Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-31938

ACORDA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-3831168

(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification No.)

420 Saw Mill River Road, Ardsley, New York		10502
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (914) 347-4300

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class		Trading Symbol		Name of each exchange on which registered
	Common Stock $0.001 par value		ACOR		Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Small reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October 31, 2019
Common Stock, $0.001 par value per share		48,030,198 shares

ACORDA THERAPEUTICS, INC.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018	1
	Consolidated Statements of Operations (unaudited) for the Three and Nine-month Periods Ended September 30, 2019 and 2018	2
	Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Three and Nine-month Periods Ended September 30, 2019 and 2018	3
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three and Nine-month Periods Ended September 30, 2019 and 2018	4
	Consolidated Statements of Cash Flows (unaudited) for the Nine-month Periods Ended September 30, 2019 and 2018	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 6.	Exhibits	38
Signatures		39

This Quarterly Report on Form 10-Q contains forward‑looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Stockholders are cautioned that such statements involve risks and uncertainties, including: we may not be able to successfully market Inbrija or any other products under development; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand; third party payers (including governmental agencies) may not reimburse for the use of Inbrija or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; competition for Inbrija, Ampyra and other products we may develop and market in the future, including increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra (dalfampridine) following our loss of patent exclusivity; the ability to realize the benefits anticipated from acquisitions, among other reasons because acquired development programs are generally subject to all the risks inherent in the drug development process and our knowledge of the risks specifically relevant to acquired programs generally improves over time; we may need to raise additional funds to finance our operations and may not be able to do so on acceptable terms; the risk of unfavorable results from future studies of Inbrija (levodopa inhalation powder) or from our other research and development programs, or any other acquired or in-licensed programs; the occurrence of adverse safety events with our products; the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class action litigation; failure to protect our intellectual property, to defend against the intellectual property claims of others or to obtain third party intellectual property licenses needed for the commercialization of our products; and failure to comply with regulatory requirements could result in adverse action by regulatory agencies. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management’s beliefs and assumptions. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and investors should not place undue reliance on these statements. In addition to the risks and uncertainties described above, we have included important factors in the cautionary statements included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2018, particularly in the “Risk Factors” section (as updated by the disclosures in our subsequent quarterly reports, including this report), that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. Forward-looking statements in this report are made only as of the date hereof, and we do not assume any obligation to publicly update any forward-looking statements as a result of developments occurring after the date of this report.

We and our subsidiaries own several registered trademarks in the U.S. and in other countries. These registered trademarks include, in the U.S., the marks “Acorda Therapeutics,” our stylized Acorda Therapeutics logo, “Biotie Therapies,” “Ampyra,” “Inbrija,” and “ARCUS.” Also, our mark “Fampyra” is a registered mark in the European Community Trademark Office and we have registrations or pending applications for this mark in other jurisdictions. Our trademark portfolio also includes several registered trademarks and pending trademark applications in the U.S. and worldwide for potential product names or for disease awareness activities. Third party trademarks, trade names, and service marks used in this report are the property of their respective owners.

PART I

Item 1. Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)	September 30, 2019			December 31, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	119,521		$	293,564
Restricted cash		387			532
Short term investments		133,636			151,989
Trade accounts receivable, net of allowances of $886 and $2,681, as of September 30, 2019 and December 31, 2018, respectively		17,553			23,430
Prepaid expenses		11,839			19,384
Inventory, net		27,396			29,014
Other current assets		4,005			10,194
Total current assets		314,337			528,107
Property and equipment, net of accumulated depreciation		130,585			60,519
Goodwill		—			282,059
Intangible assets, net of accumulated amortization		410,023			428,570
Right of use assets		24,675			—
Other assets		293			411
Total assets	$	879,913		$	1,299,666
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	26,777		$	48,859
Accrued expenses and other current liabilities		43,235			76,882
Current portion of acquired contingent consideration		3,887			4,914
Current portion of lease liabilities		7,696			—
Current portion of loans payable		587			616
Current portion of liability related to sale of future royalties		9,811			8,985
Total current liabilities		91,993			140,256
Convertible senior notes (due 2021)		326,381			318,670
Non-current portion of acquired contingent consideration		107,313			163,086
Non-current portion of lease liabilities		24,393			—
Non-current portion of loans payable		24,518			24,470
Deferred tax liability		2,804			7,483
Non-current portion of liability related to sale of future royalties		16,437			21,731
Other non-current liabilities		4,732			11,987
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value. Authorized 20,000,000 shares at September 30, 2019 and December 31, 2018; no shares issued as of September 30, 2019 and December 31, 2018, respectively		—			—
Common stock, $0.001 par value. Authorized 80,000,000 shares at September 30, 2019 and December 31, 2018; issued 47,539,910 and 47,508,505 shares, including those held in treasury, as of September 30, 2019 and December 31, 2018, respectively		48			48
Treasury stock at cost (29,304 shares at September 30, 2019 and 87,737 shares at December 31, 2018)		(638	)		(2,133	)
Additional paid-in capital		1,015,037			1,005,105
Accumulated deficit		(732,469	)		(393,843	)
Accumulated other comprehensive (loss) income		(636	)		2,806
Total stockholders’ equity		281,342			611,983
Total liabilities and stockholders’ equity	$	879,913		$	1,299,666

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

(In thousands, except per share data)	Three-month period ended September 30, 2019			Three-month period ended September 30, 2018			Nine-month period ended September 30, 2019			Nine-month period ended September 30, 2018
Revenues:
Net product revenues	$	44,800		$	139,973		$	133,325		$	393,388
Royalty revenues		2,922			2,841			8,586			8,893
Total net revenues		47,722			142,814			141,911			402,281
Costs and expenses:
Cost of sales		7,986			25,152			26,183			76,164
Research and development		16,073			22,855			51,060			79,325
Selling, general and administrative		48,702			43,571			151,622			135,435
Goodwill impairment		277,561			—			277,561			—
Amortization of intangible assets		7,692			239			17,945			1,670
Changes in fair value of acquired contingent consideration		(50,942	)		22,700			(56,342	)		21,900
Total operating expenses		307,072			114,517			468,029			314,494
Operating (loss) income		(259,350	)		28,297			(326,118	)		87,787
Other (expense) income, net:
Interest and amortization of debt discount expense		(4,500	)		(5,415	)		(16,302	)		(16,326	)
Interest income		333			1,176			3,327			2,412
Realized loss on foreign currency transactions		(1	)		(1	)		(17	)		(8	)
Other income		—			—			—			24
Total other expense, net		(4,168	)		(4,240	)		(12,992	)		(13,898	)
(Loss) income before taxes		(263,518	)		24,057			(339,110	)		73,889
Benefit from (Provision for) income taxes		(17	)		(37,968	)		484			(49,802	)
Net (loss) income	$	(263,535	)	$	(13,911	)	$	(338,626	)	$	24,087

Net (loss) income per share—basic	$	(5.55	)	$	(0.29	)	$	(7.13	)	$	0.51
Net (loss) income per share—diluted	$	(5.55	)	$	(0.29	)	$	(7.13	)	$	0.51
Weighted average common shares outstanding used in computing net (loss) income per share—basic		47,511			47,184			47,491			46,840
Weighted average common shares outstanding used in computing net (loss) income per share—diluted		47,511			47,184			47,491			47,251

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

(In thousands)	Three-month period ended September 30, 2019			Three-month period ended September 30, 2018			Nine-month period ended September 30, 2019			Nine-month period ended September 30, 2018
Net (loss) income	$	(263,535	)	$	(13,911	)	$	(338,626	)	$	24,087
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(3,190	)		(721	)		(3,671	)		(2,703	)
Unrealized (loss) income on available for sale debt securities		(63	)		35			229			(42	)
Other comprehensive loss, net of tax		(3,253	)		(686	)		(3,442	)		(2,745	)
Comprehensive (loss) income	$	(266,788	)	$	(14,597	)	$	(342,068	)	$	21,342

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

	Common stock
(In thousands)	Number of shares			Par value		Treasury stock			Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income			Total stockholders equity
Balance at December 31, 2018		47,508		$	48	$	(2,133	)	$	1,005,105		$	(393,843	)	$	2,806		$	611,983
Compensation expense for issuance of stock options to employees		—			—		—			2,745			—			—			2,745
Compensation expense for issuance of restricted stock to employees		49			—		—			922			—			—			922
Exercise of stock options		2			—		—			24			—			—			24
Purchase of Treasury Stock		4			—		(52	)		—			—			—			(52	)
Other comprehensive loss, net of tax		—			—		—			—			—			(1,431	)		(1,431	)
Net loss		—			—		—			—			(47,605	)		—			(47,605	)
Balance at March 31, 2019		47,563		$	48	$	(2,185	)	$	1,008,796		$	(441,448	)	$	1,375		$	566,586
Compensation expense for issuance of stock options to employees		—			—		—			3,180			—			—			3,180
Compensation expense for issuance of restricted stock to employees	34				—		—			1,354			—			—			1,354
Adjustments to Treasury Stock		(65	)		—		1,586			(1,586	)		—			—			—
Purchase of Treasury Stock		3			—		(39	)		—			—			—			(39	)
Other comprehensive income, net of tax		—			—		—			—			—			1,242			1,242
Net loss		—			—		—			—			(27,486	)		—			(27,486	)
Balance at June 30, 2019		47,535		$	48	$	(638	)	$	1,011,744		$	(468,934	)	$	2,617		$	544,837
Compensation expense for issuance of stock options to employees		—			—		—			2,057			—			—			2,057
Compensation expense for issuance of restricted stock to employees		5			—		—			1,236			—			—			1,236
Other comprehensive loss, net of tax		—			—		—			—			—			(3,253	)		(3,253	)
Net loss		—			—		—			—			(263,535	)		—			(263,535	)
Balance at September 30, 2019		47,540		$	48	$	(638	)	$	1,015,037		$	(732,469	)	$	(636	)	$	281,342

