ACOR Acorda Therapeutics Inc

Item  2 .  Management’s Discussion and Analysis o f F inancial 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 biopharmaceutical 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, migraine and MS. We have three clinical-stage programs in Parkinson’s disease, including INBRIJA (the proposed brand name for CVT-301, levodopa inhalation powder), our most advanced clinical program, as well as our tozadenant and SYN120 programs which we acquired with Biotie Therapies Corp. in 2016. We believe these three clinical development programs, which are further described below, position Acorda as a leader in Parkinson’s disease therapeutic development.

We currently derive substantially all our revenue from the sale of Ampyra. In March 2017, we announced a decision by the United States District Court for the District of Delaware in litigation with certain generic drug manufacturers u pholding our Ampyra Orange Book-listed patent set to expire on July 30, 2018, but invalidating our four other Orange Book-listed patents pertaining to Ampyra that were set to expire between 2025 and 2027. Under this decision, we expect to maintain patent exclusivity with respect to Ampyra at least through July 30, 2018, although the other parties to the lawsuit may appeal the District Court’s decision upholding the patent that expires in July 2018 . W e intend to appeal the ruling on the four invalidated patents, and expect the appeals process to take approximately 12 to 18 months. We expect to experience a rapid and significant decline in Ampyra sales beyond July 2018 due to competition from generic versions of Ampyra that may be marketed after the expiration of our remaining Ampyra patent, unless the District Court’s decision on the four invalidated patents is overturned on appeal, which could include reversal or remand by the appeals court back to the District Court.

In April 2017, following the District Court’s decision, we implemented a corporate restructuring to reduce our cost structure and focus our resources on our two late stage Parkinson’s disease programs, INBRIJA and tozadenant, as well as on maximizing Ampyra value and ensuring continued patient access to Ampyra. As part of this restructuring, we reduced headcount by approximately 20%. The majority of the reduction was completed in April 2017. As a result, we expect to realize annualized cost savings from the reduction of personnel of approximately $21.0 million beginning in the second quarter of 2017. We estimate that during 2017 we will incur approximately $8.0 million of pre-tax charges for severance and employee separation related costs related to the restructuring, primarily during the second quarter. As a result of the restructuring, we have reduced our 2017 projections for combined research and development and selling, general and administrative operating expense projections by approximately $50 million from our prior guidance. These revised projections are further described below under Financial Guidance for 2017 .

We believe that our INBRIJA and tozadenant programs, if approved, will serve as the foundation for Acorda’s future value. O ur top priorities over the next 12 months are to:

Our current strategic priorities also include business development initiatives, including pursuit of monetization of existing royalty streams for Fampyra and Selincro, further described below, as well as exploring partnering and out-licensing opportunities for some of our early-stage programs.

As of March 31, 2017, we had cash and cash equivalents of approximately $134 million and expect to be cash flow positive for 2017 with a projected year end cash balance in excess of $200 million. We expect a similar year-end 2018 cash

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balance based on our current internal assumptions f or 2018 Ampyra revenue. We have $345 million of convertible senior notes due in 2021 with a conversion price of $42.56.

We believe that the operating expense reductions from the restructuring will enable us to fund operations through key milestones for our late-stage development programs, including the launch of INBRIJA in the U.S., pending approval from the FDA, and obtaining topline data from the ongoing tozadenant Phase 3 efficacy trial in the first quarter of 2018. Importantly, we have kept our commercial team intact despite the restructuring. Our sales force and commercial organization have proved highly effective in the commercialization of Ampyra and, pending FDA approvals, we expect them to be major assets in commercializing INBRIJA and tozadenant.

Biotie Acquisition

In 2016, we acquired Biotie Therapies Corp. pursuant to a combination agreement with Biotie for a purchase price of approximately $376 million. On September 30, 2016, we completed the acquisition of 100% of the capital stock of Biotie. Previously, in April and May, 2016, we had acquired approximately 97% of the fully diluted capital stock of Biotie pursuant to public tender offers. On September 30, 2016, we acquired shares representing the remaining approximately 3% of Biotie's fully diluted capital stock pursuant to compulsory redemption proceedings under Finnish law that we had initiated in April 2016. Pursuant to these redemption proceedings, we were entitled to acquire these remaining Biotie shares in exchange for our provision of a cash security deposit pending a final determination and payment of the redemption price for these shares. In November 2016, the arbitration tribunal administering the redemption proceedings rendered a decision in our favor, confirming that the price for the remaining unpaid shares would be the same as the price per share set forth in the combination agreement and offered and paid to the other Biotie shareholders. We made the remaining payments in January 2017. The arbitration decision was not appealed and became final and binding in February 2017.

