ACADIA Pharmaceuticals Inc. — 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed February 27, 2018. The filing also reports fourth-quarter 2017 results. ACADIA is a commercial-stage biopharmaceutical company focused on central nervous system disorders. Its only approved product is NUPLAZID (pimavanserin), launched in the U.S. in May 2016 for hallucinations and delusions associated with Parkinson’s disease psychosis.
Financial performance
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $124.9 million | $17.3 million |
| Cost of product sales | $9.1 million | $3.1 million |
| Gross profit / gross margin | $115.8 million / 92.7% | $14.3 million / 82.2% |
| Research and development | $149.2 million | $99.3 million |
| Selling, general and administrative | $255.1 million | $186.5 million |
| Operating loss | $(292.4) million | $(272.8) million |
| Net loss | $(289.4) million | $(271.4) million |
| Basic and diluted loss per share | $(2.36) | $(2.34) |
| Net cash used in operating activities | $217.9 million | $210.4 million |
Fourth-quarter revenue was $43.6 million, gross profit was $41.1 million (94.4% gross margin), and net loss was $68.9 million. Interest income, net, was $4.1 million for 2017. The filing reports no debt balance in the presented balance sheet.
Liquidity and cash flow
Cash, cash equivalents and investment securities totaled $341.3 million at year-end 2017, down from $529.0 million at year-end 2016. Working capital was $324.4 million; total liabilities were $49.2 million and stockholders’ equity was $335.3 million. The company said existing resources were expected to fund planned operations for at least the next 12 months, while warning that additional financing may be needed. Financing cash flow was $31.2 million in 2017, primarily from stock issuance and employee equity activity; unlike 2016, there was no comparable large follow-on offering.
Changes versus the prior comparable period
- NUPLAZID net sales rose to $124.9 million from $17.3 million as sales expanded after the mid-2016 launch; the filing also cites a higher average selling price in 2017.
- Net loss widened by $18.0 million, while loss per share increased from $2.34 to $2.36. R&D expense rose 50% and SG&A rose 37%, reflecting expanded clinical programs, commercial staffing and marketing.
- Operating cash use increased by $7.4 million. Year-end cash, cash equivalents and investments declined by $187.7 million.
- In the second quarter of 2017, ACADIA moved from “sell-through” to “sell-in” revenue recognition after it could estimate rebates and chargebacks. It recognized previously deferred revenue in that quarter; the filing does not give a separate amount for the transition adjustment.
Outlook, commentary and key risks
- Management expected continued operating losses for at least the next few years and anticipated substantial R&D and commercial spending. No numeric revenue or earnings guidance was provided.
- The pipeline includes Phase 3 HARMONY for dementia-related psychosis, initiated in October 2017; Phase 3 ENHANCE-1 and Phase 2 ADVANCE for schizophrenia; and Phase 2 CLARITY for adjunctive treatment of major depressive disorder. Top-line CLARITY results were expected in the second half of 2018. FDA Breakthrough Therapy Designation was granted for pimavanserin in dementia-related psychosis. Enrollment of new patients in the SERENE Alzheimer’s agitation study was discontinued, while existing participants were to complete it.
- Risks include dependence on the commercial uptake of NUPLAZID, its boxed warning concerning increased mortality risk in elderly patients with dementia-related psychosis, and required post-marketing studies. Clinical efficacy, safety and regulatory approval for additional indications remain uncertain.
- Product sales are concentrated: four U.S. customers accounted for approximately 89% of 2017 revenue. Manufacturing is outsourced, with one API supplier and one supplier for each tablet and capsule form, creating supply-continuity risk.
- Coverage, reimbursement, Medicare Part D discounts, drug-pricing measures, and changes to healthcare laws could pressure sales or net revenue. The filing highlights a scheduled increase in the Medicare Part D coverage-gap manufacturer discount to 70% beginning in 2019.
- The company reported an accumulated deficit of $1.2 billion and may need future financing; further equity financing could dilute existing holders. The 2017 financial statements included a provisional tax-law remeasurement, offset by a full valuation allowance. The securities class action related to earlier statements about the NUPLAZID NDA timeline received final court approval in January 2018.
- Independent auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Important facts for investors to verify
- Quarterly NUPLAZID sales, prescription trends, persistence, pricing, and gross-to-net adjustments, including rebate and Medicare Part D exposure.
- Cash burn and liquidity relative to the stated minimum 12-month funding outlook, including any financing plans.
- Enrollment, timing, outcomes and safety findings for HARMONY, ENHANCE-1, ADVANCE, CLARITY and required post-marketing studies.
- Regulatory status of the 34 mg capsule and any other pending NUPLAZID submissions; the filing says the capsule NDA had been submitted and anticipated commercial availability in the second half of 2018.
- Supply reliability and regulatory readiness of third-party manufacturers, and ongoing concentration among the four largest customers.