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(unaudited)

	Common stock
(In thousands)	Number of shares		Par value		Treasury stock			Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive income			Total stockholders equity
Balance at December 31, 2017		46,441	$	46	$	(389	)	$	968,580	$	(455,108	)	$	6,858		$	519,987
Adjustment to accumulated deficit (pursuant to adoption of ASU 2014-09)		—		—		—			—		27,582			—			27,582
Compensation expense for issuance of stock options to employees		—		—		—			4,095		—			—			4,095
Compensation expense for issuance of restricted stock to employees		100		—		—			1,840		—			—			1,840
Exercise of stock options		137		1					3,366		—			—			3,367
Purchase of Treasury Stock		47				(1,202	)		—		—			—			(1,202	)
Other comprehensive income, net of tax		—		—		—			—		—			2,455			2,455
Net loss		—		—		—			—		(8,199	)		—			(8,199	)
Balance at March 31, 2018		46,725	$	47	$	(1,591	)	$	977,881	$	(435,725	)	$	9,313		$	549,925
Compensation expense for issuance of stock options to employees		—		—		—			3,797		—			—			3,797
Compensation expense for issuance of restricted stock to employees	16			—		—			1,457		—			—			1,457
Exercise of stock options	458			—		—			10,157		—			—			10,157
Purchase of Treasury Stock		24		—		(385	)		—		—			—			(385	)
Other comprehensive loss, net of tax		—		—		—			—		—			(4,514	)		(4,514	)
Net income		—		—		—			—		46,197			—			46,197
Balance at June 30, 2018		47,223	$	47	$	(1,976	)	$	993,292	$	(389,528	)	$	4,799		$	606,634
Compensation expense for issuance of stock options to employees		—		—		—			3,866		—			—			3,866
Compensation expense for issuance of restricted stock to employees		5		—		—			1,269		—			—			1,269
Exercise of stock options		82		—		—			1,454		—			—			1,454
Other comprehensive loss, net of tax		—		—		—			—		—			(686	)		(686	)
Net loss		—		—		—			—		(13,911	)		—			(13,911	)
Balance at September 30, 2018		47,310	$	47	$	(1,976	)	$	999,880	$	(403,439	)	$	4,113		$	598,625

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)	Nine-month period ended September 30, 2019			Nine-month period ended September 30, 2018
Cash flows from operating activities:
Net (loss) income	$	(338,626	)	$	24,087
Adjustments to reconcile (net loss) income to net cash (used in) provided by operating activities:
Share-based compensation expense		11,494			16,246
Amortization of net premiums and discounts on investments		(1,325	)		(807	)
Amortization of debt discount and debt issuance costs		12,202			11,917
Depreciation and amortization expense		24,697			9,118
Goodwill impairment		277,561			—
Change in acquired contingent consideration obligation		(56,342	)		21,900
Non-cash royalty revenue		(7,556	)		(7,826	)
Deferred tax (benefit) provision		(3,667	)		42,565
Changes in assets and liabilities:
Decrease in accounts receivable		5,877			29,942
Decrease (increase) in prepaid expenses and other current assets		13,725			(5,319	)
Decrease in inventory		1,619			26,701
Decrease in other assets		—			25
Decrease in accounts payable, accrued expenses and other current liabilities		(56,141	)		(5,508	)
(Decrease) increase in other non-current liabilities		(256	)		90
Net cash (used in) provided by operating activities		(116,738	)		163,131
Cash flows from investing activities:
Purchases of property and equipment		(76,414	)		(22,548	)
Purchases of intangible assets		—			(375	)
Purchases of investments		(171,431	)		(191,652	)
Proceeds from maturities of investments		191,342			52,539
Net cash used in investing activities		(56,503	)		(162,036	)
Cash flows from financing activities:
Proceeds from issuance of common stock and option exercises		24			14,978
Purchase of treasury stock		(91	)		(1,587	)
Repayment of loans payable		(614	)		(656	)
Net cash (used in) provided by financing activities		(681	)		12,735
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(265	)		(238	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(174,187	)		13,592
Cash, cash equivalents and restricted cash at beginning of period		294,351			308,039
Cash, cash equivalents and restricted cash at end of period	$	120,164		$	321,631
Supplemental disclosure:
Cash paid for interest	$	3,037		$	3,045
Cash paid for taxes		2,562			16,665

See accompanying Unaudited Notes to Consolidated Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

(1) Organization and Business Activities

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature. The Company has evaluated subsequent events through the date of this filing. Operating results for the three and nine-month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. When used in these notes, the terms “Acorda” or “the Company” mean Acorda Therapeutics, Inc. The December 31, 2018 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K, for the year ended December 31, 2018.

Certain reclassifications were made to prior period amounts in the consolidated financial statements to conform to the current year presentation.

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018. Effective January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), ASU 2018-05, “Income Taxes” (Topic 740), ASU 2018-09, “Codification Improvements” and ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220). Effective April 1, 2019, the Company adopted ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350). Other than the adoption of the new accounting guidance, our significant accounting policies have not changed materially from December 31, 2018.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows:

	Nine-month period ended September 30, 2019				Nine-month period ended September 30, 2018
(In thousands)	Beginning of period		End of period		Beginning of period		End of period
Cash and cash equivalents	$	293,564	$	119,521	$	307,068	$	321,011
Restricted cash		532		387		410		365
Restricted cash included in Other assets		255		256		561		255
Total Cash, cash equivalents and restricted cash per statement of cash flows	$	294,351	$	120,164	$	308,039	$	321,631

Amounts included in restricted cash represent those amounts required to be set aside to cover the Company’s self-funded employee health insurance. Restricted cash included in other assets on the statement of financial position relates to cash collateralized standby letters of credit in connection with obligations under facility leases, which is included with other assets in the consolidated balance sheet due to the long-term nature of the letters of credit.

Inventory

The major classes of inventory were as follows:

(In thousands)	September 30, 2019		December 31, 2018
Raw materials	$	996	$	—
Work-in-progress		15,561		—
Finished goods		10,839		29,014
Total	$	27,396	$	29,014

The Company reviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected product sales volume and provides reserves against the carrying amount of inventory as appropriate.

Foreign Currency Translation

The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiary, Biotie, are translated into United States dollars using the period-end exchange rate; income and expense items are translated using the average exchange rate during the period; and equity transactions are translated at historical rates. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction losses and gains are recognized in the period incurred and are reported as other (expense) income, net in the statement of operations.

Segment and Geographic Information

The Company is managed and operated as one business which is focused on developing therapies that restore function and improve the lives of people with neurological disorders. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location. Accordingly, the Company views its business as one reportable operating segment. Net product revenues reported are derived from the sales of Inbrija in the U.S. for the three and nine-month periods ended September 30, 2019 and from the sales of Ampyra in the U.S. for the three and nine-month periods ended September 30, 2019 and 2018.

Goodwill

Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired in a business combination accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. We perform our impairment testing at the reporting level where we have determined that we have a single reporting unit and operating segment. The impairment test for goodwill uses an approach which compares the estimated fair value of the reporting unit including goodwill to its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to the excess of the carrying value over the estimated fair value.

information and a discount rate that are developed based on certain assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. The Company then corroborates the reasonableness of the total fair value of the reporting unit by reconciling the aggregate fair value of the reporting unit to the Company’s total market capitalization adjusted to include an estimated control premium. The estimated control premium is derived from reviewing observable transactions involving the purchase of controlling interests in comparable companies. The market capitalization is calculated using the relevant shares outstanding and the closing stock price at the test date. After completing our impairment assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. The Company recorded an impairment charge of $277.6 million for the three and nine-month periods ended September 30, 2019 in the statement of operations.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a major customer and significant negative economic trends. The decline in the trading price of the Company's common stock during the quarter ended September 30, 2019, and related decrease in the Company's market capitalization, was determined to be a triggering event in connection with the Company's review of the recoverability of its long-lived assets for the three-month period ended September 30, 2019. The Company performed a recoverability test during the third quarter of fiscal 2019 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined the following subsequent event that required disclosure in these financial statements.

Accounting Pronouncements Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. See Note 12 for further information.

In August 2018, the Securities Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company adopted the rule in the three-month period ended March 31, 2019 and included its first presentation of changes in stockholders’ equity in its Form 10-Q for the three-month period ended March 31, 2019.

In February 2018, the FASB issued ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). This new standard provides entities with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the Act was effective and the amount that would have been recorded using the newly enacted rate. This guidance became effective in Q1 2019; however, the Company did not elect to make the optional reclassification.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” The ASU’s amendments clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2018-09 are not expected to have a significant effect on current accounting practices. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The ASU became effective in Q1 2019. The ASU did not have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance on April 1, 2019. The ASU did not have an impact upon adoption on its consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently amended by ASU 2019-04 and ASU 2019-05 which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements and will adopt the guidance when effective.

In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendment in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public business entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU clarifies certain aspects of ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, the ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

(3) Revenue

In accordance with ASC 606, the Company recognizes revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the good or service. ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and v) recognize revenue associated with the performance obligations as they are satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. We did not have any contract assets or any contract liabilities as of September 30, 2019 and 2018.

The following table disaggregates our revenue by major source:

(In thousands)	Three-month period ended September 30, 2019		Three-month period ended September 30, 2018		Nine-month period ended September 30, 2019		Nine-month period ended September 30, 2018
Revenues:
Net product revenues:
Ampyra	$	37,647	$	137,815	$	122,383	$	390,900
Inbrija		4,889		—		9,164		—
Other		2,264		2,158		1,778		2,488
Total net product revenues		44,800		139,973		133,325		393,388
Royalty revenues		2,922		2,841		8,586		8,893
Total net revenues	$	47,722	$	142,814	$	141,911	$	402,281

(4) Share-based Compensation

During the three‑month periods ended September 30, 2019 and 2018, the Company recognized share-based compensation expense of $3.3 million and $5.1 million, respectively. During the nine-month periods ended September 30,

2019 and 2018, the Company recognized share-based compensation expense of $11.5 and $16.2 million, respectively. Activity in options and restricted stock during the nine-month period ended September 30, 2019 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended September 30, 2019 and 2018 were approximately $2.69 and $12.39, respectively. The weighted average fair value per share of options granted to employees for the nine-month periods ended September 30, 2019 and 2018 were approximately $6.49 and $12.81, respectively.

