Form 10-Q ACORDA THERAPEUTICS INC For: Jun 30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ACORDA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

(914) 347-4300

(Registrant's telephone number,

including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒  No ☐

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

ACORDA THERAPEUTICS, INC.

TABLE OF CONTENTS

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. Stockholders are cautioned that such statements involve risks and uncertainties, including:  The ability to complete the Biotie Therapies Corp. transaction on a timely basis; the ability to realize the benefits anticipated from the Biotie Therapies transaction and the Civitas Therapeutics transaction, among other reasons because 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 ability to successfully integrate Biotie Therapies' operations and Civitas's operations respectively, into our operations; we may need to raise additional funds to finance our expanded operations and may not be able to do so on acceptable terms; our ability to successfully market and sell Ampyra (dalfampridine) Extended Release Tablets, 10 mg in the U.S.; third party payers (including governmental agencies) may not reimburse for the use of Ampyra or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; the risk of unfavorable results from future studies of Ampyra or from our other research and development programs, including CVT-301 or any other acquired or in-licensed programs; we may not be able to complete development of, obtain regulatory approval for, or successfully market CVT-301 or any other products under development; or the products that we will acquire when we complete the Biotie Therapies transaction; the occurrence of adverse safety events with our products; delays in obtaining or failure to obtain and maintain regulatory approval of or to successfully market Fampyra outside of the U.S. and our dependence on our collaborator Biogen in connection therewith; competition; 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 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, 2015, 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 do not assume any obligation to publicly update any forward-looking statements as a result of developments occurring after the date of this report.

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, "Ampyra," "Zanaflex," "Zanaflex Capsules," "Qutenza" and "ARCUS."  Also, our mark "Fampyra" is a registered mark in the European Community Trademark Office and we have registrations or pending applications for this mark in other jurisdictions.  Our trademark portfolio also includes several registered trademarks and pending trademark applications (e.g., "Plumiaz") 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.

PART I

Item 1.  Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)		June 30, 2016				December 31, 2015
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	137,400			$	153,204
Restricted cash			—				6,032
Short-term investments			—				200,101
Trade accounts receivable, net of allowances of $985 and $884, as of June 30, 2016 and December 31, 2015, respectively			45,886				31,466
Prepaid expenses			18,709				16,079
Finished goods inventory			55,553				36,476
Other current assets			5,616				7,959
Total current assets			263,164				451,317
Property and equipment, net of accumulated depreciation			36,754				40,204
Goodwill			284,504				183,636
Deferred tax asset			2,128				2,128
Intangible assets, net of accumulated amortization			751,524				430,856
Non-current portion of deferred cost of license revenue			2,589				2,906
Other assets			5,876				247
Total assets		$	1,346,539			$	1,111,294
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	29,554			$	14,233
Accrued expenses and other current liabilities			96,388				66,158
Current portion of deferred license revenue			9,057				9,057
Current portion of convertible notes payable			1,126				1,144
Total current liabilities			136,125				90,592
Convertible senior notes (due 2021)			294,854				290,420
Acquired contingent consideration			71,700				63,500
Non-current portion of deferred license revenue			36,984				41,513
Non-current portion of convertible notes payable			—				1,107
Deferred tax liability			89,960				12,146
Other non-current liabilities			35,374				8,991
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value. Authorized 80,000,000 shares at June 30, 2016 and December 31, 2015; issued 46,103,367 and 43,440,324 shares, including those held in treasury, as of June 30, 2016 and December 31, 2015, respectively			46				43
Treasury stock at cost (12,420 shares at June 30, 2016 and December 31, 2015)			(329	)			(329	)
Additional paid-in capital			904,784				812,782
Accumulated deficit			(228,152	)			(209,352	)
Accumulated other comprehensive loss			(4,711	)			(119	)
Total stockholders' equity - Acorda Therapeutics, Inc.			671,638				603,025
Noncontrolling interest			9,904				—
Total stockholders' equity			681,542				603,025
Total liabilities and stockholders' equity		$	1,346,539			$	1,111,294

