022	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

 

This Quarterly Report on Form 10-Q contains forward‑looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that such statements involve risks and uncertainties, including: We may not be able to successfully market Inbrija, Ampyra, or any other products that we may develop; our ability to attract and retain key management and other personnel, or maintain access to expert advisors; our ability to raise additional funds to finance our operations, repay outstanding indebtedness or satisfy other obligations, and our ability to control our costs or reduce planned expenditures and take other actions which are necessary for us to continue as a going concern; risks related to the successful implementation of our business plan, including the accuracy of our key assumptions; risks related to our corporate restructurings, including our ability to outsource certain operations, realize expected cost savings and maintain the workforce needed for continued operations; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand; our reliance on third-party manufacturers for the production of commercial supplies of Inbrija and Ampyra; third-party payers (including governmental agencies) may not reimburse for the use of Inbrija at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; reliance on collaborators and distributors to commercialize Inbrija and Ampyra outside the U.S.; our ability to satisfy our obligations to distributors and collaboration partners outside the U.S. relating to commercialization and supply of Inbrija and Ampyra; competition for Inbrija and Ampyra, including increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra following our loss of patent exclusivity; the ability to realize the benefits anticipated from acquisitions because, among other reasons, acquired development programs are generally subject to all the risks inherent in the drug development process and our knowledge of the risks specifically relevant to acquired programs generally improves over time; the risk of unfavorable results from future studies of Inbrija (levodopa inhalation powder) or from other research and development programs, or any other acquired or in-licensed programs; the occurrence of adverse safety events with our products; the outcome (by judgment or settlement) and costs of legal, administrative, or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class-action litigation; failure to protect our intellectual property, to defend against the intellectual property claims of others or to obtain third-party intellectual property licenses needed for the commercialization of our products; and failure to comply with regulatory requirements could result in adverse action by regulatory agencies. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management’s beliefs and assumptions. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results or events could differ materially from the plans, intentions and expectations disclosed

 

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in the forward-looking statements we make, and investors should not place undue reliance on these statements. In addition to the risks and uncertainties described above, we have included important factors in the cautionary statements included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2022, particularly in the “Risk Factors” section (as updated by the disclosures in our subsequent quarterly reports, including this report), that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments that we may make. Forward-looking statements in this report are made only as of the date hereof, and we disclaim any intent or obligation to update any forward-looking statements as a result of developments occurring after the date of this report except as may be required by law.

We and our subsidiaries own several registered trademarks in the U.S. and in other countries. These registered trademarks include, in the U.S., the marks “Acorda Therapeutics”, our stylized Acorda Therapeutics logo, “Inbrija”, “Ampyra”, and “ARCUS.” Also, our marks “Fampyra” and “Inbrija” are registered marks in the European Community Trademark Office and we have registrations or pending applications for these marks in other jurisdictions. Our trademark portfolio also includes several registered trademarks and pending trademark applications in the U.S. and worldwide for potential product names or for disease awareness activities. Third party trademarks, trade names, and service marks used in this report are the property of their respective owners.

 

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PART I

Item 1. Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

		September 30, 2023				December 31, 2022
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	32,468			$	37,536
Restricted cash			861				6,884
Trade accounts receivable, net of allowances of $791 and $842, as of    September 30, 2023 and December 31, 2022, respectively			11,977				13,866
Prepaid expenses			5,042				4,312
Inventory, net			17,942				12,752
Other current assets			5,438				6,765
Total current assets			73,728				82,115
Property and equipment, net of accumulated depreciation			2,210				2,603
Intangible assets, net of accumulated amortization			282,006				305,087
Right of use asset, net of accumulated amortization			4,496				5,287
Restricted cash			255				255
Other non-current assets			3,649				248
Total assets		$	366,344			$	395,595
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	12,330			$	9,809
Accrued expenses and other current liabilities			29,344				23,680
Current portion of lease liabilities			1,578				1,545
Current portion of acquired contingent consideration			2,577				2,532
Deferred revenue			465				384
Total current liabilities			46,294				37,950
Convertible senior notes			181,043				167,031
Non-current portion of acquired contingent consideration			30,223				38,668
Non-current portion of lease liabilities			3,468				4,341
Deferred tax liability			38,544				44,202
Other non-current liabilities			7,815				9,781
Stockholders’ equity:
Preferred stock, $0.001 par value per share. Authorized 1,000,000 shares at September 30,    2023 and December 31, 2022; no shares issued as of September 30,    2023 and December 31, 2022, respectively			—				—
Common stock, $0.001 par value per share. Authorized 3,083,333 shares at September 30,    2023 and December 31, 2022; issued 1,242,376 shares,    including those held in treasury, as of September 30, 2023 and    December 31, 2022, respectively			1				24
Treasury stock at cost (278 shares at September 30, 2023 and   December 31, 2022)			(638	)			(638	)
Additional paid-in capital			1,030,243				1,029,881
Accumulated deficit			(971,366	)			(936,273	)
Accumulated other comprehensive income			717				628
Total stockholders’ equity			58,957				93,622
Total liabilities and stockholders’ equity		$	366,344			$	395,595

 

See accompanying Unaudited Notes to Consolidated Financial Statements

1

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ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

 

(In thousands, except per share data)		Three-month period ended September 30, 2023				Three-month period ended September 30, 2022				Nine-month period ended September 30, 2023				Nine-month period ended September 30, 2022
Revenues:
Net product revenues		$	25,179			$	29,964			$	69,863			$	76,023
Royalty revenues			2,502				3,047				9,717				10,573
License revenues			34				500				68				500
Total net revenues			27,715				33,511				79,648				87,096
Costs and expenses:
Cost of sales			3,387				11,005				9,685				25,772
Research and development			1,207				1,383				4,143				4,602
Selling, general and administrative			23,152				22,997				67,492				80,002
Amortization of intangible assets			7,691				7,691				23,073				23,073
Change in fair value of derivative liability			—				—				—				(37	)
Changes in fair value of acquired contingent consideration			(5,203	)			(4,576	)			(7,118	)			(10,709	)
Total operating expenses			30,234				38,500				97,275				122,703
Operating loss			(2,519	)			(4,989	)			(17,627	)			(35,607	)
Other income (expense), net:
Interest and amortization of debt discount expense			(7,984	)			(7,465	)			(23,328	)			(22,501	)
Interest income			157				17				308				38
Realized gain (loss) on foreign currency transactions			288				(1	)			287				(1	)
Other income (expense)			115				—				209				1,250
Total other expense, net			(7,424	)			(7,449	)			(22,524	)			(21,214	)
Loss before taxes			(9,943	)			(12,438	)			(40,151	)			(56,821	)
Benefit from (provision for) income taxes			1,055				(1,416	)			5,058				(28,237	)
Net loss		$	(8,888	)		$	(13,854	)		$	(35,093	)		$	(85,058	)
Net loss per share—basic		$	(7.16	)		$	(11.17	)		$	(28.25	)		$	(97.66	)
Net loss per share—diluted		$	(7.16	)		$	(11.17	)		$	(28.25	)		$	(97.66	)
Weighted average common shares outstanding    used in computing net loss per share—basic			1,242				1,240				1,242				871
Weighted average common shares outstanding    used in computing net loss per share—diluted			1,242				1,240				1,242				871