The following table summarizes share-based compensation expense included within the consolidated statements of operations:

	For the three-month period ended September 30,				For the nine-month period ended September 30,
(In thousands)	2019		2018		2019		2018
Research and development expense	$	719	$	1,112	$	2,203	$	4,336
Selling, general and administrative expense		2,424		4,023		8,785		11,910
Cost of Sales		149		—		505		—
Total	$	3,292	$	5,135	$	11,493	$	16,246

A summary of share-based compensation activity for the nine-month period ended September 30, 2019 is presented below:

Stock Option Activity

	Number of Shares (In thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Intrinsic Value (In thousands)
Balance at January 1, 2019		8,194		$	29.81
Granted		640			12.16
Cancelled		(494	)		24.83
Exercised		(2	)		16.00
Balance at September 30, 2019		8,339		$	28.76		4.8	$	—
Vested and expected to vest at September 30, 2019		8,316		$	28.79		4.8	$	—
Vested and exercisable at September 30, 2019		7,165		$	30.23		4.2	$	—

Restricted Stock and Performance Stock Unit Activity

(In thousands)
Restricted Stock and Performance Stock Units	Number of Shares
Nonvested at January 1, 2019		231
Granted		628
Vested		(96	)
Forfeited		(52	)
Nonvested at September 30, 2019		711

Unrecognized compensation cost for unvested stock options, restricted stock awards and performance stock units as of September 30, 2019 totaled $17.1 million and is expected to be recognized over a weighted average period of approximately 2.1 years.

During the three‑month period ended September 30, 2019, the Company did not make any repurchases of shares. During the nine‑month period ended September 30, 2019, the Company repurchased 7,360 shares of common stock at an average price of $12.31 per share or approximately $91 thousand. The share repurchase consists primarily of common stock tendered to cover tax liabilities in connection with the vesting of restricted stock awards and common stock withheld to cover

tax liabilities in connection with the settlement of vested restricted stock units in the nine-month period ended September 30, 2019.

(5) (Loss) Income Per Share

The following table sets forth the computation of basic and diluted (loss) income per share for the three and nine-month periods ended September 30, 2019 and 2018:

(In thousands, except per share data)	Three-month period ended September 30, 2019			Three-month period ended September 30, 2018			Nine-month period ended September 30, 2019			Nine-month period ended September 30, 2018
Basic and diluted
Net (loss) income	$	(263,535	)	$	(13,911	)	$	(338,626	)	$	24,087
Weighted average common shares outstanding used in computing net (loss) income per share—basic		47,511			47,184			47,491			46,840
Plus: net effect of dilutive stock options and restricted common shares		—			—			—			411
Weighted average common shares outstanding used in computing net (loss) income per share—diluted		47,511			47,184			47,491			47,251
Net (loss) income per share—basic	$	(5.55	)	$	(0.29	)	$	(7.13	)	$	0.51
Net (loss) income per share—diluted	$	(5.55	)	$	(0.29	)	$	(7.13	)	$	0.51

Securities that could potentially be dilutive are excluded from the computation of diluted loss per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following amounts were not included in the calculation of net loss per diluted share because their effects were anti-dilutive:

(In thousands)

Three-month period ended September 30, 2019

Three-month period ended September 30, 2018

Nine-month period ended September 30, 2019

Nine-month period ended September 30, 2018

Denominator

Stock options and restricted common shares

8,995

8,825

8,995

7,262

Performance share units are excluded from the calculation of net loss per diluted share as the performance criteria has not been met for the three and nine-month periods ended September 30, 2019. Additionally, the impact of the convertible senior notes was determined to be anti-dilutive and excluded from the calculation of net loss per diluted share for the three and nine-month periods ended September 30, 2019 and 2018.

(6) Income Taxes

The Company’s effective income tax rate differs from the U.S. statutory rate principally due to state taxes, jurisdictions with pretax losses for which no tax benefit can be recognized, changes in the valuation allowance and the effects of share based compensation which are recorded discretely in the quarters in which they occur.

For the three-month periods ended September 30, 2019 and 2018, the Company recorded a provision of $0.02 million and $38.0 million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended September 30, 2019 and 2018 were 0% and 157.8%, respectively. The variance in the effective tax rates for the three-month period ended September 30, 2019 as compared to the three-month period ended September 30, 2018 was due primarily to differences in pre-tax book loss between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.

For the nine-month periods ended September 30, 2019 and 2018, the Company recorded a benefit of $0.5 million and a provision of $49.8 million for income taxes, respectively. The effective income tax rates for the Company for the nine-month

periods ended September 30, 2019 and 2018 were 0.14% and 67.4%, respectively. The variance in the effective tax rates for the nine-month period ended September 30, 2019 as compared to the nine-month period ended September 30, 2018 was due primarily to differences in pre-tax book (loss) income between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.

The Company continues to evaluate the realizability of its deferred tax assets 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.

The Internal Revenue Service commenced its examination of the Company’s wholly-owned subsidiary, Biotie Therapies, Inc.’s, U.S. income tax return for the short period ended December 31, 2016 in the third quarter of 2018. The audit has been substantially completed, and the IRS has proposed an adjustment that we do not believe would have a material impact on the tax provision.

The New York State Department of Tax commenced an examination of the Company’s income tax returns for the years 2014-2016 in the third quarter of 2018. There have been no proposed adjustments at this stage of the examination.

(7) Goodwill

The following table represents a summary of activities in goodwill from December 31, 2018 through September 30, 2019:

(In thousands)
Balance at December 31, 2018	$	282,059
Impairment		(277,561	)
Foreign currency translation adjustment		(4,498	)
Balance at September 30, 2019	$	—

At September 30, 2019 and December 31, 2018, the Company had $0.0 million and $282.1 million of goodwill, respectively. In connection with the Company's review of the recoverability of its goodwill for the three month period ended September 30, 2019, the Company determined that a triggering event occurred due to the decline in the trading price of the Company's common stock at and around the end of the third quarter of 2019 and related decrease in the Company's market capitalization. Given this circumstance, the Company performed a quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $277.6 million which was the carrying amount of its goodwill immediately before the charge. Refer to Note 2 for the discussion of the impairment charge.

(8) Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates, exchange rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of investments in a Treasury money market fund and U.S. government securities. The Company’s level 2 assets consist of investments in corporate bonds, commercial paper and U.S. government securities which are categorized as short-term investments for investments with original maturities between three months and one year. The Company’s Level 3 liabilities represent acquired contingent consideration related to the acquisition of Civitas and are valued using a probability weighted discounted cash flow valuation approach. No changes in valuation techniques occurred during the three or nine-month periods ended September 30, 2019. The estimated fair values of all of our financial instruments approximate their carrying values at September 30, 2019, except for the fair value of the Company’s convertible senior notes, which was approximately $264.3 million as of September 30, 2019. The Company estimates the fair value of its notes utilizing market quotations for the debt (Level 2).

(In thousands)	Level 1		Level 2		Level 3
September 30, 2019
Assets Carried at Fair Value:
Money market funds	$	28,899	$	—	$	—
U.S. government securities		2,500		13,246		—
Commercial paper		—		49,054		—
Corporate bonds		—		71,336		—
Liabilities Carried at Fair Value:
Acquired contingent consideration		—		—		111,200
December 31, 2018
Assets Carried at Fair Value:
Money market funds	$	9,586	$	—	$	—
Commercial paper		—		47,108		—
Corporate bonds		—		104,881		—
Liabilities Carried at Fair Value:
Acquired contingent consideration		—		—		168,000

The following table presents additional information about liabilities measured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value.

Acquired contingent consideration

(In thousands)	Three-month period ended September 30, 2019			Three-month period ended September 30, 2018		Nine-month period ended September 30, 2019			Nine-month period ended September 30, 2018
Acquired contingent consideration:
Balance, beginning of period	$	162,537		$	112,200	$	168,000		$	113,000
Fair value change to contingent consideration included in the statement of operations		(50,942	)		22,700		(56,342	)		21,900
Royalty payments		(395	)		—		(458	)		—
Balance, end of period	$	111,200		$	134,900	$	111,200		$	134,900

The Company estimates the fair value of its acquired contingent consideration using a probability weighted discounted cash flow valuation approach based on estimated future sales expected from Inbrija (levodopa inhalation powder), an FDA approved drug for the treatment of OFF periods in Parkinson’s disease. Using this approach, expected probability adjusted future cash flows are calculated over the expected life of the agreement and discounted to estimate the current value of the

liability at the period end date. Some of the more significant assumptions made in the valuation include (i) the estimated revenue forecasts for Inbrija, (ii) probabilities of success, and (iii) discount periods and rate. Milestone payments ranged from $1.0 million to $59.0 million for Inbrija. The valuation is performed quarterly and changes in the fair value of the contingent consideration are included in the statement of operations. For the three and nine-month periods ended September 30, 2019 and 2018, changes in the fair value of the acquired contingent consideration were primarily due to the re-calculation of cash flows for the passage of time and updates to certain other estimated assumptions. The Company has deferred consideration of further investment in the ARCUS program for acute treatment of migraine pending additional progress with the Inbrija launch.

The acquired contingent consideration is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, including but not limited to, assumptions involving probability adjusted sales estimates for Inbrija and the estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.