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

(In thousands, except per share data)		Three-month period ended June 30, 2016				Three-month period ended June 30, 2015				Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Revenues:
Net product revenues		$	120,695			$	107,565			$	230,842			$	201,064
Royalty revenues			4,499				3,878				7,990				7,966
License revenue			2,264				2,264				4,529				4,529
Total net revenues			127,458				113,707				243,361				213,559
Costs and expenses:
Cost of sales			26,435				22,708				49,621				41,155
Cost of license revenue			159				159				317				317
Research and development			50,293				31,229				94,863				61,865
Selling, general and administrative			62,604				52,819				121,584				101,589
Changes in fair value of acquired contingent consideration			2,000				1,100				8,200				4,200
Total operating expenses			141,491				108,015				274,585				209,126
Operating (loss) income			(14,033	)			5,692				(31,224	)			4,433
Other (expense) income (net):
Interest and amortization of debt discount expense			(4,033	)			(4,010	)			(7,757	)			(8,061	)
Interest income			48				94				263				160
Realized loss on foreign currency transactions			(1,486	)			—				(1,495	)			—
Other (expense) income			(425	)			351				10,026				471
Total other (expense) income (net)			(5,896	)			(3,565	)			1,037				(7,430	)
(Loss) income before taxes			(19,929	)			2,127				(30,187	)			(2,997	)
Benefit from (Provision for) income taxes			972				(1,130	)			10,709				909
Net (loss) income		$	(18,957	)		$	997			$	(19,478	)		$	(2,088	)
Net loss attributable to non-controlling interest			678				—				678				—
Net (loss) income attributable to Acorda Therapeutics, Inc.		$	(18,279	)		$	997			$	(18,800	)		$	(2,088	)
Net (loss) income per share attributable to Acorda Therapeutics, Inc.—basic		$	(0.40	)		$	0.02			$	(0.42	)		$	(0.05	)
Net (loss) income per share attributable to Acorda Therapeutics, Inc.—diluted		$	(0.40	)		$	0.02			$	(0.42	)		$	(0.05	)
Weighted average common shares outstanding used in computing net (loss) income per share attributable to Acorda Therapeutics, Inc.—basic			45,338				42,085				45,077				42,058
Weighted average common shares outstanding used in computing net (loss) income per share attributable to Acorda Therapeutics, Inc.—diluted			45,338				43,282				45,077				42,058

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

(In thousands)		Three-month period ended June 30, 2016				Three-month period ended June 30, 2015				Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Net (loss) income		$	(18,957	)		$	997			$	(19,478	)		$	(2,088	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment			(4,711	)			—				(4,711	)			—
Unrealized gains on available for sale securities			—				31				—				14
Reclassification of net losses to net income			—				—				119				—
Other comprehensive (loss) income, net of tax			(4,711	)			31				(4,592	)			14
Comprehensive (loss) income		$	(23,668	)		$	1,028			$	(24,070	)		$	(2,074	)
Other comprehensive (loss) attributable to noncontrolling interest		$	(128	)		$	—			$	(128	)		$	—

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)		Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Cash flows from operating activities:
Net loss		$	(19,478	)		$	(2,088	)
Adjustments to reconcile net (loss) to net cash used in operating activities:
Share‑based compensation expense			17,432				15,834
Amortization of net premiums and discounts on investments			467				1,434
Amortization of debt discount and debt issuance costs			4,564				4,230
Amortization of revenue interest issuance cost			—				7
Depreciation and amortization expense			9,916				7,491
Change in acquired contingent consideration obligation			8,200				4,200
Realized gain on foreign currency transaction			(10,484	)			—
Deferred tax benefit			(11,116	)			(909	)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable			(14,328	)			2,413
Decrease (increase) in prepaid expenses and other current assets			1,996				(3,845	)
Increase in inventory			(19,077	)			(22,366	)
Decrease in non-current portion of deferred cost of license revenue			317				317
Decrease in other assets			17				17
Increase (decrease) in accounts payable, accrued expenses, other current liabilities			27,217				(2,496	)
Decrease in revenue interest liability interest payable			—				(190	)
Decrease in non-current portion of deferred license revenue			(4,528	)			(4,528	)
Decrease in deferred product revenue—Zanaflex			—				(1,017	)
Decrease (increase) in restricted cash			6,032				(4,504	)
Net cash used in operating activities			(2,853	)			(6,000	)
Cash flows from investing activities:
Purchases of property and equipment			(2,504	)			(4,057	)
Purchases of intangible assets			(388	)			(572	)
Acquisitions, net of cash received			(275,100	)			—
Purchases of investments			(40,221	)			(275,987	)
Proceeds from maturities of investments			246,966				174,500
Net cash used in investing activities			(71,247	)			(106,116	)
Cash flows from financing activities:
Proceeds from issuance of common stock and option exercises			74,051				6,268
Purchase of noncontrolling interest			(14,489	)			—
Debt issuance costs			(1,479	)			—
Repayments of revenue interest liability			(41	)			(125	)
Net cash provided by financing activities			58,042				6,143
Effect of exchange rate changes on cash and cash equivalents			254				—
Net decrease in cash and cash equivalents			(15,804	)			(105,973	)
Cash and cash equivalents at beginning of period			153,204				182,170
Cash and cash equivalents at end of period		$	137,400			$	76,197
Supplemental disclosure:
Cash paid for interest			3,040				3,986
Cash paid for taxes			2,578				1,323

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

		As of and for the Period Ended
Exchange rates		June 30, 2016
Period end EUR: USD exchange rate			1.11
Average period EUR: USD exchange rate			1.13

(In thousands)		Balance at December 31, 2015
		Revised Reporting				As Previously Reported
Other assets		$	247			$	5,296
Convertible notes payable – due 2021		$	(290,420	)		$	(295,469	)

(In thousands) Cash and cash equivalents		$	73,854
Other current assets			2,208
Other long-term assets			4,962
Intangible assets (indefinite-lived)			260,500
Intangible assets (definite-lived)			65,000
Current liabilities			(17,547	)
Deferred taxes			(89,038	)
Other long-term liabilities			(26,715	)
Fair value of assets and liabilities acquired			273,224
Goodwill			102,676
Total purchase price			375,900
Less: Noncontrolling interests			(25,736	)
Purchase consideration on date of acquisition		$	350,164

