Acorda Therapeutics Inc  (NASDAQ:ACOR)
Q3 2018 Earnings Conference Call
Oct. 31, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

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Image source: The Motley Fool.

Operator

Welcome to the Acorda Therapeutics Third Quarter 2018 Update. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being taped at the company's request.

I'll now introduce your host for today's call, Felicia Vonella, Executive Director of Investor Relations at Acorda. Please go ahead.

Felicia Vonella -- Executive Director of Investor Relations

Thank you. Before we begin, let me remind everyone our presentation will contain forward-looking statements. Detailed disclosures can be found in our SEC filings, which are public, and we encourage you to refer to those filings.

Let me pass the call now off to Ron Cohen.

Ron Cohen -- President & Chief Executive Officer

Good morning, everybody, and happy Halloween. And as in previous years, when we've done our third quarter on Halloween, I am wearing our traditional raptor head mask, so if you want to get that in your mind's eye.

I'll start with some highlights for the third quarter. We, as you saw, are revising our fiscal year 2018 cash position from greater than $300 million to greater than $400 million, and we'll talk a little bit more about the financials later in the presentation. Our NDA for INBRIJA, which is our investigational inhaled levodopa treatment for symptoms of OFF periods in people with Parkinson's disease, is under review by FDA with the PDUFA date extended to January 5th of 2019. During the quarter, the FDA designated that responses that we had submitted to some of their review questions were a major amendment, which automatically extends the PDUFA date by three months to January 5th in this case. The questions were related to certain aspects of CMC, which is chemistry, manufacturing, controls, that section of the NDA.

We also reported that the FDA completed its pre-approval inspections of both the Chelsea, Massachusetts manufacturing facility and the INBRIJA inhaler device manufacturing facility. Correspondents from the FDA confirmed that the -- its inspections of the facilities are successfully closed without the need for any further action by FDA. We're continuing our constructive engagement with FDA, aiming for an approval by the new PDUFA of January 5th, and we look forward to bringing INBRIJA to people with Parkinson's who have OFF periods, which is a major unmet need in these patients.

On September 10th, we lost our AMPYRA patent appeal by a 2 to 1 vote, resulting in generic entry. We are disappointed and disagree with the court's decision, which included a vigorous dissent by one of the three judges, and we continue to believe that our AMPYRA patents reflect true invention. Last week, we filed a petition for an en banc hearing with the United States Court of Appeals for the Federal Circuit, and earlier this week, the Federal Circuit invited the generic defendants to respond to our en banc petition.

AMPYRA's net sales of $138 million for the third quarter were bolstered by the additional six weeks of exclusivity between the end of July when our remaining patent expired and the appeals court ruling in mid-September. This was not our base case budget, and as a result, we're revising the full 2018 net sales guidance for AMPYRA to more than $400 million. We do expect to see continued and significant erosion of sales over the coming months.

We've also revised our cash balance for the year-end 2018 from greater than $300 million to greater than $400 million. Note that following the district court's original ruling on AMPYRA, which was in the end of the first quarter of 2017, we had a cash balance of roughly $130 million. We've since prioritized improving our cash position going into the launch of INBRIJA and have added over $300 million to our cash balance since then. We achieved this through a combination of corporate restructuring, improved AMPYRA sales, monetization of secondary assets, and prudent capital allocation. Our capitalization is now significantly better than we projected at the beginning of this year, and we expect that this will enable us to fund the launch of INBRIJA to cash flow positivity with an approval by the PDUFA date of January 5th, 2019.

As we await the FDA decision by January 5th, we are continuing to advance the full range of launch preparations for INBRIJA, applying many of the learnings that we've accumulated from our highly successful commercialization of AMPYRA. Our sales reps and other teams have done outstanding work in bringing AMPYRA to people with MS, their morale is high, and they will now transfer to bringing INBRIJA to people with OFF periods related to Parkinson's disease.

We have completed territory mapping, incentive comp plans, and field team training. We're preparing launch materials and we will be implementing a broad range of education initiatives for movement disorder specialists and general neurologists. We're continuing our reimbursement research, engaging with payers, reimbursement specialists. Our market research continues to indicate that OFF periods represent a large unmet need in the Parkinson's community, and that both physicians and patients are enthusiastic about having INBRIJA available as a treatment option.

