- Acorda Therapeutics is tightening the corporate belt, announcing plans Wednesday to lay off roughly 120 employees, or 25% of its workforce, in an effort to slash cash burn rates as $345 million in debt will become due in less than two years.
- The restructuring will focus the company on Inbrija, a Parkinson's disease therapy that launched on Feb. 28. Acorda said the drug brought in $4.9 million in third quarter sales, below a Wall Street consensus of $6.8 million cited by Cantor Fitzgerald.
- A company spokesperson declined to say exactly how many employees will be affected beyond a 25% estimate. Earlier this year, Acorda stated it employed 474 people. The Ardsley, New York-based biotech has been a longtime industry player, founded in 1995 by CEO Ron Cohen. The company's multiple sclerosis drug Ampyra lost patent exclusivity more than a year ago, putting additional pressure on a successful launch of Inbrija.
Since June 2014, when Acorda first announced it would take on significant debt to raise more than $300 million, the health of the business has deteriorated.
The decline has accelerated in 2019, with company shares falling more than 80% since the beginning of the year. Shares opened Thursday down an additional 15%, trading at $2.30 apiece.
That debt was issued through convertible notes, but it now appears implausible that Acorda can tap into its market value to pay off the liability.
The deal set a conversion price of $42.56 per share for when the debt matures on June 15, 2021. While that may have seemed reasonable in 2014 when Acorda's stock was trading in the mid-$30s, shares now trade at a fraction of that level. The biotech will likely have to tap into cash from its balance sheet to repay if it cannot reach a refinancing deal.
Furthermore, the balance sheet has been shrinking over the past year. Acorda said it ended the month of September with approximately $253 million in cash and equivalents, down from $461 million a year ago. The biotech expects to end 2019 with around $225 million.
Stifel analyst Paul Matteis bluntly summarized the debt problem in an Oct. 24 note to investors, stating "we are unsure how this gets resolved."
The debt question was also on top of mind for Jefferies analyst Michael Yee, who wondered how the company will get through that period in a Wednesday research note. Yee raised the possibility it may require higher interest expenses to refinance, or the company may have to sell some commercial rights or royalties to Inbrija (levodopa inhalation powder) to raise capital.