 

See accompanying Unaudited Notes to Consolidated Financial Statements

2

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ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

(In thousands)		Three-month period ended September 30, 2023				Three-month period ended September 30, 2022				Nine-month period ended September 30, 2023				Nine-month period ended September 30, 2022
Net loss		$	(8,888	)		$	(13,854	)		$	(35,093	)		$	(85,058	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment			(163	)			1,352				89				3,107
Other comprehensive income (loss), net of tax			(163	)			1,352				89				3,107
Comprehensive income (loss)		$	(9,051	)		$	(12,502	)		$	(35,004	)		$	(81,951	)

 

See accompanying Unaudited Notes to Consolidated Financial Statements

3

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ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2023 and 2022

(unaudited)

 

		Common stock
(In thousands)		Number of shares				Par value				Treasury stock				Additional paid-in capital				Accumulated deficit				Accumulated other comprehensive (loss) income				Total stockholders' equity
Balance at December 31, 2022			1,242			$	24			$	(638	)		$	1,029,881			$	(936,273	)		$	628			$	93,622
Compensation expense for    issuance of stock options    to employees			—				—				—				71				—				—				71
Other comprehensive income,    net of tax			—				—				—				—				—				91				91
Net loss			—				—				—				—				(16,824	)			—				(16,824	)
Balance at March 31, 2023			1,242			$	24			$	(638	)		$	1,029,952				(953,097	)		$	719			$	76,960
Compensation expense for    issuance of stock options    to employees			—				—				—				128				—				—				128
Reverse Stock Split Adjustment			—				(23	)			—				23				—				—				—
Other comprehensive income, net of tax			—				—				—				—				—				161				161
Net loss			—				—				—				—				(9,381	)			—				(9,381	)
Balance at June 30, 2023			1,242			$	1			$	(638	)		$	1,030,103			$	(962,478	)		$	880			$	67,868
Compensation expense for    issuance of stock options    to employees			—				—				—				140				—				—				140
Other comprehensive income, net of tax			—				—				—				—				—				(163	)			(163	)
Net loss			—				—				—				—				(8,888	)			—				(8,888	)
Balance at September 30, 2023			1,242			$	1			$	(638	)		$	1,030,243			$	(971,366	)		$	717			$	58,957

 

 

 

 

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		Common stock
(In thousands)		Number of shares				Par value				Treasury stock				Additional paid-in capital				Accumulated deficit				Accumulated other comprehensive (loss) income				Total stockholders' equity
Balance at December 31, 2021			13,250			$	13			$	(638	)		$	1,023,136			$	(870,357	)		$	(1,017	)		$	151,137
Compensation expense for    issuance of stock options    to employees			—				—				—				181				—				—				181
Compensation expense for    issuance of restricted    stock to employees			35				—				—				304				—				—				304
Other comprehensive income,    net of tax			—				—				—				—				—				449				449
Net loss			—				—				—				—				(24,522	)			—				(24,522	)
Balance at March 31, 2022			13,285			$	13			$	(638	)		$	1,023,621			$	(894,879	)		$	(568	)		$	127,549
Compensation expense for    issuance of stock options    to employees			—				—				—				471				—				—				471
Interest payment for convertible notes			10,992				11				—				5,252				—				—				5,263
Other comprehensive income,    net of tax			—				—				—				—				—				1,306				1,306
Net loss			—				—				—				—				(46,682	)			—				(46,682	)
Balance at June 30, 2022			24,277			$	24			$	(638	)		$	1,029,344			$	(941,561	)		$	738			$	87,907
Compensation expense for    issuance of stock options    to employees			—				—				—				364				—				—				364
Compensation expense for    issuance of restricted    stock to employees			61				—				—				(3	)			—				—				(3	)
Other comprehensive loss, net of tax			—				—				—				—				—				1,352				1,352
Net loss			—				—				—				—				(13,854	)			—				(13,854	)
Balance at September 30, 2022			24,338			$	24			$	(638	)		$	1,029,705			$	(955,415	)		$	2,090			$	75,766

 

See accompanying Unaudited Notes to Consolidated Financial Statements

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ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

(In thousands)		Nine-month period ended September 30, 2023				Nine-month period ended September 30, 2022
Cash flows from operating activities:
Net loss		$	(35,093	)		$	(85,058	)
Adjustments to reconcile net loss to net cash used in    operating activities:
Share-based compensation expense			340				1,320
Amortization of debt discount and debt issuance costs			14,012				12,356
Depreciation and amortization expense			23,743				24,770
Non-cash lease expense			(50	)			—
Change in acquired contingent consideration obligation			(7,118	)			(10,709	)
Non-cash royalty revenue			—				(4,762	)
Deferred tax (benefit) provision			(5,021	)			28,300
Change in derivative liability			—				(37	)
Changes in assets and liabilities:
Decrease in accounts receivable			1,889				2,312
Decrease (increase) in prepaid expenses and other current assets			547				(258	)
Decrease (increase) in inventory			(5,189	)			3,297
Increase in other assets			(3,401	)			(237	)
Increase (decrease) in accounts payable, accrued expenses, and other current    liabilities			6,340				(844	)
Increase (decrease) in other non-current liabilities			(1,965	)			(439	)
Net cash used in operating activities			(10,966	)			(29,990	)
Cash flows from investing activities:
Purchases of property and equipment			(220	)			(136	)
Purchases of intangible assets			—				(123	)
Net cash (used in) provided by investing activities			(220	)			(259	)
Cash flows from financing activities:
Net cash provided by (used in) financing activities			—				—
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			95				(790	)
Net decrease in cash, cash equivalents, and restricted cash			(11,091	)			(31,040	)
Cash, cash equivalents and restricted cash at beginning of period			44,675				65,223
Cash, cash equivalents and restricted cash at end of period		$	33,584			$	34,183
Supplemental disclosure:
Cash paid for interest		$	6,210			$	947
Cash paid for taxes			788				133

 

See accompanying Unaudited Notes to Consolidated Financial Statements

 

 

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ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

 

15

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18

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21

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 15, 2023. In addition, you should read the “Risk Factors” and the disclaimers regarding forward-looking statements included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Background

We are a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders. We market Inbrija (levodopa inhalation powder), which is approved in the U.S. for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa. Inbrija is for as needed use and utilizes our ARCUS pulmonary delivery system, a technology platform designed to deliver medication through inhalation that we believe has potential to be used in the development of a variety of inhaled medicines. We also market branded Ampyra (dalfampridine) Extended Release Tablets, 10 mg in the U.S. as treatment to improve walking in patients with multiple sclerosis, or MS.