As a result of the acquisition, we have obtained 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. Further expanding our pipeline, we also obtained global rights to SYN120, an oral, 5-HT6/5-HT2A dual receptor antagonist in Phase 2 development with support from the Michael J. Fox Foundation for Parkinson’s-related dementia. We believe these acquired Biotie clinical stage programs, together with our INBRIJA clinical development program, position Acorda as a leader in Parkinson’s disease therapeutic development. Biotie is also developing BTT1023, a product candidate for the orphan disease Primary Sclerosing Cholangitis, or PSC, a chronic and progressive liver disease for which there is no FDA-approved treatment.

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.

Ampyra

General

Ampyra was approved by the FDA in January 2010 to improve 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 United States in March 2010. Net revenue for Ampyra was $112.0 million for the three months ended March 31, 2017 and $109.6 million for the three months ended March 31, 2016.

Since the March 2010 launch of Ampyra, approximately 120,000 people with MS in the U.S. have tried Ampyra. We believe that Ampyra is increasingly considered by many physicians a standard of care to improve walking in people with MS. Seven years after approval, Ampyra continues to grow, reflecting the continued unmet medical need among people with MS for a treatment to improve walking. As of December 31, 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 2016, on average, approximately 80% of new Ampyra patients enrolled in 60-day free trial. The program is in its sixth year, and data show that 60-day free trial participants have

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higher compliance and persistency rates over time compared to patients not in the program. Approximately 50% of patients who initiate therapy with the 60-day free trial 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 the Company’s 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. The specialty pharmacy providers that deliver Ampyra by mail, and Kaiser Permanente, are contractually obligated to hold no more than an agreed number of days of inventory, ranging from 10 to 30 calendar days, and some have agreed to hold a minimum of 10 business days of inventory.

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 (formerly Biogen Idec 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. 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, four of which were recently held invalid in litigation in U.S. District Court with certain generic drug manufacturers, as described in this report. The first 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 on July 30, 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). This patent was held valid by the District Court in the litigation , although the other parties to the lawsuit may appeal the District Court’s decision upholding the patent.

The other four Orange Book-listed patents were held invalid by the District Court in the litigation with generic drug manufacturers. These patents, which had been set to expire in 2025 through 2027, include: 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-

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aminopyridine (dalfampridine) twice daily; U.S. Patent No. 8,354,437, which includes claims relating to methods to improve walking, increase walking spe ed, and treat walking disability in patients with MS by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily; U.S. Patent No. 8,440,703, which includes claims directed to methods of improving lower extremity function and wal king and increasing walking speed in patients with MS by administering less than 15 mg of sustained release 4-aminopyridine (dalfampridine) twice daily; and 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.

Our Orange Book-listed patents for Ampyra have been the subject of lawsuits relating to Paragraph IV Certification Notices received from ten generic drug manufacturers, who have submitted Abbreviated New Drug Applications with the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10mg. The ANDA filers challenged the validity of our Orange Book-listed patents for Ampyra, and they also asserted that generic versions of their products do not infringe certain claims of these patents. In 2015 and 2016, we reached settlement agreements with six of the generic companies. A bench trial against the remaining four generic companies was completed in September 2016. In February 2017, we announced that we had reached a settlement agreement with one of those four generic companies. On March 31, 2017, the U.S. District Court for the District of Delaware rendered a decision upholding our Orange-Book listed patent for Ampyra set to expire in July 2018, but invalidating our four other Orange Book-listed patents. We intend to appeal the ruling on these four patents, and expect the appeals process to take approximately 12 to 18 months. We expect to experience a rapid and significant decline in Ampyra sales beyond July 2018 due to competition from generic versions of Ampyra that may be marketed after the expiration of our remaining Ampyra patent, unless the District Court’s decision on the four invalidated patents is overturned on appeal, which could include reversal or remand by the appeals court back to the District Court.

Our Orange Book-listed patents for Ampyra were also subject to inter partes review (IPR) petitions filed by a hedge fund with the U.S. Patent and Trademark Office (USPTO). These IPR petitions challenged four of the five Orange Book-listed patents. On March 9, 2017, the U.S. Patent and Trademark Office Patent Trials and Appeals Board, or PTAB, issued a ruling and upheld all four of the challenged patents. The petitioner in the IPR proceedings has until no later than May 11, 2017 to appeal these decisions. The PTAB’s decision does not affect the District Court’s decision invalidating the four patents.

