Acorda Therapeutics
Rating: Sell
Acorda Files $150mm Mixed Shelf; Reiterate Sell Rating and $15 PT
Investment Highlights:
This morning, Acorda filed a $150mm mixed shelf to sell securities, which include common and preferred stock, debt securities, warrants and units, or any combination thereof. In addition, Acorda also registered for re-sale up to 1.37mm shares of common stock from three selling stockholders - the venture capital funds Saints Capital, Cross Atlantic Partners, and Vector Fund Management, all of which are poised to sell essentially their entire ownership of ACOR shares. We also remind investors that another holder, Third Point, LLC, which had previously advocated the sale of the company to large pharma, reduced its stake in Acorda by about 59% (from 9.9% to 4.1%).As of the end of 1Q07, the company had a balance of $45.2mm in cash, cash equivalents, and short-term investments, which according to management, is sufficient through 1Q08.
Our concerns regarding lead compound Fampridine-SR. We continue to view the overall response to Fampridine-SR as unimpressive (2.54 sec average improvement in previous trial) and is, at the very least, similar to what can be achieved using non-pharmacologic methods. Additionally, we remain concerned with the safety of Fampridine-SR, as its use has been associated with an increased risk of seizures. The FDA is also requiring that the company complete a QT/QTc prolongation safety study. Given the mechanism of action of Fampridine-SR (K+ion channel blocker), we believe that there is a significant risk that the drug may prolong the QTc interval. The company plans to initiate such a study this year.
We reiterate our Sell rating and our price target of $15. As we highlighted in our last note (May 23, 2007), we continue to believe that as a result of Acorda's need to raise additional capital, combined with the lack of any meaningful catalysts for at least the next 12-months, the company's shares could face significant downside pressure.