Our Products

Inbrija/Parkinson’s Disease

Inbrija is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. Approximately one million people in the U.S. and 1.2 million people in Europe are diagnosed with Parkinson’s; it is estimated that approximately 40% of people with Parkinson’s in the U.S. experience OFF periods. The U.S. Food and Drug Administration (“FDA”) approval of Inbrija is for a single dose of 84 mg (administered as two capsules), which may be taken up to five times per day. U.S. net revenue for Inbrija was $8.1 million for the quarter ended September 30, 2023 and $7.8 million for the quarter ended September 30, 2022.

Inbrija is also approved for use in the European Union (“EU”). The European Medicines Agency approved Inbrija dose is 66 mg (administered as two capsules) up to five times per day (per EU convention, this reflects emitted dose and is equivalent to the 84 mg labeled dose in the U.S.). Under the EU approval, Inbrija is indicated for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. We have entered into agreements to commercialize Inbrija in Spain, Germany, Latin America, and China, and we are in discussions with potential partners for commercialization of Inbrija in other jurisdictions outside of the U.S. Net revenues for ex-U.S. Inbrija sales were $1.4 million for the quarter ended September 30, 2023 and $1.0 million for the quarter ended September 30, 2022.

Inbrija utilizes our ARCUS platform for inhaled therapeutics. Because of our limited financial resources, we previously suspended work on ARCUS and other proprietary research and development programs. However, we are discussing potential collaborations with other companies that have expressed interest in formulating their novel molecules for pulmonary delivery using ARCUS, and we have performed feasibility studies for a number of these opportunities.

Ampyra/MS

Ampyra is an extended-release tablet formulation of dalfampridine approved by the FDA as a treatment to improve walking in patients with multiple sclerosis, or MS. Ampyra became subject to competition from generic versions of Ampyra starting in late 2018 as a result of an adverse court ruling that invalidated certain Ampyra Orange Book-listed patents. We have experienced a significant decline in Ampyra sales due to competition from several generic versions of Ampyra. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time. U.S. net revenue for Ampyra was $15.7 million for the quarter ended September 30, 2023 and $21.1 million for the quarter ended September 30, 2022.

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Ampyra is marketed as Fampyra outside the U.S. by Biogen International GmbH, or Biogen, under a license and collaboration agreement that we entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia, and the Americas. Our Fampyra patents have been challenged in Germany and could be similarly challenged in other countries where Fampyra is marketed by Biogen, and these challenges could lead to generic competition for Fampyra. Notwithstanding patent challenges in Germany, a generic drug manufacturer has launched a competing product in Germany, which will likely result in a decline in Fampyra royalties in that country.

 

Long-Term Supply Arrangements

Catalent

In February 2021, we sold our Chelsea manufacturing operations to Catalent Pharma Solutions (“Catalent”). In connection with the sale, we entered into a long-term, global manufacturing services (supply) agreement (the “2021 MSA”) with Catalent for the manufacture of Inbrija. The 2021 MSA provided that we would purchase Inbrija exclusively from Catalent, and were obligated to make minimum purchase commitments for Inbrija of $18 million annually through the expiration of the agreement on December 31, 2030.

In December 2021, we entered into an amendment of the 2021 MSA that adjusted the structure of the minimum payment terms for the period from July 1, 2021 through June 30, 2022 (the “Adjustment Period”). Under the amendment, the minimum payment obligation for the Adjustment Period was replaced with payments to Catalent for actual product delivered during the Adjustment Period subject to a cap for the Adjustment Period that corresponds to its original minimum purchase obligation for that period (i.e., $17 million), and with certain payments being made in the first half of 2022 instead of during the second half of 2021. As a result of the amendment, payments to Catalent for product delivered during the Adjustment Period were approximately $8.4 million less than the $17 million minimum inventory purchase obligation for that period.

On December 31, 2022, we entered into a termination letter, which was subsequently amended and restated in March 2023, to terminate the 2021 MSA. In connection with the termination of the 2021 MSA, we are obligated to pay a $4 million termination fee to Catalent, payable in April 2024 and included in Accounts Payable as of September 30, 2023. The parties also entered into a Settlement and Release Agreement with respect to certain batches of Inbrija that were not delivered in 2022 as scheduled, and that were delivered in the first quarter of 2023.

Effective January 1, 2023, we entered into a new manufacturing services agreement with Catalent, which was subsequently amended in March 2023 (as amended in March 2023, the “New MSA”). Under the New MSA, Catalent will continue to manufacture Inbrija through 2030, with reduced minimum annual commitments through 2024 and significantly lower pricing thereafter. The New MSA provides for the scale-up of new spray drying equipment (“PSD-7”), which will provide expanded capacity for the long-term worldwide manufacturing requirements of Inbrija. We will be subject to purchase commitments in 2023 and 2024 of 15 and 24 batches of Inbrija, respectively, at a total cost of $10.5 million and $15.5 million, respectively. Thereafter, in 2025, we will pay Catalent a fixed per capsule fee based on the amount of Inbrija that is delivered for sale in the U.S. and other markets.

It is anticipated that by 2026, the PSD-7 equipment will be fully operational, which will significantly reduce the per capsule fees for all markets. We agreed to a minimum purchase requirement of at least three batches per year on the PSD-7 equipment, and will provide up to $1 million in each of 2023 and 2024 for capital expenditures to assist in the capacity expansion efforts. In addition, we paid Catalent $2 million in 2023 in connection with certain activities relating to the operational readiness of the PSD-7.

The New MSA, unless earlier terminated, will continue until December 31, 2030, and will be automatically extended for successive two-year periods unless either party provides the other with at least 18-months’ prior written notice of non-renewal. Either party may terminate the New MSA by written notice under certain circumstances, including material breach (subject to specified cure periods) or insolvency. We may also terminate the New MSA upon certain specified regulatory events and for convenience upon 180 days’ prior written notice.