Some of our more innovative work is reflected in our online programs to increase disease state awareness among a range of audiences. Our Facebook page, The Many Faces of OFF, recently surpassed 100,000 members. The site provides a forum for people with Parkinson's to learn more about OFF periods and connect with each other to share experiences. It includes videos of people with Parkinson's and care partners talking about their personal challenges of OFF, and it encourages the Parkinson's community to participate and share their stories.

Another initiative, livewelldotell.org, is a community engagement site that we created with input from key stakeholders in the Parkinson's community that includes people with Parkinson's, care partners, patient advocates, and healthcare professionals. The site is designed to generate a shared understanding of communication gaps about OFF periods and to help address the barriers people with Parkinson's and their care partners face in communicating the symptoms of Parkinson's disease. We believe that such a shared understanding and increased awareness can help optimize how people with Parkinson's and their healthcare professionals manage the challenges.

As a reminder, roughly 350,000 people with Parkinson's in the US are taking levodopa and experience OFF periods. We believe, based on our market research, that peak sales for INBRIJA will exceed $800 million, and our US market opportunity takes into consideration a competing product from Sunovion, which also currently has a PDUFA date in January 2019. We believe that INBRIJA will take a majority share of the market, but that Sunovion's product will take a significant minority share.

This table outlines key financials for the third quarter. We ended the quarter with approximately $460 million in cash and we are well capitalized for anticipated launch of INBRIJA.

In closing, our strategic priorities for the remainder of 2018 into 2019 are, first, to attain approval and initiate US launch of INBRIJA. We will leverage Acorda's outstanding specialty neurology commercial capabilities to maximize INBRIJA's potential.

We also plan to advance development of an inhalable drug for the treatment of acute migraine, which builds on the ARCUS technology. We believe there is a substantial market for such a therapy. Our Phase 1 studies of CVT-427, an inhaled zolmitriptan, showed attainment of maximal plasma levels or Cmax within an average of about 11 minutes, similar to an injectable. However, we saw evidence of subclinical bronchoconstriction and are now working on a reformulation. We're also working on other potential applications of the ARCUS technology. One of those is being funded by the Bill & Melinda Gates Foundation.

We're continuing to evaluate business development opportunities for late-stage neurology assets that could leverage our neuro development and commercial capabilities.

So now we will open up the call for your questions. Operator?

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from Cory Kasimov with J.P. Morgan. Your line is open.

Carmen Augustine -- J.P. Morgan -- Analyst

Hi, this is Carmen on for Cory. Thanks for taking the question. So looking at the prescription data for AMPYRA and the generics that are launched so far, it looks like Mylan's authorized generic has taken substantial share, particularly relative to the other generics on the market. I'm wondering if you could give us any more guidance on kind of how to think about the tail for AMPYRA between the residual market share that the branded product holds as these other generics continue to launch, as well as the royalties you would receive on Mylan's sales of the authorized generic.

Ron Cohen -- President & Chief Executive Officer

Yeah. I'm sorry, I really can't help you with it. We -- this is new territory here, and we ourselves are challenged to project what that tail is going to look like. We're going to have to see it as we go through it. It is correct that Mylan's authorized generic has taken substantial share. We're seeing significant erosion, as we've discussed, and it -- as more generics are coming in, it changes day by day practically. So it remains to be seen and we're just not in a position right now to project what that tail is going to look like.

Carmen Augustine -- J.P. Morgan -- Analyst

Okay. Understood. And then just a quick one on INBRIJA. Ahead of the launch, have you been able to do any more market research to gauge potential daily utilization of the product in a real world setting kind of relative to the clinical trials?

Ron Cohen -- President & Chief Executive Officer

I'm sorry. We've been able to do real world --

Carmen Augustine -- J.P. Morgan -- Analyst

Any market research --

Ron Cohen -- President & Chief Executive Officer

You said daily utilization?

Carmen Augustine -- J.P. Morgan -- Analyst

Yeah.

Ron Cohen -- President & Chief Executive Officer

I'm not sure how you would do that absent actually having a trial going on. So I guess the answer would be that the key information we have comes from the clinical trials, particularly the long-term studies which went out for a year. And actually all the studies are pretty consistent. The usage is, it ranges anywhere from 1.6 to a little over 2 times a day on average in these trials. Obviously there is a big range. Some people don't use it every day; some people use it five times a day. So the average comes out to somewhere between 1.6, and call it, 2.2, 2.3 times a day, depending on which study you're looking at.

Carmen Augustine -- J.P. Morgan -- Analyst

Okay. Thanks very much.

Operator

Your next question comes from Michael Yee with Jefferies. Your line is open.