(9) Investments

The Company has determined that all of its investments are classified as available-for-sale. Available-for-sale debt securities are carried at fair value with interest on these investments included in interest income and are recorded based on quoted market prices. Available-for-sale investments consisted of the following at September 30, 2019 and December 31, 2018, respectively:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
September 30, 2019
Commercial Paper	$	49,041	$	24	$	(11	)	$	49,054
Corporate Bonds		71,241		104		(9	)		71,336
U.S. government securities		13,250		—		(4	)		13,246
Total Short-term investments	$	133,532	$	128	$	(24	)	$	133,636
December 31, 2018
Commercial Paper	$	47,149	$	—	$	(41	)	$	47,108
Corporate Bonds		104,965		6		(90	)		104,881
Total Short-term investments	$	152,114	$	6	$	(131	)	$	151,989

Short-term investments with maturities of three months or less from date of purchase have been classified as cash equivalents, and amounted to approximately $31.4 million and $9.6 million as of September 30, 2019 and December 31, 2018, respectively. Short-term investments have original maturities of greater than 3 months but less than 1 year and amounted to approximately $133.6 million and $152.0 million as of September 30, 2019 and December 31, 2018, respectively. The aggregate fair value of short-term investments in an unrealized loss position amounted to approximately $48.7 million as of September 30, 2019. Short-term investments at September 30, 2019 primarily consisted of high-grade commercial paper, corporate bonds and U.S. government securities. Long-term investments have original maturities of greater than 1 year. There were no investments classified as long-term at September 30, 2019 or December 31, 2018. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of September 30, 2019 as the Company does not intend to sell its investments and it is not more likely than not that the Company will be required to sell its investments prior to the recovery of its amortized cost basis.

Unrealized holding gains and losses, which relate to debt instruments, are reported within accumulated other comprehensive income (AOCI) in the statements of comprehensive income. The changes in AOCI associated with the unrealized holding gains on available-for-sale investments during the nine-month period ended September 30, 2019, were as follows (in thousands):

(In thousands)	Net Unrealized Gains (Losses) on Marketable Securities
Balance at December 31, 2018	$	(125	)
Other comprehensive income before reclassifications		229
Amounts reclassified from accumulated other comprehensive income		—
Net current period other comprehensive income		229
Balance at September 30, 2019	$	104

(10) Liability Related to Sale of Future Royalties

As of October 1, 2017, the Company completed a royalty purchase agreement with HealthCare Royalty Partners, or HCRP (“Royalty Agreement”). In exchange for the payment of $40 million to the Company, HCRP obtained the right to receive Fampyra royalties payable by Biogen under the License and Collaboration Agreement between the Company and Biogen, up to an agreed upon threshold of royalties. When this threshold is met, if ever, the Fampyra royalties will revert back to the Company and the Company will continue to receive the Fampyra royalties from Biogen until the revenue stream ends. The transaction does not include potential future milestones to be paid.

The Company maintained the rights under the license and collaboration agreement with Biogen, therefore, the Royalty Agreement has been accounted for as a liability that will be amortized using the effective interest method over the life of the arrangement, in accordance with the relevant accounting guidance. The Company recorded the receipt of the $40 million payment from HCRP and established a corresponding liability in the amount of $40 million, net of transaction costs of approximately $2.2 million. The net liability is classified between the current and non-current portion of liability related to the sale of future royalties in the consolidated balance sheets based on the recognition of the interest and principal payments to be received by HCRP in the next 12 months from the financial statement reporting date. The total net royalties to be paid, less the net proceeds received will be recorded to interest expense using the effective interest method over the life of the Royalty Agreement. The Company will estimate the payments to be made to HCRP over the term of the Agreement based on forecasted royalties and will calculate the interest rate required to discount such payments back to the liability balance. Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of net royalty revenue recognized and changes in forecasted revenue. On a quarterly basis, the Company will reassess the effective interest rate and adjust the rate prospectively as necessary.

The following table shows the activity within the liability account for September 30, 2019 and December 31, 2018, respectively:

(In thousands)	September 30, 2019			December 31, 2018
Liability related to sale of future royalties - beginning balance	$	30,716		$	35,788
Deferred transaction costs recognized		495			784
Non-cash royalty revenue payable to HCRP		(7,556	)		(10,291	)
Non-cash interest expense recognized		2,593			4,435
Liability related to sale of future royalties - ending balance	$	26,248		$	30,716

(11) Convertible Senior Notes

On June 17, 2014, the Company issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the Notes) in an underwritten public offering. The net proceeds from the offering were $337.5 million after deducting the Underwriter’s discount and offering expenses paid by the Company.

The Notes are 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, under certain circumstances as outlined in the indenture, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (representing an initial conversion price of approximately $42.56 per share).

The Company may redeem for cash all or part of the Notes, at the Company’s option, after June 20, 2017, under certain circumstances as outlined in the indenture.

The Company pays 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. The Notes will mature on June 15, 2021.

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 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.

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 equity component is not re-measured as long as it continues to meet the conditions for equity classification.

The outstanding note balance as of September 30, 2019 and December 31, 2018 consisted of the following:

(In thousands)	September 30, 2019			December 31, 2018
Liability component:
Principal	$	345,000		$	345,000
Less: debt discount and debt issuance costs, net		(18,619	)		(26,330	)
Net carrying amount	$	326,381		$	318,670
Equity component	$	61,195		$	61,195

In connection with the issuance of the Notes, the Company incurred approximately $7.5 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $7.5 million of debt issuance costs, $1.3 million were allocated to the equity component and recorded as a reduction to additional paid-in capital and $6.2 million were allocated to the liability component and recorded as a reduction in the carrying amount of the debt liability on the balance sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the Notes using the effective interest method.

As of September 30, 2019, the remaining contractual life of the Notes is approximately 2 years. The effective interest rate on the liability component was approximately 4.8% for the period from the date of issuance through September 30, 2019.

The following table sets forth total interest expense recognized related to the Notes for the three and nine-month periods ended September 30, 2019 and 2018:

(In thousands)	Three-month period ended September 30, 2019		Three-month period ended September 30, 2018		Nine-month period ended September 30, 2019		Nine-month period ended September 30, 2018
Contractual interest expense	$	1,509	$	1,509	$	4,528	$	4,528
Amortization of debt issuance costs		241		229		713		680
Amortization of debt discount		2,360		2,252		6,997		6,675
Total interest expense	$	4,110	$	3,990	$	12,238	$	11,883

(12) Leases

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $28.0 million and lease liabilities of $35.1 million at January 1, 2019. The difference between the ROU assets and the lease liabilities is primarily due to unamortized initial direct costs, lease incentives and deferred rent related to the Company’s operating leases at December 31, 2018.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our leases have remaining lease terms of 2 years to 8 years, some of which include options to extend the lease term for up to 15 years, and some of which include options to terminate the lease within 2 years.

The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight line basis over the term of the lease.

Operating Leases

We lease certain office space, manufacturing and warehouse space under arrangements classified as leases under ASC 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal options ranging from 5 to 15 years. The exercise of lease renewal options is at our sole discretion. One of our leases also includes an option to early terminate the lease within 2 years.

Ardsley, New York

In June 2011, the Company entered into a 15-year lease for an aggregate of approximately 138,000 square feet of office and laboratory space in Ardsley, New York. In 2014, the Company exercised its option to expand into an additional 25,405 square feet of office space, which the Company occupied in January 2015. The Company has options to extend the term of the lease for three additional five-year periods, and the Company has an option to terminate the lease after 10 years subject to payment of an early termination fee. Also, the Company has a right of first refusal until mid-2020 to lease up to approximately 95,000 additional square feet of space in additional buildings at the same location. The Company’s extension, early termination, and expansion rights are subject to specified terms and conditions, including specified time periods when they must be exercised, and are also subject to limitations including that the Company not be in default under the lease.

The Ardsley lease provides for monthly payments of rent during the lease term. These payments consist of base rent, which takes into account the costs of the facility improvements funded by the facility owner prior to the Company’s occupancy, and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently $4.7 million per year, which reflects an annual 2.5% escalation factor.

Chelsea, Massachusetts

Through our Civitas subsidiary, we lease a manufacturing facility in Chelsea, Massachusetts with commercial-scale capabilities. The approximately 90,000 square foot facility also includes office and laboratory space. Civitas leases this facility from North River Everett Ave, LLC pursuant to a lease with a term that expires on December 31, 2025, and Civitas has two additional extension options of five years each. The base rent under the lease is currently $1.6 million per year, which reflects an annual escalation factor of 2.5% as well as an amendment to the lease to add additional property at the Chelsea, Massachusetts site as further described below.

In 2017, the Company’s Civitas subsidiary amended its existing Chelsea, Massachusetts lease. The amendment added expansion property located in Chelsea, Massachusetts next to the existing facility. The additional property includes land being used for parking and a free-standing warehouse building on the same site. The base rent for the additional property under the lease included in the rent number above, is currently $0.5 million per year with an annual escalation factor of 3.0%.

In 2018, the Company initiated a renovation and expansion of a building within the Chelsea manufacturing facility that will increase the size of the facility to approximately 95,000 square feet. The project will add a new manufacturing production line for Inbrija and other ARCUS products that has greater capacity than the existing manufacturing line, and it will create additional warehousing space for manufactured product. Pursuant to a 2018 lease amendment that enabled the renovation and expansion, upon completion of the project, annual rent under the lease will increase to $1.7 million. Construction of the project was substantially completed in October 2019, but it will take additional time to obtain the FDA approval needed to use the new production line for commercial manufacturing. All costs to renovate and expand the facility are borne by the Company, therefore, the lease for that building is accounted for as a build to suit lease.

Additional Facilities

In October 2016, we entered into a 10-year lease agreement with a term commencing January 1, 2017, for approximately 26,000 square feet of lab and office space in Waltham, MA. The lease provides for monthly rental payments over the lease term. The base rent under the lease is currently $1.1 million per year.