Patheon

In October 2022, an arbitration panel issued a decision in our dispute with Alkermes Plc (“Alkermes”) and ruled that the existing license and supply agreements with Alkermes were unenforceable. As a result of the panel’s ruling, we are no longer required to pay Alkermes any royalties on net sales for license and supply of Ampyra, and we are free to use alternative sources for supply of Ampyra, which we have already secured for U.S. supply.

We had previously designated Patheon, Inc. (“Patheon”) as a second manufacturing source of Ampyra. In connection with that designation, we entered into a manufacturing agreement with Patheon, and Alkermes assisted us in transferring

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manufacturing technology to Patheon. Patheon now supplies us with our Ampyra needs. Under the manufacturing services agreement, we agreed to purchase from Patheon, on a non-exclusive basis, a portion of our requirements for Ampyra in the U.S. We pay Patheon a fixed per bottle fee (60 tablets per bottle) based on the annual quantity of Ampyra bottles that are delivered for sale. As a result of the arbitration ruling in October 2022, we were free to obtain supply of Ampyra from alternative sources and Patheon became our sole manufacturer and packager of Ampyra for sales in the U.S.

The manufacturing services agreement is automatically renewed for successive one-year periods on December 31 of each year, unless either party provides the other party with at least 12-months’ prior written notice of non-renewal. Either party may terminate manufacturing services agreement by written notice under certain circumstances, including material breach (subject to specified cure periods) or insolvency. We may also terminate the manufacturing services agreement upon certain regulatory actions or objections. Patheon may terminate the manufacturing services agreement if we assign the agreement to a third party under certain circumstances.

The manufacturing services agreement contains customary representations, warranties and covenants, including with respect to the ownership of any intellectual property created pursuant to the manufacturing services agreement, as well as provisions relating to ordering, payment and shipping terms, regulatory matters, reporting obligations, indemnity, confidentiality, and other matters.

We rely on a single third-party manufacturer to supply dalfampridine, the active pharmaceutical ingredient, or API, in Ampyra, and also on a single supplier for a critical excipient used in the manufacture of Ampyra. If these companies experience any disruption in their operations, our supply of Ampyra could be delayed or interrupted until the problem is solved or we locate another source of supply or another packager, which may not be available. We may not be able to enter into alternative supply or packaging arrangements on terms that are commercially reasonable, if at all. Any new supplier or packager would also be required to qualify under applicable regulatory requirements. Because of these and other factors, we could experience substantial delays before we are able to obtain qualified replacement products or services from any new supplier or packager.

Financial Management

As of September 30, 2023, we had cash, cash equivalents, and restricted cash of approximately $33.6 million. Restricted cash includes $1.2 million, of which $0.9 million is related to self-funded employee health insurance, and $0.3 million is related to collateralized standby letters of credit. On June 1, 2023, we made a cash interest payment of approximately $6.2 million in satisfaction of the interest payment due on June 1, 2023, which was made out of restricted cash. Following the June 1, 2023 interest payment, we no longer have the option to pay interest on the 2024 Notes in our common stock and we have fully utilized the restricted cash that was set aside for the payment of interest on the 2024 Notes.

Inbrija and ARCUS

Inbrija is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. The FDA approved Inbrija for a single dose of 84 mg (administered as two capsules), which may be taken up to five times per day. U.S. net revenue for Inbrija was $8.1 million for the quarter ended September 30, 2023 and $7.8 million for the quarter ended September 30, 2022. Inbrija utilizes our ARCUS platform for inhaled therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines. The ARCUS platform allows systemic delivery of medication through inhalation, by transforming molecules into a light, porous dry powder. This allows delivery of substantially higher doses of medication than can be delivered via conventional dry powder technologies.

Inbrija is also approved for use in the 27 member states of the EU, as well as Iceland, Norway, and Liechtenstein, for a single dose of 66 mg (administered as two capsules) up to five times per day (per EU convention, this reflects emitted dose and is equivalent to the 84 mg labeled dose in the U.S.). Following the UK’s exit from the EU, we were granted a grandfathered Marketing Authorization by the Medicines and Healthcare Products Regulatory Agency (MHRA) in the UK in January 2021.

We have entered into agreements to commercialize Inbrija in Spain, Germany, Latin America, and China, and we are in discussions with potential partners for commercialization of Inbrija in other jurisdictions outside of the U.S. In 2021, we entered into exclusive distribution and supply agreements with Esteve Pharmaceuticals, S.A. (“Esteve Spain”) and Esteve Pharmaceuticals GmbH (“Esteve Germany”) to commercialize Inbrija in Spain and Germany and we received a €5 million

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(approximately $5.9 million) upfront payment, and we are entitled to receive sales-based milestones. Under the terms of both the Esteve Spain and Esteve Germany supply agreements, we are entitled to receive a significant double-digit percentage of the Inbrija selling price in exchange for supply of the product. Esteve Germany and Esteve Spain launched Inbrija in Germany in June 2022 and in Spain in February 2023, respectively. Net revenues for ex-U.S. Inbrija sales were $1.4 million for the quarter ended September 30, 2023 and $1.0 million for the quarter ended September 30, 2022.

In May 2022, we announced that we entered into exclusive distribution and supply agreements with Pharma Consulting Group, S.A. (known as Biopas Laboratories) to commercialize Inbrija in nine countries within Latin America. Under the terms of the Biopas agreements, we are entitled to receive a significant double-digit, tiered percentage of the Inbrija selling price in exchange for supply of the product, and we are entitled to sales-based milestones. Biopas has submitted for marketing approval of Inbrija in Argentina, Colombia, Costa Rica, Ecuador, Panama and Peru, and expects to submit additional regulatory filings for approval in Chile in late 2023 and in Mexico and Brazil in 2024. Biopas expects up to five regulatory approvals in 2024.

In May 2023, we entered into a distribution agreement and a commercial supply agreement with Hangzhou Chance Pharmaceuticals Co., Ltd (“Chance”), for the exclusive distribution of Inbrija in China. Chance is obligated to use commercially reasonable efforts to market Inbrija in China. The agreements remain in effect until the earlier of (a) the last commercial sale of Inbrija on a jurisdiction- by- jurisdiction basis, and (b) 12 years from the effective date of the agreements, subject to customary termination for insolvency and certain other termination rights. We received a non-refundable upfront payment of $2.5 million, and a near term milestone payment of up to $6 million, depending on the clinical study requirements to be determined by the Chinese National Medical Products Administration (NMPA). We will also receive $3 million upon regulatory approval of Inbrija in China, up to $132.5 million in sales milestones based on specified sales volumes, and a fixed fee for each carton of Inbrija supplied to Chance.