Kelechi Chikere -- Jefferies -- Analyst

Hi, Ron. Good morning. This is Kelechi Chikere on behalf of Michael Yee. We just had a couple of quick questions here. So just was wondering if you can help us think about your strategic value and how to best monetize your value. I guess, you have AMPYRA that will presumably go generic or face generic erosion in this quarter. You have the potential approval in INBRIJA in next year, January. You could have been a two-product company, but for now, it looks like you're going to be a one-product company. If you get INBRIJA approved, are you -- is Acorda best suited to do this as a stand-alone or are you looking at everything kind of front to back to best maximize your shareholder value? Can you just talk about how open you are to this? And should we assume you're just going to go at it alone or -- people and shareholders will just have to have patience and look at INBRIJA grow over time? And a second question. How do you think about a ex-US partner and how does that play into this as well? Is that process going on right now?

Ron Cohen -- President & Chief Executive Officer

So the best way to think about it is that the Board and management are constantly considering what makes the most sense in terms of shareholder value, and we will continue to do that and we will determine the strategy of the company based, in large measure, on those considerations. With respect to partnering, we have announced long since that we are in discussions with parties ex-US for ex-US commercialization. Those discussions are continuing. We have an MAA that has been filed. We are looking at filings elsewhere in the world and that is a developing situation. So as we have more developments that are material, we will let everyone know.

Kelechi Chikere -- Jefferies -- Analyst

Okay. Thank you.

Operator

Your next question comes from Phil Nadeau with Cowen and Company. Your line is open.

Phil Nadeau -- Cowen and Company -- Analyst

Good morning. Thanks for taking my questions. First question on INBRIJA's FDA review and more generally on the process of the CMC review. Ron, the inspections that you successfully passed, are those typically toward the end of the CMC review, or is it just parallel? The inspections happen while there is other CMC back and forth with the agency going on about other aspects of manufacturing and controls?

Ron Cohen -- President & Chief Executive Officer

So I don't know what's typical in terms of timing as far -- and this is just as far as I know, Phil. So it's certainly not gospel. The offices that do the inspections, I do not believe, are tied to the CMC review of the NDA. That's a separate set of reviewers at FDA who deal with that. The inspections are conducted by field inspectors who then feed the information back to the home office, but that's a separate process, and I don't think it's anchored to the CMC review questions per se in terms of timing or anything else. It's a stand-alone function, which is to inspect the manufacturing facilities.

Phil Nadeau -- Cowen and Company -- Analyst

Got it. Okay. And then second, would you be willing to give us any more information about the questions that the FDA asked that prompted the change to the PDUFA date?

Ron Cohen -- President & Chief Executive Officer

I'm glad you asked. No, I would not. I don't want to be entirely flip, but it is Halloween. Just historically, we don't talk about ongoing conversation details with FDA. When there is some sort of a resolution or a material event or they give us something in writing that's material, we obviously disclose that, but what we've learned from experience is that we just don't get into the back and forth because it's like taking a snapshot of a waterfall. I mean, you just capture something a moment in time and it's not necessarily informative.

Phil Nadeau -- Cowen and Company -- Analyst

Makes sense. And then last question is just on your pricing strategy for INBRIJA. In the past you've said there were broadly two different paths for you to go down. One is high price, somewhat lower volume, and the second is lower price, high volume. Have you settled on a general strategy for the pricing at this time?

Ron Cohen -- President & Chief Executive Officer

We're getting closer obviously because we're getting closer to the PDUFA date. We're continuing to do the work, and our plan is we'll announce the pricing and our logic behind it at the time that we launch. So we're not ready to do that yet, but of course, we've made a lot of progress. So the team -- I would say at this point, broadly, we have a good idea of where we're going to be, but we're still working out the details and we're not ready to go public yet.

Phil Nadeau -- Cowen and Company -- Analyst

Fair enough. Thanks for taking my questions.

Operator

Your next question comes from Salveen Richter with Goldman Sachs. Your line is open.

Ross Weinreb -- Goldman Sachs -- Analyst

Ross on for Salveen. Thanks for taking the question. So as we approach the INBRIJA PDUFA, what do you see as the greatest risk to approval? And then I have a follow-up.