In April 2017, we received a Paragraph IV Certification Notice from Micro Labs Ltd. (“Micro”) advising that it had submitted an ANDA to the FDA seeking marketing approval for a generic version of Ampyra (dalfampridine) Extended Release Tablets, 10mg. Micro has challenged the validity of four of our five Orange Book-listed patents for Ampyra, and did not file against our U.S. Patent No. 5,540,938, and it also asserted that a generic version of its product does not infringe certain claims of these patents. We have forty-five days from receipt of the Paragraph IV Certification to file suit in a United States District Court to institute a 30 month statutory stay of approval of the Micro ANDA.

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.

Legal proceedings relating to our Ampyra patents are described in further detail in Part II, Item 1 of this report.

Other Marketed Products

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

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hydrochloride, one of the two leading drugs used to trea t spasticity. The net revenue we receive from Zanaflex products has declined substantially due to generic competition.

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. Grunenthal GmbH (as the assignee of 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, migraine and MS. Following the restructuring described above, our focus is on advancing our late stage Parkinson’s disease programs – INBRIJA and tozadenant – and we believe that these products, if approved, will serve as the foundation of our future value and position us as a leader in the treatment of Parkinson’s disease.

INBRIJA (CVT-301, levodopa inhalation powder)/Parkinson’s Disease

INBRIJA (levodopa inhalation powder), the proposed brand name for CVT-301, is a self-administered, 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 causes a range of symptoms such as impaired ability to move, muscle stiffness and tremor. The standard of care for the treatment of Parkinson’s disease is oral carbidopa/levodopa, but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a 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.

INBRIJA delivers a precise dose of dry-powder formulation of L-dopa to the lung. Oral medication can be absorbed with slow and variable onset of action, as the medicine is absorbed through the gastrointestinal (digestive) tract before reaching the brain. Inhaled treatments enter the body through the lungs and reach the brain shortly thereafter, bypassing the digestive system. INBRIJA is based on our proprietary ARCUS platform, a dry-powder pulmonary drug delivery technology 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 using a simple, breath-actuated proprietary inhaler. This in turn provides the potential for pulmonary delivery of a much wider variety of pharmaceutical agents.

In 2016, we completed a Phase 3 efficacy and safety clinical trial of INBRIJA for the treatment of OFF periods in Parkinson’s disease. On February 9, 2017, we announced efficacy and safety data from this clinical trial, showing a statistically significant improvement in motor function in people with Parkinson’s experiencing OFF periods. The clinical trial had three arms: INBRIJA 84 mg and 60 mg doses (equivalent to 50 mg and 35 mg fine particle doses, respectively), and placebo. The trial met its primary outcome measure of improvement in motor function as measured by the Unified Parkinson’s Disease Rating Scale-Part 3 (UPDRS Part III) in people with Parkinson’s experiencing OFF periods. UPDRS III is a validated scale, which measures Parkinson’s disease motor impairment. The primary endpoint was measured at 30 minutes post-treatment for the 84 mg dose at the 12-week visit. UPDRS Part III change was -9.83 compared to -5.91 for placebo with a p-value of 0.009. The magnitude of INBRIJA’s benefit versus baseline was consistent with the data from the prior Phase 2b clinical trial, further described below, and represents a moderate to large clinically important difference. The placebo-adjusted difference was lower in the Phase 3 clinical trial than the Phase 2b clinical trial but still represented a clinically important difference. Data from this trial has been accepted as a late breaker at the International Congress of Parkinson’s Disease and Movement Disorders (MDS) taking place in Vancouver, BC in June 2017.

The safety profile of INBRIJA in the trial was consistent with that observed in a prior Phase 2b clinical trial. Adverse events reported in any study arm at greater than 5% were cough, upper respiratory tract infection, throat irritation, nausea and sputum discoloration. Cough was the most common adverse event, reported by approximately 15% of subjects who received INBRIJA. When reported, it was typically mild and reported once per participant during the course of treatment. Three of 227 participants receiving INBRIJA discontinued the study due to cough. Reports of serious adverse events were: 3, or 2.7%

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in the placebo arm, 6, or 5.3% in the 60 mg arm, and 2, or 1.8% in the 84 mg arm. There was one death in the study, a suicide in the 60 mg group, judged by the investigator not to be related to drug. On March 29, 2017, we announced results from two additional ongoing, long-term Phase 3 studies to assess the long-term safety profile of INBRIJA in people with Parkinson’s. These results showed no differences in pulmonary function between the group receiving INBRIJA and an obse rvational control group. These results are consistent with the previously reported Phase 2b and Phase 3 clinical trials. We also announced results from separate clinical studies that assessed the safety profile of INBRIJA in people with asthma, smokers and early morning OFF .