(In thousands)		Stockholders' Equity Acorda				Non-Controlling Interest				Total Stockholders' Equity
Balance at December 31, 2015		$	603,025			$	—			$	603,025
Net loss			(18,800	)			(678	)			(19,478	)
Other comprehensive loss			(4,592	)			(128	)			(4,720	)
Noncontrolling interest at date of acquisition			—				25,736				25,736
Purchase of noncontrolling interest			537				(15,026	)			(14,489	)
Private Placement, net of issuance costs			72,094				—				72,094
Stock compensation expense and option exercises			19,374				—				19,374
Balance at June 30, 2016		$	671,638			$	9,904			$	681,542

		Three-month								Six-month
		period ended								period ended
		June 30,								June 30,
(In thousands)		2016				2015				2016				2015
Revenues		$	127,675			$	115,178			$	244,419			$	216,016
Loss from continuing operations attributable   to Acorda		$	(25,085	)		$	(11,058	)		$	(43,177	)		$	(22,996	)

						June 30, 2016																December 31, 2015
(Dollars In thousands)		Estimated Remaining Useful Lives (Years)				Cost				Accumulated Amortization				Foreign Currency Translation				Net Carrying Amount				Cost				Accumulated Amortization				Net Carrying Amount
In-process research & development (1)		Indefinite-lived				$	683,500			$	-			$	(586	)		$	682,914			$	423,000			$	-			$	423,000
Selincro			7				65,000				(1,935	)			(1,115	)			61,950				-				-				-
Ampyra milestones			11				5,750				(2,529	)			-				3,221				5,750				(2,380	)			3,370
Ampyra CSRO royalty buyout			4				3,000				(1,962	)			-				1,038				3,000				(1,817	)			1,183
Website development costs			3				12,705				(10,657	)			-				2,048				12,504				(9,467	)			3,037
Website development costs – in process			n/a				353				-				-				353				266				-				266
						$	770,308			$	(17,083	)		$	(1,701	)		$	751,524			$	444,520			$	(13,664	)		$	430,856

(In thousands)
2016		$	5,640
2017			10,868
2018			10,172
2019			9,924
2020			9,602
Thereafter			23,166
		$	69,372

In thousands Balance at December 31, 2015		$	183,636
Goodwill associated with the acquisition of Biotie Therapies			102,676
Foreign currency translation adjustment			(1,808	)
Balance at June 30, 2016		$	284,504

	For the three-month								For the six-month
	period ended June 30,								period ended June 30,
(In millions)	2016				2015				2016				2015
Research and development		$	2.6			$	2.2			$	4.7			$	4.0
Selling, general and administrative			6.7				6.5				12.7				11.8
Total		$	9.3			$	8.7			$	17.4			$	15.8

		Number of Shares (In thousands)				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term				Intrinsic Value (In thousands)
Balance at January 1, 2016			8,223			$	30.97
Granted			1,555				32.55
Cancelled			(256	)			35.37
Exercised			(111	)			17.67
Balance at June 30, 2016			9,411			$	31.27				6.7			$	6,766
Vested and expected to vest at June 30, 2016			9,295			$	31.24				6.7			$	6,765
Vested and exercisable at June 30, 2016			5,724			$	29.40				5.3			$	6,755

(In thousands) Restricted Stock		Number of Shares
Nonvested at January 1, 2016			441
Granted			609
Vested			(18	)
Forfeited			(179	)
Nonvested at June 30, 2016			853

(In thousands, except per share data)		Three-month period ended June 30, 2016				Three-month period ended June 30, 2015				Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Basic and diluted
Net (loss) income		$	(18,279	)		$	997			$	(18,800	)		$	(2,088	)
Weighted average common shares outstanding used in computing net (loss) income per share—basic			45,338				42,085				45,077				42,058
Plus: net effect of dilutive stock options and restricted common shares			—				1,197				—				—
Weighted average common shares outstanding used in computing net (loss) income per share—diluted			45,338				43,282				45,077				42,058
Net (loss) income per share—basic		$	(0.40	)		$	0.02			$	(0.42	)		$	(0.05	)
Net (loss) income per share—diluted		$	(0.40	)		$	0.02			$	(0.42	)		$	(0.05	)

(In thousands)		Three-month period ended June 30, 2016				Three-month period ended June 30, 2015				Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Denominator
Stock options and restricted common shares			7,502				5,406				7,536				3,974
Convertible note – Saints Capital			10				19				10				19

(In thousands)		Level 1				Level 2				Level 3
June 30, 2016
Assets Carried at Fair Value:
Cash equivalents		$	28,976			$	—			$	—
Liabilities Carried at Fair Value:
Acquired contingent consideration			—				—				71,700
December 31, 2015
Assets Carried at Fair Value:
Cash equivalents		$	70,504			$	13,009			$	—
Short-term investments			—				200,101				—
Liabilities Carried at Fair Value:
Acquired contingent consideration			—				—				63,500

(In thousands)		Three-month period ended June 30, 2016				Three-month period ended June 30, 2015				Six-month period ended June 30, 2016				Six-month period ended June 30, 2015
Acquired contingent consideration:
Balance, beginning of period		$	69,700			$	55,700			$	63,500			$	52,600
Fair value change to contingent consideration (unrealized) included in the statement of operations			2,000				1,100				8,200				4,200
Balance, end of period		$	71,700			$	56,800			$	71,700			$	56,800