Our leases have remaining lease terms of 2 years to 8 years which assumes exercise of the early termination of our Ardsley, NY lease. We do not include any renewal options in our lease terms when calculating our lease liabilities as we are not reasonably certain that we will exercise these options. One of our leases includes the early termination option in the lease

term when calculating the lease liability. The weighted-average remaining lease term for our operating leases was 5 years at September 30, 2019. The weighted-average discount rate was 7.13% at September 30, 2019.

ROU assets and lease liabilities related to our operating leases are as follows:

(In thousands)	Balance Sheet Classification	September 30, 2019
Right-of-use assets	Right of use assets	$	24,675
Current lease liabilities	Current portion of lease liabilities		7,696
Non-current lease liabilities	Non-current portion of lease liabilities		24,393

We have lease agreements that contain both lease and non-lease components. We account for lease components together with non-lease components (e.g., common-area maintenance). The components of lease costs were as follows:

(In thousands)	Three-month period ended September 30, 2019		Nine-month period ended September 30, 2019
Operating lease cost	$	1,776	$	5,293
Variable lease cost		1,119		3,544
Short-term lease cost		440		1,094
Total lease cost	$	3,335	$	9,931

Future minimum commitments under all non-cancelable operating leases are as follows:

(In thousands)
2019 (excluding the nine months ended Sep 30, 2019)	$	1,902
2020		7,746
2021		7,935
2022		9,972
2023		3,043
Later years		7,666
Total lease payments		38,264
Less: Imputed interest		(6,175	)
Present value of lease liabilities	$	32,089

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

(In thousands)	Nine-month period ended September 30, 2019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	5,605
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	770

(13) Commitments and Contingencies

The Company is currently party to various legal proceedings which are principally patent litigation matters. The Company has assessed such legal proceedings and does not believe that it is probable that a liability has been incurred or that the amount of any potential liability or range of losses can be reasonably estimated. As a result, the Company did not record any loss contingencies for any of these matters. Litigation expenses are expensed as incurred.

Item 2. Management’s Discussion and Analysis of Financial 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 Inbrija (levodopa inhalation powder), which is approved in the U.S. for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa. Inbrija is for on-demand use and utilizes our ARCUS pulmonary delivery system, a technology platform designed to deliver medication through inhalation that we believe has potential to be used in the development of a variety of inhaled medicines. We also market branded Ampyra (dalfampridine) Extended Release Tablets, 10 mg.

Our New Drug Application, or NDA, for Inbrija was approved by the U.S. Food and Drug Administration, or FDA, on December 21, 2018. The approval is for a single dose of 84 mg, with no titration required. Inbrija became commercially available in the U.S. on February 28, 2019. Inbrija is marketed in the U.S. through our own specialty sales force and commercial infrastructure, and is being distributed primarily through a network of specialty pharmacies. Our sales representatives are targeting approximately 10,000 healthcare providers, currently focusing on a priority list of approximately 2,000 physicians who are high volume prescribers of levodopa/carbidopa. As of October 30, 2019, Inbrija is available in the U.S. without the need for a medical exception for approximately 66% of commercial and 25% of Medicare plan lives. Our Inbrija launch activities have thus far been focused on physician awareness and market access. As we enter our next phase of the launch, we will be maintaining these efforts while increasing focus on patient awareness and education. We project that annual peak net revenue of Inbrija in the U.S. alone could exceed $800 million.

On September 24, 2019, we announced that the European Commission, or EC, approved our Marketing Authorization Application, or MAA, for Inbrija 33 mg inhalation powder, hard capsules. Under the MAA, Inbrija is indicated in the European Union, or EU, for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. The MAA approves Inbrija for use in the 28 countries of the EU, as well as Iceland, Norway and Liechtenstein. We are in discussions with potential partners regarding the distribution of Inbrija outside of the U.S., with potential partners in Europe and Japan.

We have been engaged in litigation with generic drug manufacturers relating to certain Ampyra patents, which is further described below and in Part II, Item 1 of this report. In 2017, a U.S. District Court issued a ruling that upheld our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidated other Ampyra patents that were set to expire between 2025 and 2027. In September 2018, a U.S. Court of Appeals upheld this decision, and in October 2019, the U.S. Supreme Court denied our petition for certiorari requesting review of the case. As a result, our patent exclusivity with respect to Ampyra terminated on July 30, 2018, and we have experienced a significant decline in Ampyra sales due to competition from generic versions of Ampyra that have been marketed since the Court of Appeals decision. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time.

On October 23, 2019, we announced a corporate restructuring to reduce costs and focus our resources on the commercial launch of Inbrija, which is our key strategic priority for the remainder of 2019. As part of the restructuring, we are reducing headcount by approximately 25% through a reduction in force. The majority of the reduction took place in the fourth quarter of 2019 immediately after the announcement, and the remainder will be completed by the first quarter of 2020. We expect to realize estimated annualized cost savings related to headcount reduction of approximately $21.0 million, beginning in the second quarter of 2020. We estimate that we will incur approximately $8.0 million of pre-tax charges, substantially all of which will be cash expenditures, for severance and other employee separation related costs in the fourth quarter of 2019 and the first quarter of 2020. As a result of the restructuring, we reduced our 2019 operating expense projections, as further described below under Financial Guidance for 2019 and 2020.

As of September 30, 2019, we had cash, cash equivalents and short-term investments of approximately $253.2 million, and we expect our 2019 year-end balance to be greater than $225 million. We have $345 million of convertible senior notes due in 2021 with a conversion price of $42.56. We have engaged an advisor to assist us in addressing this debt, a top priority in addition to our focus on the Inbrija launch.

Inbrija (levodopa inhalation powder)/Parkinson’s Disease

Inbrija (levodopa inhalation powder) is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. Our New Drug Application, or NDA, for Inbrija was approved by the U.S. Food and Drug Administration, or FDA, on December 21, 2018. The approval is for a single dose of 84 mg, with no titration required. Inbrija became commercially available in the U.S. on February 28, 2019. As of October 30, 2019, Inbrija is available in the U.S. without the need for a medical exception for approximately 66% of commercial and 25% of Medicare plan lives. Net revenue for Inbrija was $4.9 million for the quarter ended September 30, 2019. We project that annual peak net revenue of Inbrija in the U.S. alone could exceed $800 million.

On September 24, 2019, we announced that the European Commission, or EC, approved our Marketing Authorization Application, or MAA, for Inbrija 33 mg inhalation powder, hard capsules. Under the MAA, Inbrija is indicated in the EU for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. The MAA approves Inbrija for use in the 28 countries of the EU, as well as Iceland, Norway and Liechtenstein. We are in discussions with potential partners regarding the distribution of Inbrija outside of the U.S., with potential partners in Europe and Japan.

Inbrija is marketed in the U.S. through our own specialty sales force and commercial infrastructure, and is distributed in the U.S. primarily through a network of specialty pharmacies. We believe we have built a leading neuro-specialty sales and marketing team through our commercialization of Ampyra, and that our commercial sale of Inbrija in the U.S. will benefit from the experiences and capabilities of this team. We currently have approximately 90 sales representatives as well as established teams of Medical Science Liaisons, Regional Reimbursement Directors, and Market Access Account Directors who provide information to payers and physicians on our marketed products; a National Trade Account Director who works with our network of specialty pharmacies for Inbrija; and Market Development Managers who work collaboratively with field teams and corporate personnel to assist in the execution of the Company’s strategic initiatives. Our sales representatives are targeting approximately 10,000 healthcare providers, currently focusing on a priority list of approximately 2,000 physicians who are high volume prescribers of levodopa/carbidopa. Our Inbrija launch activities have thus far been focused on physician awareness and market access. As we enter our next phase of the launch, we will be maintaining these efforts while increasing focus on patient awareness and education.

In January 2019, we established Prescription Support Services, which we sometimes refer to as the Inbrija hub, a service provided by Acorda which is designed to help patients navigate their insurance coverage and offer reimbursement support services, when appropriate. Services fall into one of these four categories: insurance verification, to research patient insurance benefits and confirm insurance coverage; prior authorization support, to identify prior authorization requirements; appeals support; and assistance identifying which specialty pharmacy a patient will utilize based on their insurance coverage. For patients that may need assistance paying for their medication, Prescription Support Services offers several support options, including: a program that provides no cost medication to patients who meet specific program eligibility requirements; co-pay support, which may help commercially insured (non-government funded) patients lower their out-of-pocket costs; and a bridge program, for federally-insured patients who experience a delay in coverage determination. We have implemented a no-cost sample program, available at physician offices, to enable patients and their physicians to assess the value of Inbrija before the patient has to incur out-of-pocket co-pay or co-insurance costs. In addition, we have implemented a free trial program, available through the Inbrija hub, for commercially insured patients who cannot access the free samples because of offices and institutions that have policies that prohibit samples.

Parkinson’s disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain. These neurons are responsible for producing dopamine and that loss causes a range of symptoms including impaired movement, muscle stiffness and tremors. The standard baseline 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 progresses, people are likely to experience OFF periods, which are characterized by the return of Parkinson’s symptoms that result from low levels of dopamine between doses oral carbidopa/levodopa. OFF periods are often highly disruptive to people with Parkinson’s. Approximately one million people in the U.S. and 1.2 million Europeans are diagnosed with Parkinson’s; it is estimated that approximately 40% of people with Parkinson’s in the U.S. experience OFF periods.

Inbrija is for on-demand use and utilizes our ARCUS platform for inhaled therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines. The ARCUS platform allows systemic delivery of medication through inhalation, by transforming molecules into a light, porous dry powder. This allows delivery of substantially higher doses of medication than can be delivered via

conventional dry powder technologies. We acquired the ARCUS technology platform as part of our 2014 acquisition of Civitas Therapeutics. We have worldwide rights to our ARCUS drug delivery technology, which is protected by extensive know-how and trade secrets and various U.S. and foreign patents, including patents that protect the Inbrija dry powder capsules beyond 2030. We have several patents listed in the Orange Book for Inbrija, including patents expiring between 2022 and 2032, and Inbrija is entitled to three years of data exclusivity, through December 2021, as posted in the Orange book.