We had a pre-NDA (New Drug Application) meeting with the FDA during the third quarter of 2016 and have received the FDA’s minutes of that meeting. Based on the results of the Phase 3 efficacy clinical trial and the two long-term safety studies, we plan to file an NDA with the FDA in the U.S. by the end of the second quarter of 2017. We also plan to file a Marketing Authorization Application, or MAA, in the EU by the end of 2017. 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 ^® . We believe the Phase 3 efficacy and safety clinical trial, combined with data from the two additional Phase 3 studies and supported by existing Phase 2b data, will be sufficient for filing an NDA. Pending FDA review and approval of the NDA, we are planning for a commercial launch of this product in 2018. We are projecting that, if approved, annual peak net revenue of INBRIJA in the U.S. alone could exceed $500 million. We are actively seeking to partner this program outside of the U.S., the EU and certain other countries.

In June 2015, we presented data from a Phase 2b clinical trial of INBRIJA at the 19th International Congress of Parkinson's Disease and Movement Disorders (MDS). The data showed that patients experiencing an OFF period, treated with INBRIJA, 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 October 2016, we announced that results from Phase 1, Phase 2a and preclinical studies of INBRIJA were featured in the current edition of Science Translational Medicine .

Tozadenant/Parkinson’s Disease

Through Biotie we acquired 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 approved in the U.S. for improvement of motor symptoms in Parkinson’s disease in over 20 years. We believe that tozadenant would be complementary to our other Phase 3 product for Parkinson's disease, INBRIJA, because while tozadenant is being developed as a chronic therapy for reducing overall OFF time, INBRIJA is being developed for episodic use for rapid improvement of OFF periods when they occur. Biotie is currently conducting a Phase 3 clinical trial, in which tozadenant is taken along with a person’s other Parkinson’s disease therapies. The trial is being conducted under a special protocol assessment, or SPA, from the FDA and is comparing two of the dose arms of tozadenant, 60 mg and 120 mg, that were studied in a prior Phase 2b clinical trial versus placebo. The trial is assessing improvement of motor function and activities of daily living in people with Parkinson’s while taking tozadenant. The Phase 2b trial showed, among other positive findings, that 120 mg doses of tozadenant resulted in an average increase of 1.1 hours of ON time without troublesome dyskinesias, relative to placebo; this was in patients already receiving multiple other Parkinson’s therapies. We believe that this trial, if successful, together with data from the prior Phase 2b clinical trial, will provide sufficient efficacy data to file an NDA with the FDA. We expect efficacy data from this trial in the first quarter of 2018. A separate open-label, long-term safety study commenced enrollment in April 2017. We believe that tozadenant, if approved by the FDA, represents a commercial opportunity in the U.S. that is greater than that of INBRIJA.

ARCUS Product Development – CVT-427/Acute Migraine

In addition to INBRIJA, discussed above, we are exploring opportunities for other proprietary products in which inhaled delivery using our ARCUS drug delivery technology can provide a significant therapeutic benefit to patients. Disorders of the central nervous system, or CNS, in addition to Parkinson’s disease, may be addressed by ARCUS products with the delivery of active agents to the CNS with rapid onset and reduced systemic exposure. For example, we are currently developing CVT-427, an inhaled triptan (zolmitriptan) intended for acute treatment of migraine by using the ARCUS drug delivery technology. Triptans are the class of drug most commonly prescribed for 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

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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 m edication 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 th e most rapid onset of action, but are not convenient for patients. Many triptans are also available in nasally delivered formulations. 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. In June 2016, at the 58th Annual Scientific Meeting of the American Headache Society, we presented pharmacokinetic data from the Phase 1 trial which 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, evidence of bronchoconstriction or discontinuations due to adverse events reported in this study. 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. In December 2016, we completed a special population study to evaluate safe inhalation of CVT-427 in people with asthma and in smokers. Some subjects showed evidence of acute, reversible bronchoconstriction, post-inhalation, which we believe require further investigation. We are evaluating next steps for the program and CVT-427 will not advance into a Phase 2 study by the end of 2017, as previously expected.

Other Research and Development Programs

Following is a description of our other research and development programs. We are evaluating options to partner or out-license some of these programs in light of our current corporate and capital allocation priorities.

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Asset Based Loan

On June 1, 2016, the Company and certain of its subsidiaries entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as the sole initial lender and the administrative agent for the lenders. On May 4, 2017, the Company voluntarily terminated the Credit Agreement because it no longer served the Company’s needs. The Company did not incur any early termination penalties in connection with the termination. Prior to its termination, the Credit Agreement provided the Company with a three-year senior secured revolving credit facility in the maximum amount of $60 million. The restrictive covenants, as well as the lenders' security interests in collateral, under the Credit Agreement and the related loan documents terminate in connection with the termination of the facility.   