(In thousands)		Amortized Cost				Gross unrealized gains				Gross unrealized losses				Estimated fair value
June 30, 2016
U.S. Treasury bonds		$	—			$	—			$	(—	)		$	—
December 31, 2015
U.S. Treasury bonds			200,244				—				(143	)			200,101

(In thousands)		Net Unrealized Gains (Losses) on Marketable Securities
Balance at December 31, 2015		$	(119	)
Other comprehensive loss before reclassifications:			—
Amounts reclassified from accumulated other        comprehensive loss			119
Net current period other comprehensive income			119
Balance at June 30, 2016		$	—

		Payments due by period (1)(9)
(In thousands)		Total				Less than 1 year				1-3 years				4-5 years
Convertible Senior Notes (2)		$	374,575			$	6,038			$	12,075			$	356,462
Convertible note payable (3)			1,144				1,144				—				—
Capital loans (4) (6)			19,987				—				—				—
Research and development loans (5) (6)			2,987				597				1,195				1,195
Operating leases (7)			30,434				6,192				12,330				11,912
Inventory purchase commitments (8)			30,484				30,484				—				—
Total		$	459,611			$	44,455			$	25,600			$	369,569

(In thousands)
2016		$	3,130
2017			6,180
2018			6,337
2019			5,811
2020			5,956
Later years			18,176
		$	45,590

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.

Background

We are a biotechnology company focused on developing therapies that restore function and improve the lives of people with neurological disorders.  We market three FDA-approved therapies, including Ampyra (dalfampridine) Extended Release Tablets, 10 mg, a treatment to improve walking in patients with multiple sclerosis, or MS, as demonstrated by an increase in walking speed.  We have a pipeline of novel neurological therapies addressing a range of disorders, including Parkinson's disease, post-stroke walking difficulties, migraine, and MS.

Biotie Acquisition

In January 2016, we announced that we had entered into a combination agreement to acquire Biotie Therapies Corp.  In accordance with the combination agreement, on April 18, 2016, we closed a public tender offer for all of Biotie's capital stock, pursuant to which we acquired approximately 93% of the fully diluted capital stock of Biotie.  On May 4, 2016, we acquired another approximately 4% of Biotie's fully diluted capital stock pursuant to a subsequent public offer to Biotie stockholders that did not tender their shares in the initial tender offer.  Accordingly, we currently own approximately 97% of the fully diluted capital stock of Biotie.  We intend to acquire all remaining shares of Biotie capital stock that have not been tendered to us pursuant to compulsory redemption proceedings under Finnish law that we initiated in April 2016.  We expect to complete the acquisition of 100% of Biotie pursuant to these compulsory redemption proceedings in the second half of 2016.

Subject to completion of the acquisition, as described above, we will obtain worldwide rights to tozadenant, an oral adenosine A2a receptor antagonist currently in Phase 3 development as an adjunctive treatment to levodopa in Parkinson's disease patients to reduce OFF time.  A2a receptor antagonists have the potential to be the first new class of drug for Parkinson's disease in over 20 years.  We believe that tozadenant will be complementary to our other Phase 3 product for Parkinson's disease, CVT-301, because while tozadenant is aimed at reducing overall OFF time, CVT-301 is aimed at rapid improvement of OFF periods when they occur.  We project that, if approved, tozadenant could generate peak annual U.S. net revenue of more than $400 million.  Further expanding our pipeline, when we complete the acquisition we will also obtain global rights to SYN-120, an oral, 5-HT6/5-HT2A dual receptor antagonist for Parkinson's-related dementia, in Phase 2 development with support from the Michael J. Fox Foundation.  Also, Biotie receives double digit royalties from sales of Selincro, a European Medicines Agency (EMA)-approved orally administered therapy for alcohol dependence therapy.  Selincro has been introduced across Europe by Biotie's partner, H. Lundbeck A/S, a Danish pharmaceutical company specializing in central nervous system products.  Selincro is not approved for use in the U.S. and is not under development for use in the U.S.

2016 Financing Transactions

Concurrently with the announcement of the Biotie transaction described above, we announced two separate financing transactions.  The first was a private placement of 2,250,900 shares of our common stock for an aggregate purchase price of approximately $75 million.  We paid discounts and commissions of $2,250,900 in connection with the private placement, which settled on January 26, 2016.  We used the net proceeds from the private placement to fund, in part, the Biotie acquisition.  We also announced a commitment from JPMorgan Chase, N.A. for an asset-based credit facility for up to $60 million, which we entered into on June 1, 2016.  Availability under the facility is subject to a borrowing base, which is based on our and certain of our U.S. subsidiaries' eligible accounts receivable, inventory and equipment, after adjusting for customary factors that are subject to modification from time to time by the administrative agent under the facility at its discretion (not to be exercised unreasonably).  Based on our eligible accounts receivable and inventory and other components of the borrowing base, the availability under the facility was approximately $60 million as of June 30, 2016.