FDA and European Commission approvals of Inbrija were based on a clinical program that included approximately 900 people with Parkinson’s on a carbidopa/levodopa regimen experiencing OFF periods. The Phase 3 pivotal trial for Inbrija – SPAN-PD – was a 12-week, randomized, placebo controlled, double blind study evaluating the effectiveness of Inbrija in patients with mild to moderate Parkinson’s experiencing OFF periods. In January 2019, we announced that The Lancet Neurology published results from the SPAN-PD clinical trial.

The SPAN-PD trial met its primary endpoint, with patients showing a statistically significant improvement in motor function at the week 12 visit, as measured by a reduction in Unified Parkinson’s Disease Rating Scale (UPDRS) Part III score for Inbrija 84 mg (n=114) compared to placebo (n=112) at 30 minutes post-dose (-9.83 points and -5.91 points respectively; p=0.009). Onset of action was seen as early as 10 minutes. Maintenance of effect continued to 60 minutes post-dose, which is the longest time point assessed in the trial. UPDRS III is a validated scale, which measures Parkinson’s disease motor impairment.

The most common adverse reactions with Inbrija (at least 5% and greater than placebo) in the pivotal trial were cough (15% vs. 2%), upper respiratory tract infection (6% vs. 3%), nausea (5% vs. 3%) and discolored sputum (5% vs. 0%).

Inbrija was also studied in a Phase 3 long-term, active-controlled, randomized, open-label study (N=398) assessing safety and tolerability over one year. This study showed the average reduction in FEV1 (forced expiratory volume in 1 second) from baseline was the same (-0.1 L) for the Inbrija and observational cohorts. Patients with chronic obstructive pulmonary disease (COPD), asthma, or other chronic respiratory disease within the last five years were excluded from this study.

Inbrija is not to be used by patients who take or have taken a nonselective monoamine oxidase inhibitor such as phenelzine or tranylcypromine within the last two weeks.

It is not known if Inbrija is safe or effective in children.

Ampyra

General

Ampyra was approved by the FDA in January 2010 to improve walking in adults with multiple sclerosis. To our knowledge, Ampyra is the first 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). Net revenue for Ampyra was $37.6 million for the quarter ended September 30, 2019 and $137.8 million for the quarter ended September 30, 2018.

Ampyra is marketed in the U.S. through our own specialty sales force and commercial infrastructure, and is distributed in the U.S. primarily through a network of specialty pharmacies which deliver the medication to patients by mail. 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 multiple sclerosis, and insurance carriers. We have a 60-day free trial program that provides eligible patients with two months of Ampyra at no cost. We are evaluating the level of our continuing investment in certain Ampyra sales and marketing programs, including our free trial program and APSS, due to the introduction of generic competition and corresponding decline in Ampyra sales.

We have been engaged in litigation with certain generic drug manufacturers relating to our five initial Orange Book-listed Ampyra patents. In 2017, the United States District Court for the District of Delaware (the “District Court”) issued a ruling that upheld our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidated our four other Orange Book-listed patents pertaining to Ampyra that were set to expire between 2025 and 2027. Under this decision, our patent exclusivity with respect to Ampyra terminated on July 30, 2018. We appealed the District Court decision to the United

States Court of Appeals for the Federal Circuit (the “Federal Circuit”), which issued a ruling in September 2018 upholding the District Court’s decision (the “Appellate Decision”). In January 2019, the Federal Circuit denied our petition for rehearing en banc. In October 2019, the U.S. Supreme Court denied our petition for certiorari requesting review of the case. This litigation is discussed in further detail in Part II, Item 1 of this report. We have experienced a significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time.

License and Collaboration Agreement with Biogen

Ampyra is marketed as Fampyra outside the U.S. by Biogen 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. In November 2017, we announced a $40 million Fampyra royalty monetization transaction with HealthCare Royalty Partners, or HCRP. In return for the payment to us, HCRP obtained the right to receive these Fampyra royalties up to an agreed-upon threshold. Until this threshold is met, if ever, we will not receive Fampyra royalties although we have retained the right to receive any potential future milestone payments, described above. The HCRP transaction is accounted for as a liability, as described in Note 10 to our Consolidated Financial Statements included in this report.

Ampyra Patent Update

Six issued Ampyra patents have been listed in the Orange Book. The five initial Orange Book-listed patents have been the subject of litigation with certain generic drug manufacturers, as described above. In connection with the litigation, our Orange Book-listed patent that expired on July 30, 2018, was upheld, but four other Ampyra patents set to expire between 2025 and 2027 were invalidated. We have filed a request to have these four patents delisted from the Orange Book. The litigation is discussed in further detail in Part II, Item 1 of this report. The sixth Orange Book-listed patent (U.S. Patent No. 9,918,973), set to expire in 2024, was more recently issued and was not involved in the litigation. We have filed a request to have this patent delisted from the Orange Book. We note that this patent did not entitle us to any additional statutory stay of approval under the Hatch-Waxman Act against the generic drug manufacturers that were involved in the patent litigation described in this report.

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. In February 2016, the EPO Opposition Division rendered a decision that revoked the EP 2377536 patent. We appealed the decision. In the Appeal Hearings in September 2019, the European Technical Board of Appeals upheld claims covering Fampyra in both the EP 1732548 patent and the EP 2377536 patent. Both European patents are set to expire in 2025, absent any additional exclusivity granted based on regulatory review timelines. In June 2019, the EPO granted EP 2460521, which is a divisional of the EP 2377536 patent. The EP 2460521 patent may be opposed by a third party within nine months of the date of grant. This patent is also set to expire in 2025. Fampyra also has 10 years of market exclusivity in the European Union that is set to expire in 2021.

ARCUS Product Development

We have been exploring opportunities for other proprietary products in which inhaled delivery of medicine using our ARCUS drug delivery technology can provide a significant therapeutic benefit to patients. We believe there are potential opportunities with central nervous system, or CNS, as well as non-CNS, disorders.

Our ARCUS development has been focused on a program for acute treatment of migraine. Existing oral therapies for migraine can be associated with slow onset of action and gastrointestinal challenges. Patients cite the need for rapid relief from migraine symptoms as their most desired medication 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. We have been evaluating therapeutic candidates for their suitability to move forward with this program. Due to the restructuring described above and associated cost-cutting measures, we have deferred consideration of further investment in this program pending additional progress with the Inbrija launch.

In July 2015, the Bill & Melinda Gates Foundation awarded us a $1.4 million grant to support the development of a formulation and delivery system for a dry powder version of lung surfactant, a treatment for neonatal respiratory distress syndrome, or nRDS. In collaboration with the Massachusetts Institute of Technology, we developed a formulation and delivery device based on our proprietary ARCUS drug delivery technology. nRDS is a condition affecting prematurely born infants in which their lungs are underdeveloped and thus lack a sufficient amount of lung surfactant. It can be fatal, or lead to severe, chronic health issues caused by a lack of oxygen getting to the baby’s brain and other organs. Delivering liquid surfactant to the lungs via intubation is the standard of care. We believe that our formulation and delivery system may present a more practical alternative for use in developing areas of the world, where intubation poses numerous problems. Based on recent achievement of pre-clinical proof of concept, the foundation has expanded the funding to include pre-IND development. This program is not aimed at developing a commercial product, but our work on this program (funding for which has not been impacted by the restructuring) could potentially generate information that is useful for adapting the ARCUS drug delivery technology to commercial pediatric uses.

Other Research and Development Programs

Our other research and development programs include rHIgM22 and Cimaglermin alpha. rHIgM22 is a remyelinating antibody that is a potential therapeutic for multiple sclerosis. Data from a Phase 1 safety and tolerability trial showed that a single dose of rHIgM22 was not associated with any safety signals. The study was not powered to show efficacy and exploratory measures showed no difference between the treatment groups. Cimaglermin alfa is a member of the neuregulin growth factor family, and has been shown to promote recovery after neurological injury, as well as enhance heart function in animal models of heart failure. We initiated a Phase 1b clinical trial assessing three doses of cimaglermin in people with heart failure, but discontinued enrollment and then received an FDA clinical hold based on the occurrence of a case of hepatotoxicity (liver injury). The FDA clinical hold was lifted after we presented additional data on the hepatotoxicity, but we have not since restarted any clinical study of cimaglermin. We are considering next steps for these programs, which could include potential partnering or out-licensing, but due to the restructuring described above and associated cost-cutting measures, we have deferred consideration of any further investment pending additional progress with the Inbrija launch.

We were previously developing SYN120 and BTT1023, but have no current plans to further invest in these programs. SYN120 is a potential treatment for Parkinson’s-related dementia, which we acquired with Biotie Therapies. Data from a Phase 2 exploratory study that we completed in 2017 showed that several of the outcome measures trended in favor of drug versus placebo, particularly with respect to neuropsychiatric symptoms. However, neither the primary nor key secondary endpoints achieved statistical significance. We were developing BTT1023 (timolumab) for the orphan disease Primary Sclerosing Cholangitis, or PSC, a chronic and progressive liver disease. The University of Birmingham was conducting a Phase 2 proof-of-concept clinical trial of BTT1023 for PSC, but the university informed us in January 2019 that they terminated the trial. Pending review of final data from the discontinued trial, we intend to evaluate the potential for out-licensing.

Financial Guidance for 2019 and 2020

We are providing the following guidance with respect to our 2019 financial performance, which is an update from prior guidance on research and development (R&D) and selling, general and administrative (SG&A) operating expenses due to the restructuring described above:

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We expect 2019 net revenue from the sale of Ampyra to be greater than $140 million.

