ACADIA Pharmaceuticals Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. ACADIA is a biopharmaceutical company whose only marketed product was NUPLAZID (pimavanserin), approved in the U.S. for hallucinations and delusions associated with Parkinson’s disease psychosis (PDP). Amounts below are in millions of dollars, except per-share data.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Product sales and total revenue | $106.6 | $90.1 | Up $16.5, or 18.3% |
| Cost of product sales | $2.2 | $2.8 | About 2% vs. 3% of sales |
| Research and development | $57.0 | $72.6 | Down $15.7 |
| Selling, general and administrative | $111.7 | $102.0 | Up $9.7 |
| Operating loss | $(66.8) | $(89.5) | Loss narrowed |
| Net loss | $(66.4) | $(88.0) | Loss narrowed |
| Net loss per share, basic and diluted | $(0.42) | $(0.57) | |
| Net cash used in operating activities | $(60.1) | $(49.0) | Cash use increased |
Revenue growth primarily reflected approximately 4% growth in NUPLAZID unit sales and a higher average gross selling price. The filing says Q1 sales were nevertheless negatively affected by COVID-19-related declines in patient office visits and long-term-care-facility census. Lower R&D expense reflected, among other items, the $10.0 million Vanderbilt upfront payment in Q1 2020 and reduced costs following cessation of pimavanserin development for major depressive disorder. Higher SG&A was primarily associated with preparation for a potential dementia-related psychosis launch, partly offset by lower stock-based compensation.
At March 31, 2021, cash and cash equivalents were $304.5 and available-for-sale investment securities were $273.3. Management reported cash, cash equivalents and investment securities of $577.8, down from $632.0 at December 31, 2020, and said these resources were expected to fund planned operations for at least 12 months. Total assets were $755.2; total liabilities were $173.6, including $66.7 of operating lease liabilities. The balance sheet reports no borrowings or other funded debt. Current assets were $674.0 versus current liabilities of $109.4. Stockholders’ equity was $581.6, down from $627.0 at year-end.
Operating cash outflow was partly offset by $30.9 of investing cash inflow, primarily net maturities of investment securities, and $7.7 of financing cash inflow, mainly employee stock-option exercises. Cash, cash equivalents and restricted cash ended the quarter at $310.3. The company reported an accumulated deficit of $2.1 billion.
Material developments, outlook and risks
- Dementia-related psychosis (DRP): After the quarter, on April 2, 2021, the FDA issued a complete response letter for the pimavanserin supplemental application. The FDA cited lack of statistical significance in some dementia subgroups and insufficient numbers for certain less common subtypes. ACADIA planned to meet with the FDA to determine next steps; timing and prospects for approval were unclear.
- Pipeline: ACADIA expected results from the Phase 3 LAVENDER trofinetide Rett syndrome study in Q4 2021. It initiated a Phase 2 study of ACP-044 for postoperative pain in March 2021 and planned an osteoarthritis pain study in Q2 2021. The Phase 3 ADVANCE-2 study of pimavanserin for negative symptoms of schizophrenia was underway. The filing notes that the Phase 3 MDD program did not meet its primary endpoint and no further Phase 3 studies were planned at that time.
- Management outlook: Management expected operating losses to continue for the next few years, with cash use and R&D spending expected to increase as it advances commercial and development programs. It could not estimate with certainty future development costs or completion dates. Additional financing may be needed; if unavailable on acceptable terms, programs or commercialization efforts could be delayed, reduced or discontinued, and financing could dilute shareholders.
- COVID-19 and execution: The pandemic affected sales and had previously disrupted trial enrollment and field access. ACADIA reported supply remained uninterrupted and said it did not anticipate supply disruption, while cautioning that further effects were difficult to predict.
- Litigation and patents: Generic-drug patent litigation remained pending against several NUPLAZID ANDA filers; a joint trial was scheduled for May 2023. After quarter-end, ACADIA settled with Hetero, permitting a generic launch on July 27, 2038, subject to earlier-launch triggers. Securities and derivative litigation was also pending. Management considered the pending claims not likely to have a material adverse effect, but could not predict outcomes or estimate possible losses and had accrued no amounts other than incurred legal fees.
- Other commitments: Licensing and merger agreements could require aggregate milestone payments of up to $2.2 billion, in addition to royalties. These are contingent obligations, not current debt. The 2% Ipsen royalty on NUPLAZID sales was scheduled to terminate in 2021.
- Other unusual item: A change in estimate for performance-based awards reduced Q1 2021 stock-based compensation expense by approximately $6.1 million.
Important facts for investors to verify
- How the FDA CRL affects the DRP development plan, potential additional studies, timing and expected costs.
- Whether NUPLAZID sales recover from pandemic-related impacts and how unit growth, pricing and sales allowances evolve.
- Progress and results for LAVENDER, ADVANCE-2 and ACP-044, and the capital required to fund these programs.
- Cash burn against management’s stated liquidity runway, given expected higher spending and possible financing needs.
- Outcomes of remaining generic patent cases and the terms, including early-launch triggers, of the Hetero settlement.
- Potential financial effects of litigation, contingent milestone and royalty obligations, and the effect of lease commitments.