Ampyra

General

Ampyra was approved by the FDA in January 2010 for the improvement of walking in people with MS.  To our knowledge, Ampyra is the first and only drug approved for this indication.  Efficacy was shown in people with all four major types of MS (relapsing remitting, secondary progressive, progressive relapsing and primary progressive).  Ampyra was made commercially available in the U.S. in March 2010.  Net revenue for Ampyra was $122.1 million for the three-months ended June 30, 2016 and $105.5 million for the three-months ended June 30, 2015.

Since the March 2010 launch of Ampyra, more than 110,000 people with MS in the U.S. have tried Ampyra.   We believe that Ampyra is increasingly considered by many neurologists a standard of care to improve walking in people with MS.  As of March 1, 2016, approximately 70% of all people with MS who were prescribed Ampyra received a first refill, and approximately 40% of all people with MS who were prescribed Ampyra have been dispensed at least six months of the medicine through refills, consistent with previously reported trends.  These refill rates exclude patients who started Ampyra through our 60 day free trial program.  Our 60 day free trial program provides eligible patients with two months of Ampyra at no cost.  During 2015, on average more than 70% of new Ampyra patients were enrolled in our 60 day free trial program.  The program is in its fifth year, and data show that participants in the 60 day free trial program have higher compliance and persistency rates over time compared to patients that are not in the program.  Approximately 50% of patients who initiate Ampyra therapy with the 60 day free trial program convert to paid prescriptions.

Ampyra is marketed in the U.S. through our own specialty sales force and commercial infrastructure.  We currently have approximately 90 sales representatives in the field calling on a priority target list of approximately 7,000 physicians.  We also have established teams of Medical Science Liaisons, Regional Reimbursement Directors, and Market Access Account Directors who provide information and assistance to payers and physicians on Ampyra; National Trade Account Directors who work with our limited network of specialty pharmacies; and Market Development Managers who work collaboratively with field teams and corporate personnel to assist in the execution of our strategic initiatives.

Ampyra is distributed in the U.S. exclusively through a limited network of specialty pharmacy providers that deliver the medication to patients by mail; Kaiser Permanente, which distributes Ampyra to patients through a closed network of on-site pharmacies and ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which distributes Ampyra to the U.S. Bureau of Prisons, the U.S. Department of Defense, the U.S. Department of Veterans Affairs, or VA, and other federal agencies.  All of these customers are contractually obligated to hold no more than an agreed number of days of inventory, ranging from 10 to 30 calendar days.

We have contracted with a third party organization with extensive experience in coordinating patient benefits to run Ampyra Patient Support Services, or APSS, a dedicated resource that coordinates the prescription process among healthcare providers, people with MS, and insurance carriers.  Processing of most incoming requests for prescriptions by APSS begins within 24 hours of receipt.  Patients will experience a range of times to receive their first shipment based on the processing time for insurance requirements.  As with any prescription product, patients who are members of benefit plans that have restrictive prior authorizations may experience delays in receiving their prescription.

Three of the largest national health plans in the U.S. – Aetna, Cigna and United Healthcare – have listed Ampyra on their commercial formulary.  Approximately 75% of insured individuals in the U.S. continue to have no or limited prior authorizations, or PA's, for Ampyra.  We define limited PAs as those that require only an MS diagnosis, documentation of no contraindications, and/or simple documentation that the patient has a walking impairment; such documentation may include a Timed 25-Foot Walk (T25W) test.  The access figure is calculated based on the number of pharmacy lives reported by health plans.

License and Collaboration Agreement with Biogen

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.  Biogen anticipates making Fampyra available in additional markets in 2016.  Under our agreement with Biogen, we are entitled to receive double-digit tiered royalties on sales of Fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones.  We received a $25 million milestone payment from Biogen in 2011, which was triggered by Biogen's receipt of conditional approval from the European

Commission for Fampyra.  The next expected milestone payment would be $15 million, due when ex-U.S. net sales exceed $100 million over four consecutive quarters.

Ampyra Patent Update

We have five issued patents listed in the Orange Book for Ampyra, as follows:

·

The first is U.S. Patent No. 8,007,826, with claims relating to methods to improve walking in patients with MS by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily. Based on the final patent term adjustment calculation of the United States Patent and Trademark Office, or USPTO, this patent will extend into 2027.

·

The second is U.S. Patent No. 5,540,938, the claims of which relate to methods for treating a neurological disease, such as MS, and cover the use of a sustained release dalfampridine formulation, such as AMPYRA (dalfampridine) Extended Release Tablets, 10 mg for improving walking in people with MS.  In April 2013, this patent received a five year patent term extension under the patent restoration provisions of the Hatch-Waxman Act.  With a five year patent term extension, this patent will expire in 2018.  We have an exclusive license to this patent from Alkermes (originally with Elan, but transferred to Alkermes as part of its acquisition of Elan's Drug Technologies business).

·

The third is U.S. Patent No. 8,354,437, which includes claims relating to methods to improve walking, increase walking speed, and treat walking disability in patients with MS by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily.  This patent is set to expire in 2026.