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R&D expenses in 2019 are expected to range from $55 million to $60 million, reduced from our prior guidance of $70 million to $80 million, excluding restructuring costs and share-based compensation charges.

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SG&A expenses in 2019 are expected to range from $185 million to $190 million, reduced from our prior guidance of $200 million to $210 million, excluding restructuring costs and share-based compensation charges.

We are providing the following guidance with respect to our 2020 financial performance:

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R&D expenses in 2020 are expected to range from $20 million to $25 million, excluding restructuring costs and share-based compensation charges.

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SG&A expenses in 2020 are expected to range from $160 million to $165 million, excluding restructuring costs and share-based compensation charges.

The projected ranges of R&D and SG&A expenses in 2019 and 2020 are provided on a non-GAAP basis, as both exclude restructuring costs and share-based compensation charges. Due to the forward looking nature of this information, the amount of compensation charges 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 GAAP results, provides investors with a more meaningful understanding of our projected operating performance because they exclude (i) expenses that pertain to non-routine restructuring events, and (ii) non-cash charges that are substantially dependent on changes in the market price of our common stock. 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.

Results of Operations

Three-Month Period Ended September 30, 2019 Compared to September 30, 2018

Net Product Revenues

Inbrija

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Inbrija of $4.9 million for the three-month period ended September 30, 2019.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers. We recognized net revenue from the sale of Ampyra of $37.6 million and $137.8 million for the three-month periods ended September 30, 2019 and 2018, respectively, a decrease of $100.2 million, or 73%. The net revenue decrease comprised decreased net volume of $100.3 million partially offset by discount and allowance adjustments 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. Discounts and allowances are recorded following shipment of our products to our customers. 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.

Other Product Revenues

We recognized net revenue from the sale of other products of $2.3 million for the three-month period ended September 30, 2019 as compared to $2.2 million for the three-month period ended September 30, 2018.

Royalty Revenue

We recognized $2.9 million and $2.8 million in royalty revenue for the three-month periods ended September 30, 2019 and 2018, respectively, related to ex-U.S. sales of Fampyra by Biogen.

Cost of Sales

We recorded cost of sales of $8.0 million for the three-month period ended September 30, 2019 as compared to $25.2 million for the three-month period ended September 30, 2018. Cost of sales for the three-month period ended September 30, 2019 consisted primarily of $7.2 million in inventory costs related to recognized revenues, $0.2 million in royalty fees based on net product shipments and $0.5 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for the three-month period ended September 30, 2018 consisted primarily of $23.1 million in inventory costs related to recognized revenues, $1.7 million in royalty fees based on net product shipments and $0.2 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for inventory manufactured pre-launch for Inbrija was not recorded for the three-month period ended September 30, 2019, since the inventory manufactured prior to the FDA approval was expensed as research and development expense as incurred and was combined with other research and development expenses in 2018.

Amortization of intangibles

We recorded amortization of intangible asset related to Inbrija of $7.7 million for the three-month period ended September 30, 2019 as compared to $0.2 million related to Ampyra for the three-month period ended September 30, 2018.

Research and Development

Research and development expenses for the three-month period ended September 30, 2019 were $16.1 million as compared to $22.9 million for the three-month period ended September 30, 2018, a decrease of approximately $6.8 million, or 30%. The decrease was due primarily to reductions in spending of $5.5 million due to the commercialization of Inbrija, and decreases in overall salaries and benefits and certain other programs of $1.5 million, partially offset by other programs of $0.2 million.

Selling, General and Administrative

Sales and marketing expenses for the three-month period ended September 30, 2019 were $27.5 million compared to $22.7 million for the three-month period ended September 30, 2018, an increase of approximately $4.8 million, or 21.1%. The increase was attributable primarily to an increase in marketing related spending of $7.4 million due to launch activities for Inbrija, partially offset by a decrease in overall salaries and benefits of $1.5 million and a decrease in spending of $1.0 million for marketing related cost of Ampyra.

General and administrative expenses for the three-month period ended September 30, 2019 were $21.2 million compared to $20.9 million for the three-month period ended September 30, 2018, an increase of approximately $0.2 million, or 1.0%. The increase was primarily due to an increase in costs related to medical affairs of $0.4 million and launch activities for Inbrija of $1.3 million. This was partially offset by a decrease in legal costs and certain other costs of $1.5 million.

Goodwill Impairment

We recognized a goodwill impairment charge of $277.6 million in the three-month period ended September 30, 2019. During the third quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. We performed a quantitative assessment and after completing the assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. We did not recognize any goodwill impairment charge in the three-month period ended September 30, 2018.

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 those future royalties is assessed quarterly. We recorded income pertaining to changes in the fair-value of acquired contingent consideration of $50.9 million for the three-month period ended September 30, 2019 as compared to an expense of $22.7 million for the three-month period ended September 30, 2018. The 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 Expense, Net

Other expense, net was $4.2 million for the three-month periods ended September 30, 2019 and 2018.

Benefit from (Provision for) Income Taxes

For the three-month periods ended September 30, 2019 and 2018, the Company recorded a provision of $0.02 million and $38.0 million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended September 30, 2019 and 2018 were 0% and 157.8%, respectively. The variance in the effective tax rates for the three-month period ended September 30, 2019 as compared to the three-month period ended September 30, 2018 was due primarily to differences in pre-tax book income between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research and development tax credit.

Nine-Month Period Ended September 30, 2019 Compared to September 30, 2018

Net Product Revenues

Inbrija

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Inbrija of $9.2 million for the nine-month period ended September 30, 2019.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers. We recognized net revenue from the sale of Ampyra of $122.4 million and $390.9 million for the nine-month periods ended September 30, 2019 and 2018, respectively, a decrease of $268.5 million, or 69%. The net revenue decrease comprised decreased net volume of $295.0 million partially offset by discount and allowance adjustments of $26.5 million.

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.

Other Product Revenues

We recognized net revenue from the sale of other products of $1.8 million for the nine-month period ended September 30, 2019 as compared to $2.5 million for the nine-month period ended September 30, 2018.

Royalty Revenue

We recognized $8.6 million and $8.9 million in royalty revenue for the nine-month periods ended September 30, 2019 and 2018, respectively related to ex-U.S. sales of Fampyra by Biogen.

Cost of Sales

We recorded cost of sales of $26.2 million for the nine-month period ended September 30, 2019 as compared to $76.2 million for the nine-month period ended September 30, 2018. Cost of sales for the nine-month period ended September 30, 2019 consisted primarily of $24.9 million in inventory costs related to recognized revenues, $0.7 million in royalty fees based on net product shipments and $0.5 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for the nine-month period ended September 30, 2018 consisted primarily of $68.2 million in inventory costs related to recognized revenues, $7.5 million in royalty fees based on net product shipments and $0.2 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for inventory manufactured pre-launch for Inbrija was not recorded for the nine-month period ended September 30, 2019, since the inventory manufactured prior to the FDA approval was expensed as research and development expense as incurred and was combined with other research and development expenses in 2018.

Amortization of intangibles

We recorded amortization of intangible asset related to Inbrija of $17.9 million for the nine-month period ended September 30, 2019 as compared to $1.7 million related to Ampyra for the nine-month period ended September 30, 2018.

Research and Development

Research and development expenses for the nine-month period ended September 30, 2019 were $51.1 million as compared to $79.3 million for the nine-month period ended September 30, 2018, a decrease of approximately $28.2 million, or 35.6%. The decrease was due primarily to reductions in spending of $9.4 million due to the termination of the tozadenant development program, reductions in spending of $12.0 million due to the commercialization of Inbrija, and decreases in overall salaries and benefits and certain other programs of $6.8 million.

Selling, General and Administrative

Sales and marketing expenses for the nine-month period ended September 30, 2019 were $86.3 million compared to $68.7 million for the nine-month period ended September 30, 2018, an increase of approximately $17.6 million, or 25.6%. The increase was attributable primarily to an increase in marketing related spending of $22.9 million due to launch activities for Inbrija, partially offset by a decrease in overall salaries and benefits of $2.3 million and a decrease in spending related to marketing for Ampyra of $3.0 million.

General and administrative expenses for the nine-month period ended September 30, 2019 were $65.3 million compared to $66.7 million for the nine-month period ended September 30, 2018, a decrease of approximately $1.4 million, or 2.0%. The decrease was primarily due to a reduction in salaries and benefits related costs of $2.1 million, business development costs of $1.8 million and legal costs and certain other costs of $2.6 million, partially offset by an increase in spending related of launch activities of $2.8 million and costs related to medical affairs of $2.2 million.

Goodwill Impairment

We recognized a goodwill impairment charge of $277.6 million in the nine-month period ended September 30, 2019. During the third quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. We performed a quantitative assessment and after completing the assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. We did not recognize any goodwill impairment charge in the nine-month period ended September 30, 2018.

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 those future royalties is assessed quarterly. We recorded income pertaining to changes in the fair-value of acquired contingent consideration of $56.3 million for the nine-month period ended September 30, 2019 as compared to an expense of $21.9 million for the nine-month period ended September 30, 2018. The changes in the fair-value of the acquired contingent consideration were primarily due to the re-calculation of discounted cash flows for the passage of time and updates to certain other estimated assumptions.

Other Expense, Net

Other expense, net was $13.0 million for the nine-month period ended September 30, 2019 as compared to $13.9 million for the three month period ended September 30, 2018. This was due primarily to an increase in interest income of $0.8 million.

Benefit from (Provision for) Income Taxes

For the nine-month periods ended September 30, 2019 and 2018, the Company recorded a $0.5 million benefit and a $49.8 million provision for income taxes, respectively. The effective income tax rates for the Company for the nine-month periods ended September 30, 2019 and 2018 were 0.14% and 67.4%, respectively. The variance in the effective tax rates for the nine-month period ended September 30, 2019 as compared to the nine-month period ended September 30, 2018 was due primarily to differences in pre-tax book income between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research and development tax credit.