Corporate Update

Effective February 17, 2017, Catherine D. Strader, Ph.D., joined the Company’s Board of Directors. Dr. Strader assumed a newly-added Board seat and will be up for re-election in 2018.

Financial Guidance for 2017

We are providing the following guidance with respect to our 2017 financial performance, which is an update from our prior guidance on research and development expenses and selling, general and administrative operating expenses due to the restructuring described above:

We expect to be cash flow positive for 2017 with a projected year end cash balance in excess of $200 million. We expect a similar year-end 2018 cash balance based on our current internal assumptions for 2018 Ampyra revenue.

The projected range of R&D and SG&A expenses in 2017 are provided on a non-GAAP basis, as both excluding share-based compensation charges and restructuring costs. Due to the forward looking nature of this information, the amount of compensation charges and benefits needed to reconcile these measures to the most directly comparable GAAP financial measures is dependent on future changes in the market price of our common stock and is not available at this time. Non-GAAP financial measures are not an alternative for financial measures prepared in accordance with GAAP. However, we believe the presentation of these non-GAAP financial measures, when viewed in conjunction with actual GAAP results, provides investors with a more meaningful understanding of our projected operating performance because they exclude non-cash charges that are substantially dependent on changes in the market price of our common stock and non-recurring restructuring costs. We believe these non-GAAP financial measures help indicate underlying trends in our business, and are important in comparing current results with prior period results and understanding expected operating performance. Also, our management uses these non-GAAP financial measures to establish budgets and operational goals, and to manage our business and to evaluate its performance.

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Results of Oper ations

Three-Month Period Ended March 31, 2017 Compared to March 31, 2016

Net Product Revenues

Ampyra

We recognize product sales of Ampyra following receipt of product by our network of specialty pharmacy providers, Kaiser Permanente and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Ampyra to these customers of $112.0 million and $109.6 million for the three-month periods ended March 31, 2017 and 2016, respectively, an increase of $2.4 million, or 2.2%. The net revenue increase was comprised of net price increases, net of discount and allowance adjustments of $4.1 million, offset by net volume reductions of $1.7 million, due in part to specialty pharmacies dropping their inventories in anticipation of potential generic availability. Effective January 1, 2017, we increased our list sale price to our customers by 9.5%.

Discounts and allowances which are included as an offset in net revenue consist of allowances for customer credits, including estimated chargebacks, rebates and discounts. Discounts and allowances are recorded following shipment of Ampyra tablets to our network of specialty pharmacy providers, Kaiser Permanente and ASD Specialty Healthcare, Inc. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Affordable Care Act, the health care reform legislation enacted in 2010. Discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future.

The net revenue for the three-month period ended March 31, 2017 decreased from net revenue of $140.6 million for the three-month period ended December 31, 2016. We believe that the decrease in net revenue between the fourth quarter of 2016 and the first quarter of 2017 reflects certain recurring seasonal factors relating to the commencement of a new calendar year. These factors include patients switching insurance plans or pharmacy benefit providers at year-end. Consequently, many patients must re-establish eligibility during the first few months of the calendar year. Also, when deductibles and the Medicare donut hole reset at the beginning of the calendar year, it can affect timely refills for consumers with financial constraints. In addition, as in previous years, there was some inventory build in the fourth quarter of 2016 that was destocked during the first quarter. In the three-month period ended March 31, 2017, an additional factor affecting net revenue was specialty pharmacies dropping their inventories of Ampyra in anticipation of potential generic availability.

Other Product Revenues

We recognized net revenue from the sale of other products of $0.6 million for the three-month period ended March 31, 2017, as compared to $0.5 million for the three-month period ended March 31, 2016, an increase of $0.1 million.

Discounts and allowances, which are included as an offset in net revenue, consist of allowances for customer credits, including estimated chargebacks, rebates, returns and discounts.

License Revenue

We recognized $2.3 million in license revenue for the three-month periods ended March 31, 2017 and 2016, related to the $110.0 million received from Biogen in 2009 as part of our collaboration agreement. We currently estimate the recognition period to be approximately 12 years from the date of the Collaboration Agreement.

Royalty Revenue

We recognized $2.5 million in royalty revenue for the three-month periods ended March 31, 2017 and 2016, respectively, related to ex-U.S. sales of Fampyra by Biogen.