Ron Cohen -- President & Chief Executive Officer

I honestly can't -- I don't know what the greatest risk to approval would be because we're not privy to what the FDA is thinking or doing other than what they tell us and what communications we get. Based on the communications we get or we've gotten, we believe that the CMC is the -- or the CMC questions that they had asked during the review and that we responded to are the remaining piece that they are continuing to review, which is why they wanted the extra time. That is all we know. From where we stand, we think it's a strong NDA and we think the product ought to be approved -- ought to be approvable. Beyond that, we can't -- we can't speak for FDA. They're going to make their decision based on whatever their processes are.

Ross Weinreb -- Goldman Sachs -- Analyst

Great. Thank you. And so you previously mentioned that INBRIJA would benefit from higher physician involvement with patients, given its use and potential compliance issues. So how are you planning to address patient compliance and what impact do you anticipate this having on the INBRIJA uptake and its launch trajectory?

Ron Cohen -- President & Chief Executive Officer

I'm not quite sure I got the question. Could you maybe reformulate that a little bit? I'm just not sure what you're asking there.

Ross Weinreb -- Goldman Sachs -- Analyst

Sure. So on previous calls, you mentioned that the drug would benefit from higher physician involvement given its --

Ron Cohen -- President & Chief Executive Officer

Hold on. Let me just stop you there. I'm not sure I've said that it would benefit from high -- I don't know what higher physician involvement means. Is there a different wording I used on that? You mean training physicians or --

Ross Weinreb -- Goldman Sachs -- Analyst

Yeah. More physicians -- more training from the physicians and greater physician involvement in the patient care with the use of the drug.

Ron Cohen -- President & Chief Executive Officer

Yeah. Well, I mean, we are -- as part of the launch, we are planning a very robust education of the prescribers about the device, how it works, what to expect, what the trial showed, what the data shows, what the label says. So we will be providing that. We will also be providing sample kits, which is -- not -- this is not the same as samples, OK? These are kits without the active ingredient, but kits that they can practice on, their demo kits, so demonstration kits. So the sales force will be out there right away with demo kits, showing them how the device is used, how you train patients on it, and so forth.

And we have some very interesting other plans for how to give patients access to training, to videos from a number of different sources so that there will be ample opportunity tailored to the patients' desires about do they want to get it online, do they want to get it from the office, do they want to get it in a more direct way, we will have multiple ways of training people. I should say that this is not a hard device to use or master. What we have found repeatedly in the clinical work on this is that it's easy. It's actually surprisingly easy. It surprised us early on, because we were concerned about it, how well patients learn it and then use it regularly on their own. So this is not a terribly complicated device to master.

Ross Weinreb -- Goldman Sachs -- Analyst

Great. And so my question on that is that do you see any complications arising with patient compliance? I mean, use could be up to five times daily. So my question is really around how you're looking at patient compliance impacting drug uptake and the initial launch trajectory.

Ron Cohen -- President & Chief Executive Officer

Well, per an earlier question, the best proxy we have right now is the long-term, year-long open-label safety study that we did, where people got -- the patients got drug and they were able to use it as much as they want it up to five times a day, and that was the limit we put on it by the way, up to five times a day. And so we -- we've analyzed all those data. As I said earlier, in the one-year study, it was about two times a day that they were using it on an average, with a whole range. Again, some were using it five times a day; some were using it twice a day; some were using it not every day, maybe once every few days. So there is a whole range depending on the severity of the patients' symptoms, the frequency of the patients' symptoms.

In terms of compliance, we are actually less concerned here about compliance than you would be with a chronic daily drug. And the reason is that the cue for taking it is that the patient is having a symptom, in this case, an OFF period, which is very bothersome to them. So that's their cue to take the medicine. The compliance issues typically come up with, let's say, something like a hypertension drug. We are taking it every day or twice a day or three times a day, and you don't feel it, you don't know it, and that's when it becomes very difficult to keep some people on drug. But here, hey, you are going into an OFF period, you don't want to be in an OFF period, and so you want medicine to take that away as quickly as you can.

Ross Weinreb -- Goldman Sachs -- Analyst

Great. Thank you.

Operator

Your next question comes from Laura Chico with Raymond James. Your line is open.

Laura Chico -- Raymond James -- Analyst

Good morning and thanks for taking the question. Ron, I just wanted to follow up on a couple of questions here with regards to INBRIJA drug pricing. Obviously, drug pricing is a popular topic in the news these days. I guess -- I'd be curious to get your thoughts with regards to policies or proposals you're seeing being advanced; not seeing too many focused on influencing how pricing is initially set. So I guess, as you're considering the policy landscape, but also the competitive landscape, how do those factor into your pricing decisions for INBRIJA?