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, payments received under our collaboration and licensing agreements, sales of Ampyra, Fampyra, Zanaflex and Qutenza, and, to a lesser extent, from loans, government and non-government grants and other financing arrangements. We expect sales of Inbrija to become a source of financing for our operations.

At September 30, 2019, we had $253.2 million of cash, cash equivalents and short-term investments, compared to $445.6 million at December 31, 2018. 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 filing date. As discussed in greater detail below, the principal of our Convertible Senior Notes due 2021 becomes due and payable in June 2021. We intend to opportunistically repurchase or refinance such indebtedness prior to maturity, which may include issuance of new debt or equity, privately negotiated exchange transactions and/or open-market repurchases.

Our future capital requirements will depend on a number of factors, including the amount of revenue generated from sales of Inbrija and 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

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 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 Offering). 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 September 30, 2019, the Notes did not meet the criteria to be convertible.

The Company may redeem for cash, all or part of the Notes, at the Company’s option, 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.

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.

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 amount 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 continues to meet the conditions for equity classification.

Our outstanding note balances as of September 30, 2019 consisted of the following:

(In thousands)	September 30, 2019
Liability component:
Principal	$	345,000
Less: debt discount and debt issuance costs, net		(18,619	)
Net carrying amount	$	326,381
Equity component	$	61,195

Non-Convertible Capital Loans

Non-convertible capital loans were granted by Business Finland (formerly Tekes), with an adjusted acquisition-date fair value of $20.5 million (€18.2 million) and a carrying value of $24.0 million as of September 30, 2019. The loans are composed of fourteen non-convertible loans. The loans bear interest based on the greater of 3% or the base rate set by Finland’s Ministry of Finance minus one (1) percentage point. The maturity dates for these loans range from eight to ten years from the date of issuance, however, according to certain terms and conditions of the loans, the Company may repay the principal and accrued and unpaid interest of the loans only when the consolidated retained earnings of Biotie is sufficient to fully repay the loans.

Research and Development Loans

Research and Development Loans (“R&D Loans”) were granted by Business Finland with an acquisition-date fair value of $2.9 million (€2.6 million) and a carrying value of $1.2 million as of September 30, 2019. 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 began in January 2017. The loan principal will be paid in equal annual installments over a 5 year period, ending January 2021.

Investment Activities

At September 30, 2019, cash, cash equivalents and short-term investment were approximately $253.2 million, as compared to $445.6 million at December 31, 2018. Our cash equivalents consist of highly liquid investments with original maturities of three months or less at date of purchase and consist of investments in a Treasury money market fund. Our short term investments consist of high-grade corporate debt securities, commercial paper and U.S. government securities with original maturities of twelve months or less at date of purchase. 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 $116.7 million for the nine-month period ending September 30, 2019. Cash used by operations for the nine-month period ended September 30, 2019 was primarily due to net loss of $338.6 million, non-cash royalty revenue of $7.6 million, deferred tax benefit of $3.7 million, a change in contingent consideration liability of $56.3 million, amortization of net premiums and discounts on investments of $1.3 million and a decrease in accounts payable and accrued expenses of $56.1 million. This was offset by a goodwill impairment charge of $277.6 million, a decrease in accounts receivable of $5.9 million, stock compensation expense of $11.5 million, depreciation and amortization of $24.7 million, a decrease in inventory of $1.6 million, amortization of debt discount and debt issuance costs of $12.2 million, and a decrease in other prepaid expenses and other current assets of $13.7 million

Net Cash Used in Investing

Net cash used in investing activities for the nine-month period ended September 30, 2019 was $56.5 million, which was due primarily to purchases of short-term investments and property and equipment of $171.4 million and $76.4 million, respectively. This was partially offset by proceeds from maturities of investments of $191.3 million.

Net Cash Used in Financing

Net cash used in financing activities for the nine-month period ended September 30, 2019 was $0.7 million, which was primarily due to the repayment of loans payable of $0.6 million and purchases of treasury stock of $0.1 million.

Contractual Obligations and Commitments

A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Note 14 of our Annual report on Form 10-K for the year ended December 31, 2018. 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 or license fees and milestones 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 nine-month period ended September 30, 2019, commitments related to the purchase of inventory decreased as compared to December 31, 2018. As of September 30, 2019, we have inventory-related purchase commitments totaling approximately $2.0 million.

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, 2018. As of September 30, 2019, with the exception of the adoption of ASU 2016-02, “Leases” (Topic 842), ASU 2018-05, “Income Taxes” (Topic 740), ASU 2018-09, “Codification Improvements”, ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350) and ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220), our critical accounting policies have not changed materially from December 31, 2018.

Goodwill

During the second quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. This circumstance required the Company to perform a quantitative assessment to assess the value of the goodwill for impairment. The Company performed an assessment of the goodwill and concluded that there was no impairment. During the third quarter of 2019, we experienced a further significant decline in our stock price that reduced the market capitalization further below the carrying value of the Company. The Company performed a quantitative assessment of the goodwill and concluded that there was an impairment to the goodwill. The Company utilized the income approach in the goodwill assessment process. The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions. This valuation approach considers a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, and discount rates and require us to make certain assumptions and estimates. When performing our income approach, we incorporate the use of projected financial information and a discount rate that are developed based on certain assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. The Company then corroborates the reasonableness of the total fair value of the reporting unit by reconciling the aggregate fair value of the reporting unit to the Company’s total market capitalization adjusted to include an estimated control premium. The estimated control premium is derived from reviewing observable transactions involving the purchase of controlling interests in comparable companies. The market capitalization is calculated using the relevant shares outstanding and the closing stock price at the test date. After completing our impairment assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. The Company recorded an impairment charge of $277.6 million for the three and nine month periods ended September 30, 2019 in the statement of operations.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a major customer and significant negative economic trends. The decline in the trading price of the Company's common stock during the quarter ended September 30, 2019 and related decrease in the Company's market capitalization was determined to be a triggering event in connection with the Company's review of the recoverability of its long-lived assets for the three-month period ended September 30, 2019. The Company performed a recoverability test during the third quarter of fiscal 2019 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments consist of cash equivalents, short-term investments, convertible senior notes, non-convertible capital loans, research and development loans and accounts payable. The estimated fair values of all of our financial

instruments approximate their carrying values at September 30, 2019, except for the fair value of the Company’s convertible senior notes which was approximately $264.3 million as of September 30, 2019.

We have cash equivalents and short-term investments at September 30, 2019, which are exposed to the impact of interest rate changes and our interest income fluctuates as our interest rates change. Due to the nature of our investments in money market funds, high-grade corporate bonds, commercial paper and U.S. government securities, the carrying value of our cash equivalents and short-term investments approximate their fair value at September 30, 2019. At September 30, 2019, we held $253.2 million in cash, cash equivalents and short-term investments which had an average interest rate of approximately 2.4%.

We maintain an investment portfolio in accordance with our investment policy. The primary objective of our investment policy is to preserve principal, maintain proper liquidity and to meet operating needs. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, interest rate risk is mitigated due to the conservative nature and relatively short duration of our investments.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the Exchange Act) we carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the third quarter of 2019, the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief, Business Operations and Principal Accounting Officer. Based on that evaluation, these officers have concluded that, as of September 30, 2019, our disclosure controls and procedures were effective to achieve their stated purpose.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations, and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief, Business Operations and Principal Accounting Officer, as appropriate, to allow timely decisions regarding disclosure.

Change in internal control over financial reporting

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and Chief, Business Operations and Principal Accounting Officer, concluded that there were no changes in our internal control over financial reporting during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Beginning January 1, 2019, we implemented ASC 842 - Leases. As a result of our implementation of ASC 842, in the first quarter of 2019 we enhanced our control documentation related to lease accounting. The enhancements included documentation enhancements to support ongoing monitoring activities in order to provide reasonable assurance regarding the fair presentation of our consolidated financial statements and related disclosures.

Limitations on the effectiveness of controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Ampyra ANDA Litigation

We have been engaged in litigation with certain generic drug manufacturers relating to our five initial Orange Book-listed Ampyra patents. We filed lawsuits against these generic drug manufacturers in response to their submitting Abbreviated New Drug Applications, or ANDAs, to the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10mg. As previously reported, we settled with some, but not all, of these companies. In March 2017, the U.S. District Court for the District of Delaware (the “District Court”) rendered a decision from a bench trial held in September 2016. The District Court upheld our Ampyra Orange Book-listed patent that expired in July 2018, but invalidated the four other Orange Book-listed patents pertaining to Ampyra that were the subject of the litigation that were set to expire between 2025 and 2027. We appealed the decision on the four invalidated patents to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”), which issued a ruling on September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”). In January 2019, the Federal Circuit denied our petition for rehearing en banc. On October 7, 2019, the U.S. Supreme Court denied our petition for certiorari requesting review of the case.

Item 1 of Part II of our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, and June 30, 2019, include prior updates to the legal proceedings described above.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2018, as updated in our Quarterly Reports subsequently filed during the current fiscal year, all of which could materially affect our business, financial condition or future results. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 6. Exhibits

Exhibit No.		Description
10.1*		Amendment to December 19, 2005 Employment Agreement, dated August 13, 2019, by and between the Registrant and David Lawrence.
10.2*		Amendment to December 19, 2005 Employment Agreement, dated August 13, 2019, by and between the Registrant and Jane Wasman.
31.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2		Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).

*	Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Acorda Therapeutics, Inc.

	By:	/s/ Ron Cohen
Date: November 7, 2019		Ron Cohen, M.D. President, Chief Executive Officer and Director

	By:	/s/ David Lawrence
Date: November 7, 2019		David Lawrence Chief, Business Operations and Principal Accounting Officer

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