We believe there are potential opportunities for using ARCUS with central nervous system, or CNS, as well as non-CNS, disorders. Due to several corporate restructurings since 2017 and associated cost-cutting measures, including the corporate restructurings we announced in January and September 2021, we suspended work on ARCUS and other proprietary research and development programs. However, we continue to discuss potential collaborations with other companies that express interest in formulating their novel molecules for pulmonary delivery using ARCUS, and have performed feasibility studies for a number of these opportunities.

Ampyra

Ampyra was approved by the FDA in January 2010 to improve walking in adults with multiple sclerosis. Efficacy was shown in people with all four major types of MS (relapsing remitting, secondary progressive, progressive relapsing and primary progressive). Ampyra became subject to competition from generic versions of Ampyra starting in late 2018 as a result of an adverse court ruling that invalidated certain Ampyra Orange Book-listed patents. We have experienced a significant decline in Ampyra sales due to competition from several generic versions of Ampyra. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time. U.S. net revenue for Ampyra was $15.7 million for the quarter ended September 30, 2023 and $21.1 million for the quarter ended September 30, 2022.

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Prior to October 2022 our primary source of supply of Ampyra was provided through a manufacturing and license agreement with Alkermes. In connection with a dispute over license and supply royalties, in the fourth quarter of 2022, an arbitration panel awarded to us an aggregate of $18.3 million including prejudgment interest. In addition, the arbitration panel ruled the agreements with Alkermes as unenforceable, and as a result we no longer have to pay Alkermes any royalties on net sales for license and supply of Ampyra, and we are now free to use alternative sources for supply of Ampyra, which we have secured. We expect the cost savings associated with this decision to greatly benefit Ampyra’s value to us.

License and Collaboration Agreement with Biogen

Ampyra is marketed as Fampyra outside the U.S. by Biogen under a license and collaboration agreement that we entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia, and the Americas. Biogen initiated a commercial launch of Fampyra in China in 2022. Our Fampyra patents have been challenged in Germany and could be similarly challenged in other countries where Fampyra is marketed by Biogen. Fampyra currently faces generic competition in Germany, notwithstanding that certain of the Germany Fampyra Patents remain in effect, and challenges to the Fampyra patents could lead to additional generic competition with Fampyra in Germany and other countries.

Under our agreement with Biogen, we are entitled to receive double-digit tiered royalties on net sales of Fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones, although we do not anticipate achievement of any of those milestones in the foreseeable future.

Results of Operations

Three-Month Period Ended September 30, 2023 Compared to September 30, 2022

Net Product Revenues

Inbrija

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which for Inbrija primarily includes specialty pharmacies and distributors. We recognized net revenues from the U.S. sales of Inbrija of $8.1 million and $7.8 million for the three-month periods ended September 30, 2023 and 2022, respectively, an increase of $0.3 million, or 4%. The increase in Inbrija net revenues of $0.3 million was composed of an increase in volume of $0.1 million, and an increase in price net of discounts and allowance adjustments of $0.2 million for the three-month period ended September 30, 2023. Additionally, we recognized revenues from our supply agreements with Esteve Germany and Esteve Spain for sales in ex-U.S. of $1.4 million and $1.0 million for the three-month periods ended September 30, 2023 and 2022, respectively.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which for Ampyra primarily includes specialty pharmacies, which deliver the medication to patients by mail. We recognized net revenues from the sale of Ampyra to these customers of $15.7 million and $21.1 million for the three-month periods ended September 30, 2023 and 2022, respectively, a decrease of $5.4 million, or 26%. The decrease in Ampyra net revenues of $5.4 million was composed of a decrease in volume of $4.8 million, and a decrease in price net of discounts and allowance adjustments of $0.6 million for the three-month period ended September 30, 2023.

 

Discounts and Allowances on Sales

Discounts and allowances for both Inbrija and Ampyra are included as an offset in net revenues consisting of allowances for customer credits, including estimated chargebacks, rebates, and discounts. Discounts and allowances are recorded following shipment of our products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Patient Protection and Affordable Care Act. Discounts and allowances may increase as a percentage of sales as we enter into new managed care contracts in the future.

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We believe that first and fourth quarter revenues for Inbrija and Ampyra are subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductibles and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe specialty pharmacies may increase their inventory in anticipation of the holidays and new year. These factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues. Also, discounts and allowances typically are highest in the first quarter, and lowest in the fourth quarter, and when this occurs, fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.

Royalty Revenues

We recognized $2.5 million and $3.0 million in royalty revenues for the three-month periods ended September 30, 2023 and 2022, respectively, a decrease of $0.5 million or 18%.

License Revenues

We recognized negligible license revenue and $0.5 million in license revenues for the three-month periods ended September 30, 2023 and 2022, respectively.

Cost of Sales

We recorded cost of sales of $3.4 million for the three-month period ended September 30, 2023 as compared to $11.0 million for the three-month period ended September 30, 2022. Cost of sales for the three-month period ended September 30, 2023 consisted primarily of $3.1 million in inventory costs related to recognized revenues and $0.3 million in other period costs. Cost of sales for the three-month period ended September 30, 2022 consisted primarily of $10.2 million in inventory costs related to recognized revenues, $0.2 million in royalty fees based on net product shipments, and $0.6 million in other period costs.

Amortization of Intangibles

We recorded amortization of intangible asset related to Inbrija of $7.7 million for the three-month periods ended September 30, 2023 and 2022.

Research and Development

Research and development expenses for the three-month period ended September 30, 2023 were $1.2 million as compared to $1.4 million for the three-month period ended September 30, 2022, a decrease of approximately $0.2 million, or 13%. The decrease was primarily due to restructuring and related decreases in several research and development programs.

Selling, General and Administrative

Sales and marketing expenses for the three-month period ended September 30, 2023 were $9.6 million compared to $9.8 million for the three-month period ended September 30, 2022, a decrease of approximately $0.2 million, or 2%. The decrease was primarily due to a decrease in marketing-related spending for Inbrija of $0.4 million, and a decrease in spending for Ampyra of $0.2 million; partially offset by an increase in other selling and marketing expenses of $0.4 million.

General and administrative expenses for the three-month period ended September 30, 2023 were $13.5 million compared to $13.2 million for the three-month period ended September 30, 2022, an increase of approximately $0.4 million, or 3%. The increase was primarily due to an increase in finance-related costs of $0.8 million, an increase in digital strategy and innovation costs of $0.4 million, an increase in salaries and benefits of $0.3 million; partially offset by a decrease in legal expenses of $1.1 million.