Ron Cohen -- President & Chief Executive Officer

Well, we're taking all of that into account, and -- but at the end of the day, it is a negotiation that takes place between us and the payers, right? It's -- the payers, the PBMs. And so we have been already long since conducting educational meetings and then discussions with payers all over the country, talking about what their sensitivities are, what is their understanding of the medical need for patients, of the drug, the value of the drug. And in the end, we are working to create a win-win where patients get access to a drug that is going to help them and where insurance companies, PBMs, are able to fulfill their mission, which is to allow patients to have -- allow the customers to have access to medicines that they need and to improve their health overall, and the need for us to make a fair -- have fair revenue coming from it for the investment, the innovation, and the contribution to society and patients. So that's the equation, right?

That's achieved through negotiation. I'll give you -- one of my favorite examples from our shop is what we did with AMPYRA, and we were creative there, and we are looking at a number of creative ways of approaching the payers. And we've already been talking to payers about it, and have gotten a good reception conceptually with approaching this in a win-win kind of way based on the value of the product. But with AMPYRA, we invented this first step program that we implemented where any patient who qualified and was able to, under the law, meaning, commercial pay, was able to get two months of free drug, and that was entirely on us. And the reason we did that was our clinical data showed that a subset of patients were responding to the drug. Now, by the way, that's true of essentially every drug, but we showed it in the way in which we did our trial. So it was obvious that we had about a 40% or so responder rate and so forth.

So we went to the insurance or to reimbursement side and we said, look, you don't know in advance if this patient -- a given patient is going to respond or not. We don't have a good way of predicting it. There is no biomarker that we know of for predicting it. The only way to do it is to actually put them on drug for a month or two and have them and the physician assess, whether it's actually helping their walking. And so what we said is, therefore, what we're going to do is, we're not going to charge you for that. We will take that on ourselves. We will give two months free to the patient, then they and the doctor can make up their mind about whether they're responding. And if they do respond, you should pay for the drug. And that got a terrific positive reception from managed care. And by the way, what we're finding now is when we walk in the door for most of these payers, we already have a good reputation because of that and other ways in which we conducted ourselves for the AMPYRA negotiations. So we walk in and they are very open to talking with us and negotiating creative ways of ensuring that we have a win-win.

Laura Chico -- Raymond James -- Analyst

That is very helpful, Ron. I appreciate the color there. I guess, just one last housekeeping question, if I might. So you've updated your cash guidance now to be exiting the year with over $400 million in cash. I'm just curious, if you could elaborate a little bit on kind of the range of runway that that would actually provide you. And I guess the reason I'm asking is because of the convert that's due in 2021. Any color you can offer here?

Ron Cohen -- President & Chief Executive Officer

Yeah. Well, first, just leaving the convert aside for a moment, we believe that the cash on hand, based on where we believe the launch of INBRIJA is going to go, is enough to get us to cash flow positive on INBRIJA. And we actually believe that when we gave our original projection earlier this year of over $300 million at the end of the year, so now with over $400 million, obviously that gives us a bit more flexibility in terms of time. And I think it's fair -- we haven't given next year's numbers yet, but I think it's fair to say that if you look at the budget this year, $400 million is well in excess of that for an entire year this year. Next year, we'll have some increased marketing and launch expenses. We do expect to have some savings in other areas. So we'll fill out those numbers for everyone early next year. But the $400 million is going to last us a significant amount of time and allow us to ramp up on INBRIJA and get it to cash flow positive.

Now, the convert is a real issue. It's there. We have another two and a half years or so on it. There are, as you know, various ways of addressing that. Maybe the best way is to get the stock price up, so with converts. So we are continuing to assess that and what would be the most cost-effective ways of addressing the convert as we get closer to it. And we'll be addressing that over the next year or so.

Laura Chico -- Raymond James -- Analyst

Thanks very much, Ron.

Operator

Your next question comes from Paul Matteis with Stifel. Your line is open.

Benjamin Burnett -- Stifel -- Analyst

Hi, thanks so much. This is Ben Burnett on for Paul Matteis. So first question, just a question on the commercial strategy for INBRIJA. I guess, specifically, how will you be approaching the market in terms of disease severity? Will you be horning in on early stage Parkinson's or later stage? And I guess, how do the call points differ between these groups?