We recognized $1.3 million and $1.0 million in royalty revenue for the three-month periods ended March 31, 2017 and 2016, respectively, related to the authorized generic sale of Zanaflex Capsules.

We recognized $0.7 million in royalty revenue for the three-month period ended March 31, 2017 related to sales of Selincro.

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Cost of Sales

We recorded cost of sales of $25.2 million for the three-month period ended March 31, 2017 as compared to $23.2 million for the three-month period ended March 31, 2016. Cost of sales for the three-month period ended March 31, 2017 consisted primarily of $20.2 million in inventory costs related to recognized revenues, $2.5 million in royalty fees based on net product shipments and costs related to Biotie of $2.2 million.

Cost of sales for the three-month period ended March 31, 2016 consisted primarily of $19.8 million in inventory costs related to recognized revenues and $2.5 million in royalty fees based on net product shipments.

Cost of License Revenue

We recorded cost of license revenue of $0.2 million for the three-month periods ended March 31, 2017 and 2016, respectively. Cost of license revenue represents the recognition of a portion of the deferred $7.7 million paid to Alkermes in 2009 in connection with the $110.0 million received from Biogen as a result of our collaboration agreement.

Research and Development

Research and development expenses for the three-month period ended March 31, 2017 were $46.5 million as compared to $44.6 million for the three-month period ended March 31, 2016, an increase of approximately $1.9 million, or 4.3%. The increase was due primarily to spending for products acquired as a result of the Biotie acquisition of $11.2 million, partially offset by a reductions for the following programs: $2.6 million for our discontinued Plumiaz program, $2.2 million for INBRIJA (CVT-301) and CVT-427, $0.9 million for our cimaglermin program, $1.0 million in research and development staffing costs and $0.6 for other programs.

Selling, General and Administrative

Sales and marketing expenses for the three-month period ended March 31, 2017 were $25.1 million compared to $27.2 million for the three-month period ended March 31, 2016, a decrease of approximately $2.1 million, or 7.7%. The decrease was attributable to a decrease in overall marketing, selling, distribution, and market research expenses of $1.0 million, and compensation and benefits costs of $1.1 million.

General and administrative expenses for the three-month period ended March 31, 2017 were $26.9 million compared to $31.8 million for the three-month period ended March 31, 2016, a decrease of approximately $4.9 million, or 15.4%. This decrease was primarily due to decreases in business development expenses of $6.1 million and increased spending at Biotie of $1.5 million.

Changes in Fair Value of Acquired Contingent Consideration

As a result of the original Civitas spin out of Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Civitas products. Acorda acquired this contingent consideration as part of the Civitas acquisition. The fair value of that future royalty is assessed quarterly. We recorded expenses pertaining to changes in the fair-value of acquired contingent consideration of $10.8 million for the three-month period ended March 31, 2017 as compared to $6.2 million for the three-month period ended March 31, 2016. Changes in the fair-value of the acquired contingent consideration were due to the re-calculation of discounted cash flows for the passage of time and updates to certain other estimated assumptions.

Other Income / Expense

Other expense was $4.5 million for the three-month period ended March 31, 2017 compared to other income of $6.9 million for the three-month period ended March 31, 2016, a difference of $11.4 million. The difference is due primarily to an increase in interest and amortization of debt discount expense of approximately $4.1 million and realized losses on foreign currency exchange of approximately $0.2 million, partially offset by a reduction in interest income of approximately $0.1 million.

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Benefit from Income Taxes

For the three-month periods ended March 31, 2017 and 2016, the Company recorded a $0.9 million and $9.7 million benefit from income taxes, respectively, based upon its estimated annual effective tax rate. The benefit from income taxes is based on federal, state, and foreign income taxes, net of any tax credits and valuation allowance. The effective income tax rates for the Company for the three-month periods ended March 31, 2017 and 2016 were 5% and 95%, respectively. The variance in the effective tax rates for the three-month period ended March 31, 2017 as compared to the three-month period ended March 31, 2016 was due primarily to the valuation allowance recorded on jurisdictions with Biotie pretax losses for which no tax benefit can be recognized, the tax implications of costs related to the Biotie transaction, the absence of orphan drug development in 2017, and a reduction in foreign tax expense.

The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through private placements and public offerings of our common stock and preferred stock, a convertible debt offering, payments received under our collaboration and licensing agreements, sales of Ampyra, Zanaflex Tablets and Capsules and Qutenza, and, to a lesser extent, from loans, government and non-government grants and other financing arrangements.