·

The fourth is U.S. Patent No. 8,440,703, which includes claims directed to methods of improving lower extremity function and walking and increasing walking speed in patients with MS by administering less than 15 mg of sustained release 4-aminopyridine (dalfampridine) twice daily.  This patent is set to expire in 2025.

·	The fifth is U.S. Patent No. 8,663,685 with claims relating to methods to improve walking in patients with MS by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily.  Absent patent term adjustment, the patent is set to expire in 2025.

Ampyra also has Orphan Drug designation, which gives it marketing exclusivity in the U.S. until January 2017.

Our Orange Book-listed patents for Ampyra are the subject of lawsuits relating to Paragraph IV Certification Notices received from several generic drug manufacturers, and also inter partes review (IPR) petitions filed by a hedge fund with the U.S. Patent and Trademark Office.  An adverse outcome in these legal proceedings could result in our loss of some or all Orange-Book listed patents that we rely on for Ampyra.  These legal proceedings are described in Part II, Item 1 of this report.

In 2011, the European Patent Office, or EPO, granted EP 1732548, with claims relating to, among other things, use of a sustained release aminopyridine composition, such as dalfampridine (known under the trade name Fampyra in the European Union), to increase walking speed.  In March 2012, Synthon B.V. and neuraxpharm Arzneimittel GmBH filed oppositions with the EPO challenging the EP 1732548 patent.  We defended the patent, and in December 2013, we announced that the EPO Opposition Division upheld amended claims in this patent covering a sustained release formulation of dalfampridine for increasing walking in patients with MS through twice-daily dosing at 10 mg.  Both Synthon B.V. and neuraxpharm Arzneimittel GmBH have appealed the decision.  In December 2013, Synthon B.V., neuraxpharm Arzneimittel GmBH and Actavis Group PTC EHF filed oppositions with the EPO challenging our EP 2377536 patent, which is a divisional of the EP 1732548 patent.  On February 24, 2016, the EPO Opposition Division rendered a decision that revoked the EP 2377536 patent.  We believe the claims of this patent are valid and we have appealed the decision.  Both European patents, if upheld as valid, are set to expire in 2025, absent any additional exclusivity granted based on regulatory review timelines.  Fampyra also has 10 years of market exclusivity in the European Union that is set to expire in 2021.

We will vigorously defend our intellectual property rights.

Zanaflex

Zanaflex Capsules and Zanaflex tablets are FDA-approved as short-acting drugs for the management of spasticity, a symptom of many central nervous system disorders, including MS and spinal cord injury.  These products contain tizanidine

hydrochloride, one of the two leading drugs used to treat spasticity.  In 2012, Apotex commercially launched a generic version of tizanidine hydrochloride capsules, and we also launched our own authorized generic version, which is being marketed by an Allergan subsidiary as part of its Actavis business (originally Watson Pharma, Inc.).  In March 2013, Mylan Pharmaceuticals commercially launched their own generic version of Zanaflex Capsules.  The commercial launch of generic tizanidine hydrochloride capsules has caused a significant decline in net revenue from the sale of Zanaflex Capsules, and the launch of these generic versions and the potential launch of other generic versions is expected to cause our net revenue from Zanaflex Capsules to decline further in 2016 and beyond.

Qutenza

Qutenza is a dermal patch containing 8% prescription strength capsaicin the effects of which can last up to three months and is approved by the FDA for the management of neuropathic pain associated with post-herpetic neuralgia, also known as post-shingles pain.  We acquired commercialization rights to Qutenza in July 2013 from NeurogesX, Inc.  These rights include the U.S., Canada, Latin America and certain other territories.  Qutenza was approved by the FDA in 2010 and launched in April 2010 but NeurogesX discontinued active promotion of the product in March 2012.  In January 2014, we re-launched Qutenza in the U.S. using our existing commercial organization, including our specialty neurology sales force as well as our medical and safety reporting infrastructure.

Astellas Pharma Europe Ltd. has exclusive commercialization rights for Qutenza in the European Economic Area (EEA) including the 28 countries of the European Union, Iceland, Norway, and Liechtenstein as well as Switzerland, certain countries in Eastern Europe, the Middle East and Africa.

Research & Development Programs

We have a pipeline of novel neurological therapies addressing a range of disorders, including Parkinson's disease,  post-stroke walking difficulties, migraine, and MS.  Our pipeline includes the programs described below as well as the programs we are acquiring with Biotie described above.

CVT-301, CVT-427 and ARCUS Technology

We acquired CVT-301 in October 2014 with our acquisition of Civitas Therapeutics, Inc.  CVT-301 is a Phase 3 inhaled formulation of levodopa, or L-dopa, for the treatment of OFF periods in Parkinson's disease.  Parkinson's disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain responsible for producing dopamine.  The disease is characterized by symptoms such as impaired ability to move, muscle stiffness and tremor.  The standard of care for the treatment of Parkinson's disease is oral levodopa (L-dopa), but there are significant challenges in creating a dosing regimen that consistently maintains therapeutic effects as Parkinson's disease progresses.  The re-emergence of symptoms is referred to as an OFF period, and despite optimized regimens with current therapeutic options and strategies, OFF periods remain one of the most challenging aspects of the disease.

