UPDATE 3-Europe backs Acorda, Biogen drug in change of tack

Fri May 20, 2011 11:32am EDT

* EU agency recommends conditional approval for Fampyra

* Decision reverses earlier rejection of drug

* Approval will trigger $25 mln payment to Acorda

* Acorda shares jump as much as 21 percent (Adds analyst comment, details throughout)

By Toni Clarke

BOSTON, May 20 (Reuters) - In a surprise reversal, European regulators have recommended approving Acorda Therapeutics Inc's (ACOR.O) drug Fampyra, sending the company's shares up as much as 21 percent.

Fampyra is designed to improve the walking ability of patients with multiple sclerosis.

The European Medicines Agency, which advises the European Commission on whether to approve new drugs, said in a statement it has recommended giving the drug conditional approval.

U.S. biotechnology company Biogen Idec Inc (BIIB.O) acquired European rights to the drug, known as Ampyra in the United States, in 2009 and is in charge of commercialization and marketing it in Europe.

Conditional approval means Biogen can start selling the product once it is formally approved -- expected within 67 days -- but the company will have to provide additional information once it is on the market. If and when all the conditions are met, it will receive full approval.

"This is a major milestone for the company," said Ron Cohen, Acorda's chief executive, in an interview.

Shares of Acorda were up 15.5 percent at $30.84 in midday trading on Nasdaq. Earlier in the day they rose as high $32.20. Shares of much bigger Biogen rose 1 percent to $97.71. Fampyra is a relatively small drug in Biogen's overall portfolio of drugs, which include the MS drugs Tysabri and Avonex.

Ampyra was approved in the United States in January, 2010, but in January this year, European advisers rejected the drug, saying they were not convinced it conferred a clinically meaningful benefit. Biogen appealed the decision.

"This is a definite surprise," said Geoff Meacham, an analyst at J.P. Morgan. "We estimate Fampyra sales could contribute about $40 million in revenues booked by Acorda in 2015."

Analysts currently see Fampyra/Ampyra reaching total sales of around $600 million by 2015, according to Thomson Reuters Pharma consensus forecasts.

Under terms of their agreement, Biogen paid $110 million upfront for the European rights to the product, and agreed to pay up to $400 million more in milestone payments. Acorda will also receive a double-digit percentage royalty. Approval in Europe triggers a $25 million milestone payment to Acorda.

SECOND PIECE OF GOOD NEWS

The European decision is the second piece of good news Acorda has received on the drug recently. In April, the stock jumped 27 percent amid optimism the company will be granted a patent extension on Ampyra, potentially pushing out generic competition beyond 2024.

Acorda's shares had fallen nearly 30 percent from their year high last June. Some investors have grown concerned sales of its key medicine have flattened.

Cohen said that the flattening of prescriptions reflected the fact that when the drug was first approved, a large number of patients -- some 40,000 -- rushed to try it. Inevitably, the product did not work for everyone and a proportion of people stopped taking it.

Now the company is optimistic it can increase sales by marketing the drug for a wider group of patients -- those whose walking ability has not deteriorated as much as those who initially took the drug.

"Data show that the most mildly affected patients did at least as well as the more severely affected." Cohen said. "Even if you are just beginning to have impairment in your walking abilities you can benefit."

Irish drugmaker Elan Corp Plc ELN.I, which manufactures the drug, is entitled to 7 percent of the milestone payments Acorda receives from Biogen. It also receives an 18 percent royalty on global net sales.

Elan's shares rose 1.8 percent in Ireland.

European regulators also recommended approval of Amgen Inc's (AMGN.O) bone drug Xgeva, for preventing fractures and other skeletal problems in cancer patients. And Merck & Co (MRK.N) won approval for its new hepatitis C drug Victrelis. (Editing by Ben Hirschler, Dave Zimmerman)