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Change in Fair Value of Derivative Liability

A derivative liability was recorded in December 2019 as a result of the issuance of the 2024 Notes. The derivative liability is measured at fair value on a quarterly basis and changes in the fair value are recorded in the consolidated statement of operations. We recorded no income due to the change in the fair value of the derivative liability for the three-month periods ended September 30, 2023 and September 30, 2022 respectively.

Changes in Fair Value of Acquired Contingent Consideration

As a result of the original spin out of Civitas from Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Inbrija. We acquired this contingent consideration as part of the Civitas acquisition. The fair value of that future royalty is assessed quarterly. We recorded a gain relating to changes in the fair value of our acquired contingent consideration of $5.2 million for the three-month period ended September 30, 2023 as compared to a gain of $4.6 million for the three-month period ended September 30, 2022. The changes in the fair value of the acquired contingent consideration were primarily due to the change in projected revenue and the recalculation of cash flows for the passage of time, as well as an increase in the discount rate.

Other Expense, Net

Other expense, net was $7.4 million for the three-month periods ended September 30, 2023 and 2022, respectively. Nearly all other expense, net was interest on the 2024 Notes.

Benefit from/(Provision for) Income Taxes

For the three-month periods ended September 30, 2023 and 2022, we recorded a benefit from income taxes of $1.1 million and a provision for income taxes of ($1.4) million, respectively. The effective income tax rates for the three-month periods ended September 30, 2023 and 2022 were 10.6% and (11.3)%, respectively.

The variance in the effective tax rates for the three-month period ended September 30, 2023 as compared to the three-month period ended September 30, 2022 was due primarily to an increase in the existing valuation allowance recorded on our deferred tax assets for which no tax benefit can be recognized, as a result of the deemed ownership that occurred in the prior year under IRS Section 382 which required a valuation allowance to be recorded on the Company’s tax attributes and the forfeitures of equity of which no tax deduction is recorded.

We continue to evaluate the realizability of our deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, and the regulatory approval of products under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact our income taxes.

The Massachusetts income tax examination for the tax years 2018 and 2019 was finalized during the third quarter of 2023 with no adjustment. The New Jersey income tax examination was finalized during the first quarter of 2023 for tax years 2015 through 2018 with no adjustments.

Nine-Month Period Ended September 30, 2023 Compared to September 30, 2022

Net Product Revenues

Inbrija

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which for Inbrija primarily includes specialty pharmacies and distributors. We recognized net revenues from the U.S. sales of Inbrija of $22.0 million and $19.0 million for the nine-month periods ended September 30, 2023 and 2022, respectively, an increase of

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$3.0 million, or 16%. The increase in Inbrija net revenues of $3.0 million was comprised of an increase in volume of $1.8 million and an increase in price net of discounts and allowance adjustments of $1.2 million for the nine-month period ended September 30, 2023. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below. Additionally, we recognized revenues from our supply agreements with Esteve Germany and Esteve Spain for sales in ex-U.S. of $2.7 million and $2.9 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which for Ampyra primarily includes specialty pharmacies, which deliver the medication to patients by mail. We recognized net revenues from the sale of Ampyra to these customers of $45.2 million and $54.2 million for the nine-month periods ended September 30, 2023 and 2022, respectively, a decrease of $9.0 million, or 16%. The decrease in Ampyra net revenues of $9.0 million was comprised of a decrease in volume of $10.5 million, partially offset by an increase in price net of discounts and allowance adjustments of $1.5 million for the nine-month period ended September 30, 2023. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below.

 

Discounts and Allowances on Sales

Discounts and allowances for both Inbrija and Ampyra are included as an offset in net revenues consisting of allowances for customer credits, including estimated chargebacks, rebates, and discounts. Discounts and allowances are recorded following shipment of our products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Patient Protection and Affordable Care Act. Discounts and allowances may increase as a percentage of sales as we enter into new managed care contracts in the future.

We believe that first and fourth quarter revenues for Inbrija and Ampyra are subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductibles and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe specialty pharmacies may increase their inventory in anticipation of the holidays and new year. These factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues. Also, discounts and allowances typically are highest in the first quarter, and lowest in the fourth quarter, and when this occurs, fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.

Royalty Revenues

We recognized $9.7 million and $10.6 million in royalty revenues for the nine-month periods ended September 30, 2023 and 2022, respectively, a decrease of $0.9 million or 8%.

License Revenues

We recognized $0.1 million and $0.5 million in license revenues for the nine-month periods ended September 30, 2023 and 2022, respectively a decrease of $0.4 million or 86%.

Cost of Sales

We recorded cost of sales of $9.7 million for the nine-month period ended September 30, 2023 as compared to $25.8 million for the nine-month period ended September 30, 2022. Cost of sales for the nine-month period ended September 30, 2023 consisted primarily of $9.0 million in inventory costs related to recognized revenues and $0.7 million in other period costs. Cost of sales for the nine-month period ended September 30, 2022 consisted primarily of $24.4 million in inventory costs related to recognized revenues, $0.7 million in royalty fees based on net product shipments and $0.7 million in other period costs.

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Amortization of Intangibles

We recorded amortization of intangible asset related to Inbrija of $23.1 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

Research and Development

Research and development expenses for the nine-month period ended September 30, 2023 were $4.1 million as compared to $4.6 million for the nine-month period ended September 30, 2022, a decrease of approximately $0.5 million, or 10%. The decrease was primarily due to restructuring and related decreases in several research and development programs.

Selling, General and Administrative

Sales and marketing expenses for the nine-month period ended September 30, 2023 were $28.7 million compared to $30.6 million for the nine-month period ended September 30, 2022, a decrease of approximately $1.9 million, or 6%. The decrease was primarily due to a decrease in spending for Ampyra of $1.1 million, a decrease in salaries and benefits of $0.9 million, and a decrease in marketing-related spending for Inbrija of $0.3 million; partially offset by an increase in other selling related expenses of $0.4 million.

General and administrative expenses for the nine-month period ended September 30, 2023 were $38.7 million compared to $49.4 million for the nine-month period ended September 30, 2022, a decrease of approximately $10.7 million, or 22%. The decrease was primarily due to a decrease in rent and facility costs of $4.7 million, a decrease in legal expenses of $4.2 million, a decrease in salaries and benefits of $2.2 million, a decrease in executive costs of $1.5 million, and a decrease of technical operation costs of $0.7 million; partially offset by an increase in digital strategy and innovation costs of $2.4 million, and an increase in other departmental spending of $0.2 million.