Ron Cohen -- President & Chief Executive Officer

Well, it's really geared toward not so much the stage of Parkinson's per se, although that influences it. It's geared toward whether they have OFF periods that are bothersome and how bothersome they are to the patient. Typically, the more advanced you are, the more that becomes an issue. However, there -- if you think about it, there has been a trend for younger and younger people to be showing up with Parkinson's, and I don't think it's understood exactly why that is. But when you have people even in their 30s, but even -- more likely in their 40s or 50s who are still very much active in the workforce, very much active in general, for people like that, even though their Parkinson's may be earlier stage, for someone like that, even one OFF period a day could be extremely disruptive to their lives, and they may want help with that, right? If you're older, let's say, and retired and spend most of your time at home, if you're having an OFF period while you're sitting down watching TV, you might not be as motivated. So for something like that, maybe they'll use it for half of their OFF periods, the ones where they're trying to be active and it's really bothering them. In our clinical trials, it's worth noting that the younger patients actually utilized the drug more often for the reasons I just stated.

So in terms of your question, yeah, I mean, we are not going to gear our training toward talking to doctors about, well, if it's a younger patient, do this, and if it's an older patient, do that. We're going to gear it toward, if they have OFF periods that are bothersome, here is what the drug does and here is what the label says.

Benjamin Burnett -- Stifel -- Analyst

Got it. Okay. Makes sense. And if I could, just a follow-up question about the migraine product candidate. Could you give us just a little bit more color on the, I think you mentioned subclinical bronchoconstriction? And correct me if that's wrong.

Ron Cohen -- President & Chief Executive Officer

That's correct.

Benjamin Burnett -- Stifel -- Analyst

And I guess -- OK. The steps you're going into reformulating that, is that really -- is it all about reformulating the drug or is it the device or do you have to do both? And I guess maybe just any detail you can provide there would be great. Thanks.

Ron Cohen -- President & Chief Executive Officer

Yeah. We don't believe it's related to the device at all. I mean, it's really the formulation. So we're looking at broadly two different things, which you would expect. One is the excipients that are used to formulate the zolmitriptan, which was in the CVT-427, and the other one is the API, which is the zolmitriptan, and there are other choices for migraine that we can formulate with ARCUS to be inhalable. So we are testing it in (ph) broadly both of those areas, which is changing the inactive ingredients, the excipients, and also swapping out the zolmitriptan for other migraine drugs.

Benjamin Burnett -- Stifel -- Analyst

Okay. Awesome. Thanks very much.

Operator

Your next question comes from Raghuram Selvaraju with H.C. Wainwright. Your line is open.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Hi, thanks very much for questions. Just a couple sort of housekeeping items here. Could you maybe provide us with a little bit more frame of reference granularity regarding the prior authorization situation you anticipate with INBRIJA, looking, just relatively speaking, at what's historically been the trend with other drugs of this -- in the Parkinson's space, understanding that INBRIJA is, of course, something of a loan (ph) to its own?

And then secondarily, if you could maybe comment on your strategic interest in arenas beyond INBRIJA, if you were to entertain the possibility of in-licensing other things? I think this is a question that I've asked before, but just wanted to see whether your strategic (technical difficulty) what other disease areas -- regarding what other disease areas you might potentially entertain the possibility of in-licensing things in order to maybe flush out the marketed product portfolio beyond INBRIJA going forward, if you were to do those type of transactions?

Ron Cohen -- President & Chief Executive Officer

Yeah. So in terms of prior authorizations, we certainly expect we'll see them. I mean, there's no question about it. And we saw them with AMPYRA and we have years of experience in dealing with those and addressing them. So we'll see who imposes prior auths, what the nature of them are, and then we'll address them as they come up. But I -- there are so many different flavors. There is no way I can give you a quick summary of it, but I can tell you that our experience with AMPYRA was, we weren't at nearly as good at it in the first couple of years as we were in the ensuing years because we gained a lot of experience in what works, what doesn't, how to approach the insurance companies who are imposing the prior auths, and we'll be working out of a similar playbook here. So again, can't be very specific until we see what the prior auths are. I can tell you there will be prior auths and that's part of what our launch planning prepares for.

With respect to business development, we are continuing to be very active in accumulating lists of assets that would be compatible with our expertise here. Obviously, broadly speaking, the neurology markets are our sweet spot. That's where our sales force and commercial teams live, that's where our development teams live. So broadly speaking, I would say, neurology is what we're looking at.