CVT-301 is based on the proprietary ARCUS technology platform that we acquired with Civitas.  The ARCUS technology is a dry-powder pulmonary delivery system that we believe has potential applications in multiple disease areas.  This platform allows delivery of significantly larger doses of medication than are possible with conventional dry powder formulations.  This in turn provides the potential for pulmonary delivery of a much wider variety of pharmaceutical agents.

In December 2014, we announced that the first patient was enrolled in a Phase 3 study of CVT-301 for the treatment of OFF periods in Parkinson's disease.  The last patient out of the efficacy trial is expected by the end of 2016 and data is expected in the first quarter of 2017.  Our goal to file a new drug application, or NDA, in the U.S. by the end of the first quarter of 2017 dependent on the timing of the last patient out of the trial.  We expect that the NDA will be filed under section 505(b)(2) of the Food Drug and Cosmetic Act, referencing data from the branded L-dopa product Sinemet®.  Based on Civitas's interactions with the FDA, we believe a single Phase 3 efficacy study will be needed for filing an NDA, supported by existing Phase 2b data.  A separate long-term safety study is also required and is ongoing.  We are projecting that, if approved, annual peak net revenue of CVT-301 in the U.S. alone could exceed $500 million.

In June 2015, we presented data from a Phase 2b clinical trial of CVT-301 at the 19th International Congress of Parkinson's Disease and Movement Disorders (MDS).  The data showed that patients experiencing an OFF period, treated with CVT-301, experienced significantly greater improvements in motor function than patients treated with an inhaled placebo; the difference in improvement was already apparent 10 minutes after dosing and was durable for at least an hour, the

longest time point at which patients were measured.  In April 2016, data from this clinical trial were one of six platform presentations highlighted during the Movement Disorders Invited Science Session at the 68^th Annual Meeting of the American Academy of Neurology.  In June 2016, data from this clinical trial was also presented in three posters during the 20th International Congress of Parkinson's Disease and Movement Disorders (MDS).

In addition to CVT-301, we are exploring opportunities for other proprietary products in which inhaled delivery using our ARCUS technology can provide a significant therapeutic benefit to patients.  For example, we are currently developing CVT-427, an inhaled triptan (zolmitriptan) intended for acute treatment of migraine by using the ARCUS delivery system.  Triptans are the class of drug most commonly prescribed for the acute treatment of migraine.  Oral triptans, which account for the majority of all triptan doses, can be associated with slow onset of action and gastrointestinal challenges.  The slow onset of action, usually 30 minutes or longer, can result in poor response rates.  Patients cite the need for rapid relief from migraine symptoms as their most desired medication attribute.  Additionally, individuals with migraine may suffer from nausea and delayed gastric emptying which further impact the consistency and efficacy of the oral route of administration.  Triptans delivered subcutaneously (injection) provide the most rapid onset of action, but are not convenient for patients.  Many triptans are also available in a nasally-delivered formulation.  However, based on available data, we believe that nasally-delivered triptans generally have an onset of action similar to orally administered triptans.

In December 2015, we initiated and completed a Phase 1 safety/tolerability and pharmacokinetic clinical trial of CVT-427 for acute treatment of migraine.  Based on initial study analyses, we are planning to advance the development program and are designing protocols for the next studies.  On June 10, 2016, at the 58^th Annual Scientific Meeting of the American Headache Society, we presented pharmacokinetic data from the Phase 1 trial which showed that CVT-427 showed increased bioavailability and faster absorption compared to oral and nasal administration of the same active ingredient in healthy adults.  In particular, the data showed that CVT-427 had a median Tmax of about 12 minutes for all dose levels compared to 1.5 hours for the oral tablet and 3.0 hours for the nasal spray.  There were no serious adverse events, dose-limiting toxicities or study discontinuations due to adverse events reported after administration of CVT-427.  The most commonly reported treatment-emergent adverse events were cough, chest discomfort, headache, and feeling hot.  Apart from cough, single dose CVT-427 tolerability was generally consistent with the known safety profile of zolmitriptan.  We are planning to initiate a special population study to evaluate safe inhalation in patients with asthma and in smokers in the second half of 2016, and to advance the program into Phase 2 in 2017.

Plumiaz

Plumiaz is a proprietary nasal spray formulation of diazepam, for the treatment of people with epilepsy currently on stable regimens of antiepileptic drugs (AEDs) who experience bouts of increased seizure activity, also known as seizure clusters or acute repetitive seizures.  In 2013, we submitted a New Drug Application, or NDA, for Plumiaz to the FDA.  In May 2014, the FDA issued a Complete Response Letter, or CRL, for the Plumiaz NDA.  In May 2015, we announced that we completed discussions with the FDA, and thereafter we continued to advance development of Plumiaz.  Based on these discussions, we were conducting three clinical trials for Plumiaz.  However, in May 2016 we announced that we were discontinuing the program because data from these clinical trials did not demonstrate Plumiaz's bioequivalence to Diastat® rectal gel.  Specifically, the data demonstrated unexpectedly lower nasal mucosa absorption of diazepam in persons with epilepsy compared to studies in healthy volunteers.