Change in Fair Value of Derivative Liability

A derivative liability was recorded in December 2019 as a result of the issuance of the 2024 Notes. The derivative liability is measured at fair value on a quarterly basis and changes in the fair value are recorded in the consolidated statement of operations. We recorded no income due to the change in the fair value of the derivative liability for the nine-month period ended September 30, 2023, compared to a negligible change in the fair value of the derivative liability for the nine-month period ended September 30, 2022.

Changes in Fair Value of Acquired Contingent Consideration

As a result of the original spin out of Civitas from Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Inbrija. We acquired this contingent consideration as part of the Civitas acquisition. The fair value of that future royalty is assessed quarterly. We recorded a gain relating to changes in the fair value of our acquired contingent consideration of $7.1 million for the nine-month period ended September 30, 2023 as compared to a gain of $10.7 million for the nine-month period ended September 30, 2022. The changes in the fair value of the acquired contingent consideration were primarily due to the change in projected revenue and the recalculation of cash flows for the passage of time, as well as an increase in the discount rate.

Other Expense, Net

Other expense, net was $22.5 million and $21.2 million for the nine-month periods ended September 30, 2023 and 2022, respectively. Nearly all other expense, net was interest on the 2024 Notes.

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Benefit from/(Provision for) Income Taxes

For the nine-month periods ended September 30, 2023 and 2022, we recorded a benefit from income taxes of $5.1 million and a provision for income taxes of ($28.2) million, respectively. The effective income tax rates for the nine-month periods ended September 30, 2023 and 2022 were 12.6% and (49.7)%, respectively.

The variance in the effective tax rates for the nine-month period ended September 30, 2023 as compared to the nine-month period ended September 30, 2022 was primarily due to an increase in the existing valuation allowance recorded on the Company’s deferred tax assets for which no tax benefit can be recognized, as a result of the deemed ownership that occurred in the prior year under IRS Section 382 which required a valuation allowance to be recorded on the Company’s tax attributes and the forfeitures of equity of which no tax deduction is recorded.

We continue to evaluate the realizability of our deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, and the regulatory approval of products under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact our income taxes.

The Massachusetts income tax examination for the tax years 2018 and 2019 was finalized during the third quarter of 2023 with no adjustment. The New Jersey income tax examination was finalized during the first quarter of 2023 for tax years 2015 through 2018 with no adjustments.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily from: private placements and public offerings of our capital stock; borrowing money through loans and the issuance of debt instruments; payments received under our collaboration and licensing agreements; revenue from sales of Ampyra, Fampyra, and Inbrija, as well as our former products, Zanaflex and Qutenza; royalty monetization and a revenue interest financing arrangement; and, to a lesser extent, funding from government grants. Also, in February 2021, we obtained additional capital from the sale of our Chelsea manufacturing operations.

On September 30, 2023, we had $32.5 million of cash and cash equivalents, compared to $37.5 million at December 31, 2022. Our September 30, 2023 cash and cash equivalents balance does not include $1.2 million of restricted cash, of which $0.9 million is related to self-funded employee health insurance, and $0.3 million is related to collateralized standby letters of credit. We incurred a net loss of $35.1 million for the nine-month period ended September 30, 2023.

Our future capital requirements will depend on a number of factors, including:

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Our ability to meet our future operating requirements, repay our liabilities, and meet our other obligations, and continue as a going concern are dependent upon a number of factors, including our ability to generate cash from product sales, reduce planned expenditures, and obtain additional financing. If we are unable to generate sufficient cash flow from the sale of our products, we may be required to adopt one or more alternatives, subject to the restrictions contained in the indenture governing our 2024 Notes, such as further reducing expenses, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous and which are likely to be highly dilutive. Also, our ability to raise additional capital and repay or restructure our indebtedness will depend on the capital markets and our financial condition at such time, among other factors. In addition, financing may not be available when needed, at all, on terms acceptable to us or in accordance with the restrictions described above.

We believe that our existing cash and cash equivalents will be sufficient to cover our cash flow requirements for the next twelve months from the issuance date of these financial statements. However, the 2024 Notes mature on December 1, 2024 and, unless earlier converted in accordance with their terms, we will be required to pay all outstanding principal and any accrued and unpaid interest on the notes on the maturity date. At September 30, 2023, the principal balance outstanding under the 2024 Notes was $207 million. We are evaluating our options to raise additional capital and repay or restructure all or a portion of the 2024 Notes, but our ability to do so will depend on numerous factors, some of which are beyond our control. We can provide no assurance that such efforts will be successful.

Financing Arrangements

Convertible Senior Secured Notes Due 2024

On December 24, 2019, we completed the private exchange of $276.0 million aggregate principal amount of our then outstanding 1.75% Convertible Senior Notes due 2021 (the “2021 Notes”) for the 2024 Notes and cash. We issued $207.0 million aggregate principal amount of the 2024 Notes and paid approximately $55.2 million in cash to participating holders.

The 2024 Notes were issued pursuant to an Indenture, dated as of December 23, 2019, among us, our wholly owned subsidiary, Civitas Therapeutics, Inc. (along with any domestic subsidiaries acquired or formed after the date of issuance, the “Guarantors”), and Wilmington Trust, National Association, as trustee and collateral agent (the “2024 Indenture”). The 2024 Notes are senior obligations of us and the Guarantors, secured by a first priority security interest in substantially all of the assets of us and the Guarantors, subject to certain exceptions.

The 2024 Notes will mature on December 1, 2024 unless earlier converted in accordance with their terms. Interest on the 2024 Notes is payable semi-annually in arrears at a rate of 6.00% per annum on each June 1 and December 1. On June 1 2023, we made a cash payment of approximately $6.2 million in satisfaction of the interest payment due on June 1, 2023 which was made out of restricted cash. We no longer have the option to pay interest on the 2024 Notes in common stock and we have fully utilized the restricted cash that was set aside for the payment of interest on the 2024 Notes. Accordingly, we will be required to use unrestricted cash for remaining interest payments on the 2024 Notes, including the $6.2 million interest payment that will be due on December 1, 2023.

Subject to a number of exceptions and qualifications, the 2024 Indenture restricts our ability and certain of our subsidiaries to, among other things, (i) pay dividends or make other payments or distributions on their capital stock, or purchase, redeem, defease or otherwise acquire or retire for value any capital stock, (ii) make certain investments, (iii) incur indebtedness or issue preferred stock, other than certain forms of permitted debt, (iv) create liens on their assets, (v) sell their assets, (vi) enter into certain transactions with affiliates or (vii) merge, consolidate or sell all or substantially all of our assets. The 2024 Indenture also requires us to make an offer to repurchase the 2024 Notes upon the occurrence of certain asset sales.