At March 31, 2017, we had $133.6 million of cash and cash equivalents, compared to $158.5 million at December 31, 2016. We expect that our existing cash and cash flows from operations, will be sufficient to fund our ongoing operations over the next 12 months from the financial statement reporting date.  

In April 2017, following a Federal District Court’s decision which invalidated certain of the Company’s patents relating to Ampyra, we implemented a corporate restructuring to reduce our cost structure and focus our resources on our two late stage Parkinson’s disease programs, INBRIJA and tozadenant, as well as on maximizing Ampyra value and ensuring continued patient access to Ampyra. As part of this restructuring, we reduced headcount by approximately 20%. The majority of the reduction was completed in April 2017. While we believe that the cost savings from the restructuring and subsequent operating expense reductions will enable us to fund operations through the key milestones for our late-stage development programs, including the commercial launch of INBRIJA, pending approval from the FDA, and Phase 3 data for tozadenant, there can be no guarantee that we will have sufficient funding to do so. We may need to seek additional equity or debt financing or strategic collaborations to complete our product development activities, and could require substantial funding to commercialize any products that we successfully develop. We may not be able to raise additional capital on favorable terms or at all.

Our future capital requirements will depend on a number of factors, including the amount of revenue generated from sales of Ampyra, the continued progress of our research and development activities, the amount and timing of milestone or other payments payable under collaboration, license and acquisition agreements, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, and capital required or used for future acquisitions or to in-license new products and compounds including the development costs relating to those products or compounds. To the extent our capital resources are insufficient to meet future operating requirements we will need to raise additional capital, reduce planned expenditures, or incur indebtedness to fund our operations. If we require additional financing in the future, we cannot assure you that it will be available to us on favorable terms, or at all.

Financing Arrangements

Saints Capital Notes

Effective January 2017, the Company paid $0.8 million in full payment of these notes.

Convertible Senior Notes

In June 2014, the Company entered into an underwriting agreement (the Underwriting Agreement) with J.P. Morgan Securities LLC (the Underwriter) relating to the issuance by the Company of $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the Notes) in an underwritten public offering pursuant to the Company’s

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Registration Statement on Form S-3 (the Registration Statement) and a related preliminary and final prospectus supplement, filed with the Securities and Exchange Commission (the Offeri ng). The net proceeds from the offering, after deducting the Underwriter’s discount and the offering expenses paid by the Company, were approximately $337.5 million.

The Notes are governed by the terms of an indenture, dated as of June 23, 2014 (the Base Indenture) and the first supplemental indenture, dated as of June 23, 2014 (the Supplemental Indenture, and together with the Base Indenture, the Indenture), each between the Company and Wilmington Trust, National Association, as trustee (the Trustee). The Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $42.56 per share), only in the following circumstances and to the following extent: (1) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (2) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; (4) upon the occurrence of specified events described in the Indenture; and (5) at any time on or after December 15, 2020 through the second scheduled trading day immediately preceding the maturity date. As of March 31, 2017, the Notes did not meet the criteria to be convertible.

The Company may not redeem the Notes prior to June 20, 2017. The Company may redeem for cash all or part of the Notes, at the Company’s option, on or after June 20, 2017 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within five trading days prior to the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company will pay 1.75% interest per annum on the principal amount of the Notes, payable semiannually in arrears in cash on June 15 and December 15 of each year.

If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture.

The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects and for up to 270 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Notes.

The Notes will be senior unsecured obligations and will rank equally with all of the Company’s existing and future senior debt and senior to any of the Company’s subordinated debt. The Notes will be structurally subordinated to all existing or future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries and will be effectively subordinated to the Company’s existing or future secured indebtedness to the extent of the value of the collateral. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur.

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In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal am ount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the seven-year term of the Notes using the effective interest method. The equity component is not re-measured as long as it co ntinues to meet the conditions for equity classification.

Our outstanding note balances as of March 31, 2017 consisted of the following:

Asset Based Loan

On June 1, 2016, the Company and certain of its subsidiaries entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as the sole initial lender and the administrative agent for the lenders. On May 4, 2017, the Company voluntarily terminated the Credit Agreement because it no longer served the Company’s needs. The Company did not incur any early termination penalties in connection with the termination. Prior to its termination, the Credit Agreement provided the Company with a three-year senior secured revolving credit facility in the maximum amount of $60 million. The restrictive covenants, as well as the lenders' security interests in collateral, under the Credit Agreement and the related loan documents terminate in connection with the termination of the facility.