Ampyra/Dalfampridine Development Programs

We believe there may be potential for dalfampridine to be applied to neurological conditions in addition to MS.  In December 2014, we announced that the first patient was enrolled in a Phase 3 clinical trial evaluating the use of dalfampridine administered twice-daily (BID) to improve walking in people who are suffering from post-stroke walking difficulties (PSWD) after experiencing an ischemic stroke.  

We have been exploring a once-daily (QD) formulation of dalfampridine for use in the post-stroke clinical program.   We tested three prototype formulations based on in vitro testing, which did not demonstrate the alcohol dose dumping issue we identified in a prior QD formulation we had been developing.  In March 2016, we completed Phase 1 pharmacokinetic studies for these formulations, and at least one of which met our success criteria.  Data from the Phase 1 multi-dose pharmacokinetic testing for once-daily (QD) dalfampridine are expected in the fourth quarter of 2016.

Given the progress of our development of a once-daily (QD) formulation of dalfampridine, we have made the decision to stop enrollment of the Phase 3 clinical trial and conduct an unblinded analysis of the trial data.  Data are expected in the fourth quarter of 2016, and will be used to inform the design of planned Phase 3 trials.  Subject to positive results from

this data and the QD pharmacokinetic results, we are planning to move forward with two concurrent pivotal Phase 3 clinical trials of dalfampridine in PSWD in mid-2017 using a QD formulation.

rHIgM22

We are developing rHIgM22, a remyelinating antibody, as a potential therapeutic for MS.  We believe a therapy that could repair myelin sheaths has the potential to restore neurological function to those affected by demyelinating conditions.  In April 2013, we initiated a Phase 1 clinical trial of rHIgM22 to assess the safety and tolerability of rHIgM22 in patients with MS.  The study also includes several exploratory clinical, imaging and biomarker measures.  We announced top-line safety and tolerability results in February 2015.  The trial, which followed participants for up to six months after receiving a single dose of rHIgM22, found no dose-limiting toxicities at any of the five dose levels studied.  In April 2015, we presented additional safety data from this trial at the 67^th American Academy of Neurology Annual Meeting.  The additional data showed that rHIgM22 was well tolerated in each of the five doses, supporting additional clinical development.  In October 2015, we presented pharmacokinetics from the trial in patients with stable MS, confirming that rHIgM22 penetrates the central nervous system.  This data was presented at the 31^st Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) annual meeting.  We are advancing clinical development of rHIgM22 for MS.  We are currently enrolling a Phase 1 trial using one of two doses of rHIgM22 or placebo in people with MS who are experiencing an acute relapse.  In addition to assessing safety and tolerability during an acute relapse, the study includes exploratory efficacy measures such as a timed walk, magnetization transfer ratio imaging of lesion myelination in the brain and various biomarkers.  We expect to complete the trial in the first half of 2017.

Cimaglermin alfa /Neuregulins

Cimaglermin alfa is our lead product candidate for our neuregulin program.  We have completed a cimaglermin Phase 1 clinical trial in heart failure patients.  This was a dose-escalating trial designed to test the maximum tolerated single dose, with follow-up assessments at one, three, and six months.  Data from this trial showed a dose-related improvement in ejection fraction in addition to safety findings.  A dose-limiting report of hepatotoxicity (liver injury) was also identified in the highest planned dose cohort which resolved within several days.

  In March 2015, we presented new analyses of data from this trial at the American College of Cardiology (ACC) 64th Annual Scientific Session and Expo.  These analyses found that cimaglermin produced a dose-dependent benefit at multiple time points for up to three months following a single infusion.

In October 2013, we commenced a second clinical trial of cimaglermin.  This Phase 1b single-infusion trial in people with heart failure is assessing tolerability of three dose levels of cimaglermin, which were tested in the first trial, and also includes assessment of drug-drug interactions and several exploratory measures of efficacy.  In June 2015 we announced that we had stopped enrollment in this trial based on the occurrence of a case of hepatotoxicity (liver injury) (elevated ALT, AST and bilirubin), based on blood test results.  We also received a notification of clinical hold from the FDA following submission of this information, and the trial remains subject to this clinical hold.  The abnormal blood tests resolved within several days, as was the case with the one case of hepatotoxicity reported in the previous Phase 1 study noted above.  The 22 patients who were dosed in the trial will complete the pre-planned one year of follow up.  Outside of the hepatotoxicity case, the safety profile from this trial was consistent with our first Phase 1 trial, but efficacy data was inconclusive which we believe was in part due to the very small number of patients in the trial.  We have ongoing analyses and non-clinical studies to further define the nature of the bilirubin signal.  We have met with the FDA to present analysis of the data from the cimaglermin studies, as well as data from non-clinical studies, as part of our request that the program be removed from clinical hold.

Chondroitinase Program

We are continuing research on the potential use of chondroitinases for the treatment of injuries to the brain and spinal cord, as well as other neurotraumatic indications.  The chondroitinase program is in the research and translational development phase and has not yet entered formal preclinical development.

(In thousands)		June 30, 2016
Liability component:
Principal		$	345,000
Less: debt discount and debt issuance costs, net		(50,146)
Net carrying amount		$	294,854
Equity component		$	61,195

EXHIBIT 10.1

 

Execution Copy

ASSET BASED LENDING