Now, there is a twist to that because of the ARCUS technology. The ARCUS technology has allowed us to branch out beyond that because it provides a -- I think an important new technology. Just to remind people, this came out of Bob Langer's lab at MIT. It is a unique way of getting relatively large amounts of drug into the system through the lungs, much larger than you can get with standard dry powder formulations, which typically are going to be delivering less than a milligram of drug. Here we're delivering 25 milligrams per capsule. So it's well over a log more than you can do normally.

And that opens up the potential beyond neurology really into other therapeutic areas where there could be an advantage over existing delivery systems, oral medications and so on. So migraine is the first one that we're excited about, that we're looking at, where we think there is a real market. There are others, particularly with some orphan diseases, which, in one case, is, I mentioned, being funded by the Bill & Melinda Gates Foundation. So we're looking at that, and that's helping us to expand our horizons a bit, but particularly with respect to inhaled therapies. With -- beyond -- other than inhaled therapies, we're looking very broadly in the neurology markets where we can make a difference.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Is it going to be accurate to say that if in the future, the ARCUS technology works, you demonstrate applicability in areas outside of neurology that you might potentially out-license those, especially if they are not for niche indications or would that be premature at this time?

Ron Cohen -- President & Chief Executive Officer

Well, that -- I think that's a good starting point for anchoring the way you're -- we're thinking about the strategy. Never say never, but that's, I think, a very good way of thinking about it. If it's a niche or an orphan area where, without too much difficulty, we could service that and commercialize that, and where financially it made sense, we would certainly not close off doing that on our own. For larger indications outside of neurology, you have to be aware of what you're good at and what it's going to cost. And to get the expertise you need outside of neurology for a whole new therapeutic area and staff that, that's a pretty substantial enterprise. So that's where we would, at least from the get-go, think about out-licensing or partnering with someone else.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Thank you. Very helpful.

Operator

Your next question comes from Jay Olson with Oppenheimer. Your line is open.

Silvan Turkcan -- Oppenheimer -- Analyst

Hi, this is Silvan Turkcan on for Jay Olson. Thank you for taking my questions. Can you comment a little bit more about what you expect for the gross margin of INBRIJA in the near term and the long-term, considering it's a drug-device combination and you have starter kits and maintenance kits?

Ron Cohen -- President & Chief Executive Officer

I don't think I can give you guidance on the margins right now. I mean, we really have to wait until we get the pricing and get a better sense of what we're doing on the launch. So we will be providing information in that direction once we have the launch in hand and the pricing in hand. Right now I think it's premature to be talking about the margins. They -- I can tell you just broadly, we expect them to be better than AMPYRA. And AMPYRA had a 20% cost of goods, which subsumed the royalties and the actual manufacturing of the drug. So that was about an 80% margin. We expect that in INBRIJA will be better than that.

Silvan Turkcan -- Oppenheimer -- Analyst

Great. And then you commented on -- a little bit on what can we expect for SG&A next year, considering using the same sales force. Will it be flat or are you going to make additional investments?

Ron Cohen -- President & Chief Executive Officer

Yeah. Again, we're going to wait until beginning of the year when we can give you guidance on how we see the year shaping up. As I said earlier, it's fair to assume that with the launch in hand that we're going to have launch expenses so that people should be prepared for, and obviously we would not stint on the launch because we want to make sure it's as successful as possible. But as I also mentioned earlier, there are other areas where I believe we can bring some expenses back, and we'll give more detail on that when we do our projections. And I think typically we do that around J.P. Morgan.

Silvan Turkcan -- Oppenheimer -- Analyst

Great. Thanks. And one last question, if I may. You -- for example, your shared with us that FDA pre-approval was successfully concluded. Will you share any other updates on the approval process, so maybe like labeling, entering labeling discussions or things like that, or should we just sit tight on that till January?

Ron Cohen -- President & Chief Executive Officer

You and we can both sit tight on that. We don't expect to provide any blow-by-blow descriptions until we have something material to say, and hopefully that's going to be an approval.

Silvan Turkcan -- Oppenheimer -- Analyst

Great. Thank you very much and congrats on the quarter and the extra cash.

Ron Cohen -- President & Chief Executive Officer

Thanks.

Operator

(Operator Instructions) Your next question comes from Ken Trbovich with Janney. Your line is open.

Ken Trbovich -- Janney Montgomery Scott -- Analyst

Thanks for taking the question. Ron, I just wanted to follow up on an earlier comment you made about the ease of use for INBRIJA. I guess, the reason for the question is trying to perhaps help us to better understand the human factor studies related to INBRIJA and its use. Simply because it's a combination product, obviously it's a unique sort of aspect of this particular program. Can you give us a sense as to the nature of the human factor studies and how representative the specific human factor studies were relative to a real-world patient population?

