Activist pushes Acorda to sell, figuring pipeline's too risky to offset Ampyra loss

Acorda Therapeutics has an activist problem on its hands. After a key patent loss and company cutbacks, the hedge fund Scopia Capital Management is pushing Acorda to put itself on the block.

The precipitating event: Acorda’s loss of patent protection on Ampyra, its $493 million drug for multiple sclerosis patients. In April, a U.S. district court struck down four of Ampyra’s patents, clearing the way for generic competition next July. Acorda plans to appeal, but in the meantime has retrenched by cutting jobs and costs.

With its lead drug at risk of collapsing and a long wait until its candidate medication Inbrija wins FDA approval, Acorda is running out of time. And meanwhile, other biotechs in the same field are selling, the hedge fund wrote in a letter to Acorda's board Monday.

"While we have been supportive of the Company’s strategy to this point, we believe it is now time to sell the Company," the letter states. "In 2018 the business will revert to burning cash with a levered balance sheet and no clear timeline to return to profitability. These are treacherous waters."

Acorda says now is not the time to consider takeover offers. A buyout wouldn't compensate shareholders for the value of its pipeline, the company said in a Monday securities filing. And putting the company up for sale now would do more harm than good, the company said; it would "destabilize operations, hinder our ability to execute on the company’s business plan and risk significantly devaluing the company."  

Scopia, of course, disagrees. Acorda spent more than $800 million developing Ampyra, the letter states, and the company’s street value is now around $1.2 billion. But a couple of recent deals—Cynapsus, which sold to Sunovion for $624 million, and NeuroDerm, which went for $1.1 billion—suggest Acorda could be worth more as a bidding target, thanks to Inbrija and tozeadenant, its pipeline Parkinson’s disease meds.

"We are highly confident that multiple qualified, potential buyers would be interested in engaging with Acorda at a significant premium to its present value," Scopia contends, adding, "Pursuing an independent strategy now is gambling with shareholder capital."

Acorda has taken steps to preserve its capital for an Ampyra court fight, an Inbrija launch, and its other R&D work. The company said in April in would cut 20% of its workforce, or more than 100 staffers. Most of the layoffs will take place this month, and Acorda expected to save $21 million annually with the move, CEO Ron Cohen said in an interview at the time.

The cuts will be "falling widely across the organization," Cohen said, though they would disproportionately affect the R&D organization as the company reduces its emphasis on earlier stage programs and shifts focus to lead pipeline candidates Inbrija, formerly known as CVT-301, and tozadenant.

Pharma companies have increasingly relied on biotechs and their R&D output to beef up pipelines and top lines in recent years. Cancer has been the hottest area for dealmaking, but interest in central nervous system drugs has also ramped up, partly because of the aging U.S. population.

Neurodegenerative disease treatments make for riskier acquisitions but stand to prompt buyout interest nevertheless, Morgan Stanley M&A exec Susan Huang told Bloomberg last August. "[D]emographics would point me toward things like Alzheimer’s, Parkinson’s," she said. 

This isn't the first time a hedge fund has gone after Acorda, albeit in a different way. Kyle Bass targeted Ampyra's patents with an inter partes review challenge in 2015. That challenge failed earlier this year, an outcome some industry watchers thought presaged victory at the district court level. 

Acorda says it's more valuable on its own even after that prediction turned out to be untrue. The company took stock after the negative Ampyra court decision and decided that "focusing on our two late-stage programs in Parkinson’s disease (Inbrija and tozadenant) and maximizing Ampyra is the best path forward to create value for shareholders," Monday's filing states.