Non-convertible Capital Loans

Non-convertible capital loans (“Tekes Loans”) granted by Tekes, a Finnish Funding Agency for Technology and Innovation, with an adjusted acquisition-date fair value of $23.3 million (€20.6 million) and a carrying value of $22.9 million as of March 31, 2017. The Tekes Loans are comprised of fourteen non-convertible loans granted by Tekes. The maturity dates for the Tekes Loans range from eight to ten years. These loans bear interest based on the greater of 3% or the base rate set by the Finland’s Ministry of Finance minus one (1) percentage point. According to certain terms and conditions of the Tekes Loans, Biotie may repay the principal amounts of these loans and the accrued and unpaid interest only if the restricted equity of Biotie, including its consolidated subsidiaries is positive (fully covered).

Convertible Capital Loan

Convertible capital loans acquired from Biotie issued to certain shareholders and venture capital organizations had a fair value of $0.5 million (€0.5 million) and a carrying value of $0.2 million as of March 31, 2017.

In the three-month period ended March 31, 2017, the Company extended an offer to each of the convertible capital loan holders to repurchase the outstanding principal amount of each convertible capital loan. As of March 31, 2017, all but one of the loan holders agreed to the terms of the Company’s offer and agreed to accept payment of the principal amount as payment in full for their respective outstanding loans. The Company paid approximately $1.7 million (€1.5 million) in March 2017 to repurchase the outstanding principal amount of these loans. In April 2017, the final loan holder agreed to accept the Company’s repurchase offer and the Company paid approximately $0.2 million (€0.2 million) to repurchase the outstanding principal amount of this loan.

Research and Development Loans

Research and Development Loans (“R&D Loans”) were granted by Tekes with an acquisition-date fair value of $2.9 million (€2.6 million) and a carrying value of $2.3 million as of March 31, 2017. The R&D Loans bear interest based on the greater of 1% or the base rate set by Finland’s Ministry of Finance minus three (3) percentage points. The repayment of these loans shall be initiated after five years, thereafter the loan principal shall be paid in equal installments over a 5 year period.

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Investment Activities

At March 31, 2017, cash and cash equivalents were approximately $133.6 million, as compared to $158.5 million at December 31, 2016. Our cash equivalents consist of highly liquid investments with original maturities of three months or less at date of purchase and consists of time deposits and investments in money market funds. At March 31, 2017 and December 31, 2016, we held no short-term investments. Also, we maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances.

Net Cash Used in Operations

Net cash used in operations was $25.4 million for the three-month period ending March 31, 2017 while $6.7 million was provided by operations for the three-month period ended March 31, 2016. Cash used in operations for the three-month period ended March 31, 2017 was primarily due to a net loss of $18.9 million, a decrease in accounts payable and accrued expenses of $23.1 million, a deferred tax benefit of $4.7 million, a decrease in other assets of $3.4 million, a decrease in inventory of $2.9 million and a decrease in non-current portion of deferred license revenue of $2.3 million, partially offset by a change in contingent consideration liability of $10.8 million, stock compensation expense of $7.9 million, depreciation and amortization expense of $5.6 million, amortization of debt discount and debt issuance costs of $2.6 million and a decrease in accounts receivable of $2.0 million.

Net Cash Used in Investing

Net cash used in investing activities for the three-month period ended March 31, 2017 was $5.8 million, which was due primarily to purchases of property and equipment.

Net Cash Provided by Financing

Net cash provided by financing activities for the three-month period ended March 31, 2017 was $6.0 million, which was due to $5.5 million in net proceeds from the issuance of common stock, and a refund of $2.7 million for the completion of the purchase of the noncontrolling interest in Biotie, partially offset by the repayment of loans payable of $2.2 million.

Contractual Obligations and Commitments

A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Note 10 of our Annual report on Form 10-K for the year ended December 31, 2016. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

Under certain agreements, we are required to pay royalties for the use of technologies and products in our R&D activities and in the commercialization of products. The amount and timing of any of the foregoing payments are not known due to the uncertainty surrounding the successful research, development and commercialization of the products. During the three-month period ended March 31, 2017, commitments related to the purchase of inventory decreased as compared to December 31, 2016. As of March 31, 2017, we have inventory-related purchase commitments totaling approximately $26.5 million.

Under certain agreements, we are also required to pay license fees and milestones for the use of technologies and products in our R&D activities and in the commercialization of products.

Critical Accounting Policies and Estimates

Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2016. As of March 31, 2017, with the exception of the adoption of ASU 2016-09, “Compensation – Stock Compensation” (Topic 718) and ASU 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory, and ASU 2016-06, “Derivatives and Hedging” (Topic 815): Contingent Put and Call Options in Derivative Contracts, our critical accounting policies have not changed materially from December 31, 2016.