Ron Cohen -- President & Chief Executive Officer

Well, as far as I am aware, the human factor studies complied with the regulations and what is required for human factor studies, which includes having a representative population of patients, so they did have that. And I can't get -- again, I can't get into details on all that, but I can tell you that taking that into account as well as our overall clinical experience, we believe that the drug has -- that the drug device has shown itself to be readily understandable and usable by this patient population.

Ken Trbovich -- Janney Montgomery Scott -- Analyst

Sure. And does that vary at all depending on the stage or severity of disease as a patient progresses? As -- I guess, that's one of the things that's not clear from the outside looking in. I understand that the ease of use has been described, but I didn't know if at all, that changes with disease state.

Ron Cohen -- President & Chief Executive Officer

Yeah. So remember, the way this drug is used, it's not a chronic daily maintenance therapy. It's used for off-period. So if you're in an OFF period, it's less relevant if you are a later stage patient or an earlier stage patient because when you're going -- when you're in an OFF period, you are in your base disease state level of function, which is not a good level of function regardless. The major difference is that if you are earlier, you tend to have fewer of those for a given age group. And as you progress with the disease and get into later stages, they tend to come on more and more and the daily maintenance regimens are less and less reliable in that regard.

So the way the drug is used is, if they're going into or they're into an OFF period, they inhale the drug. And what we showed in the trials is that they recover from the OFF period relatively rapidly and then move on as a bridge between their oral doses. And by the way, I like to keep plugging this, the name INBRIJA has the sense of bridge, INBRIJA, because it's bridging the oral doses that are no longer as reliable as they should be.

So no, we do not -- so the point is, when you're in an OFF period, you're slow, you have tremor, you have all of the disease state problems. And we found that when you're in that state, you can readily use this -- you can readily use INBRIJA. And it doesn't really matter if you're -- if it's later stage disease or earlier stage. We didn't see any correlation there or any separation where you'd say, well, this group doesn't use it well and this group does use it well. That was not the case. It was used readily and straightforwardly across the populations that we studied.

Ken Trbovich -- Janney Montgomery Scott -- Analyst

Thanks. That's very helpful. And then, Ron, I guess maybe just to enhance the understanding relative to commercial spending and the plan there, it sounds as though you've generated an adequate cash balance that you wouldn't sort of hold back on funding the launch here, that the plan at launch is in no way, shape impaired by the outcome of the AMPYRA litigation and the generic encroachment. That's the sense that I have from everything that's been said, but just want to fully understand that as clearly as possible in front of a potential approval.

Ron Cohen -- President & Chief Executive Officer

That's completely correct. We've -- as I indicated, we've worked diligently and very purposefully ever since the original district court decision at the end of first quarter of 2017, looking ahead to ensure that we had enough dry powder to get through the setbacks. And we've done that. So we -- what you said, I completely support, we are not at all feeling constrained on the launch. We are not stinting one single bit on the launch. We're approaching this as we would any launch, whether we had $1 billion in the bank or $500 million. Now, well, actually I shouldn't say that because our Head of Commercial, if I said that, she would definitely come and ask me for more just because she could, but the reality is that we are well funded and we are not stinting on the launch.

Ken Trbovich -- Janney Montgomery Scott -- Analyst

Perfect. Thank you.

Operator

And at this time, I will turn the call over to the presenters.

Ron Cohen -- President & Chief Executive Officer

Okay. Well, thank you for joining us, everyone. I hope you agree it was a very good quarter and positions us very well after a year of some pretty significant challenges. And we're looking ahead now to hopefully an approval of a major new drug and moving up from there, building from there. Happy Halloween, and we'll look forward to seeing you on the next call.

Felicia Vonella -- Executive Director of Investor Relations

Thank you.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 49 minutes

Call participants:

Felicia Vonella -- Executive Director of Investor Relations

Ron Cohen -- President & Chief Executive Officer

Carmen Augustine -- J.P. Morgan -- Analyst

Kelechi Chikere -- Jefferies -- Analyst

Phil Nadeau -- Cowen and Company -- Analyst

Ross Weinreb -- Goldman Sachs -- Analyst

Laura Chico -- Raymond James -- Analyst

Benjamin Burnett -- Stifel -- Analyst

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Silvan Turkcan -- Oppenheimer -- Analyst

Ken Trbovich -- Janney Montgomery Scott -- Analyst

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