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The 2024 Indenture provides that a number of events will constitute an event of default, including, among other things, (i) a failure to pay interest for 30 days, (ii) failure to pay the 2024 Notes when due at maturity, upon any required repurchase, upon declaration of acceleration or otherwise, (iii) failure to convert the 2024 Notes in accordance with the 2024 Indenture and the failure continues for five business days, (iv) not issuing certain notices required by the 2024 Indenture within a timely manner, (v) failure to comply with the other covenants or agreements in the 2024 Indenture for 60 days following the receipt of a notice of non-compliance, (vi) a default or other failure by us to make required payments under other indebtedness of our or certain subsidiaries having an outstanding principal amount of $30.0 million or more, (vii) failure by us or certain subsidiaries to pay final judgments aggregating in excess of $30.0 million, (viii) certain events of bankruptcy or insolvency and (ix) the commercial launch in the U.S. of a product determined by the FDA to be bioequivalent to Inbrija. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to us, all outstanding 2024 Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2024 Notes may declare all the notes to be due and payable immediately.

The outstanding 2024 Notes balances as of September 30, 2023 consisted of the following:

 

(In thousands)		September 30, 2023
Liability component:
Principal		$	207,000
Less: debt discount and debt issuance costs, net			(25,957	)
Net carrying amount		$	181,043
Equity component		$	18,257
Derivative liability-conversion Option		$	—

Non-Convertible Capital Loans

Our foreign subsidiary, Biotie Therapies Ltd., received several non-convertible capital loans from Business Finland for research and development of specific drug candidates, with an aggregate adjusted acquisition-date fair value of $20.5 million. The loans were to be repaid only when the consolidated retained earnings of Biotie Therapies, Ltd. from the development of specific product candidates is sufficient to fully repay the loans. We filed an application with Business Finland for waiver of the loans and accrued interest. In July 2022, Business Finland granted the waiver request, which became effective in December 2022. We recorded a gain on extinguishment of debt of $27.1 million for the carrying amount of the loans including accrued interest in December 2022. In October 2023, we dissolved our Biotie Therapies, Ltd. subsidiary, resulting in no financial impact to the Company.

Cash and Cash Equivalents

At September 30, 2023 cash and cash equivalents were approximately $32.5 million, as compared to $37.5 million at December 31, 2022. Our cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at date of purchase and consist of investments in a Treasury money market fund. Also, we maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. Our September 30, 2023 cash and cash equivalents balance does not include $1.2 million of restricted cash, of which $0.9 million is related to self-funded employee health insurance, and $0.3 million is related to collateralized standby letters of credit.

Net Cash Used in Operations

Net cash used in operations was $11 million for the nine-month period ending September 30, 2023. Cash used by operations for the nine-month period ended September 30, 2023 was primarily due to:

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Net Cash Used in Investing

Net cash used in investing activities for the nine-month period ended September 30, 2023 was $0.2 million.

Net Cash Provided by Financing

Net cash provided by financing activities for the nine-month period ended September 30, 2023 was $0.

Contractual Obligations and Commitments

A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Note 12 of our Annual Report on Form 10-K for the year ended December 31, 2022. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

Under certain agreements, we are required to pay royalties or license fees and milestones for the use of technologies and products in our research and development activities and in the commercialization of products. The amount and timing of any of the foregoing payments are not known due to the uncertainty surrounding the successful research, development, and commercialization of the products.

 

Effects of Inflation

Our most liquid assets are cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, primarily employee compensation and contract services, which could increase our level of expenses.

Critical Accounting Policies and Estimates

Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2022. Effective January 1, 2022, we adopted ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.” Other than the adoption of these new accounting guidance, our significant accounting policies have not changed materially from December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”) we carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the second quarter of 2023, the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer and Treasurer. Based on that evaluation, these officers have concluded that, as of September 30, 2023, our disclosure controls and procedures were effective to achieve their stated purpose.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules, regulations, and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding disclosure.

Change in internal control over financial reporting

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our President and Chief Executive Officer and our Chief Financial Officer and Treasurer, concluded that there were no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation or other legal proceedings relating to claims arising out of operations in the normal course of our business, including the matters described below. The outcome of litigation and other legal proceedings is unpredictable, and regardless of outcome, they can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

In January 2023, we filed a petition in the District Court for the Southern District of New York (“District Court”) to confirm and modify the arbitral award received in October 2022 relating to a dispute with Alkermes plc (“Alkermes”). In that arbitration proceeding, the arbitration panel found in our favor that Alkermes had leveraged its patent to illegally obtain royalties beyond the life of the patent in violation of federal law. The arbitration panel held that Alkermes’ conduct in continuing to charge royalties after the patent expired was unlawful per se and that the underlying agreements were unenforceable. The panel awarded us approximately $18.3 million, including interest, representing license royalties overpaid since July 2020 (“Award”). We petitioned the District Court to confirm the Award, with modifications to the extent the arbitration panel disregarded federal law by declining to award royalties us paid prior to July 2020 and after July 2018, the date on which the arbitration panel found that the parties’ agreements were unenforceable as a matter of law. The petition sought restitution of the remaining illegal royalties that the arbitration panel found were demanded and collected by Alkermes in violation of the law in the amount of approximately $65 million together with pre- and post-award interest and costs. On February 8, 2023, Alkermes filed a brief opposing the relief requested in our petition and requested that the Award be confirmed without modification. We filed a brief in response on February 22, 2023. On August 4, 2023, the District Court confirmed the Award and denied our request to modify the Award. We filed a notice of appeal on September 1, 2023 at the United States Court of Appeals for the Federal Circuit appealing the District Court's denial of our request to modify the Award. On September 22, 2023, Alkermes filed a motion to transfer the appeal proceedings to the United States Court of Appeals for the Second Circuit. On October 10, 2023, we filed our response to Alkermes’ motion to transfer and on October 24, 2023 Alkermes filed a reply to our response. We are awaiting the decision of the Federal Circuit Court on the motion to transfer.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022, as updated in our Quarterly Reports subsequently filed during the current fiscal year, including this report, all of which could materially affect our business, financial condition and/or operating results. There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results in the future.

 

Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2023, none of our directors or Section 16 reporting officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

 

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Item 6. Exhibits

 

Exhibit No.		Description
31.1		Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2		Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Acorda Therapeutics, Inc.
	By:		/s/ Ron Cohen
Date: November 13, 2023			Ron Cohen, M.D. President, Chief Executive Officer and Director (Principal Executive Officer)
	By:		/s/ Michael A. Gesser
Date: November 13, 2023			Michael A. Gesser Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

 

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