ACADIA Pharmaceuticals Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. Unaudited consolidated financial statements; dollar amounts below are in millions except per-share data.
Business context
ACADIA is a clinical-stage biopharmaceutical company with no product sales to date. Its lead candidate, pimavanserin, is in development for Parkinson’s disease psychosis (PDP); the company also has programs in Alzheimer’s disease psychosis, schizophrenia, chronic pain and glaucoma. The FDA had agreed that the pivotal -020 study and supporting data could support an NDA filing for PDP, subject to standard FDA review and completion of remaining work.
Key financial metrics
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Collaborative revenue | $0.24 | $3.48 | $1.11 | $4.53 |
| Research and development expense | $7.25 | $4.40 | $18.80 | $13.89 |
| General and administrative expense | $3.80 | $1.49 | $8.44 | $4.70 |
| Operating loss | $(10.81) | $(2.41) | $(26.13) | $(14.07) |
| Net loss | $(10.70) | $(2.40) | $(25.90) | $(14.04) |
| Basic and diluted loss per share | $(0.12) | $(0.04) | $(0.31) | $(0.26) |
| Operating cash used | — | $(21.50) | $(15.34) |
At September 30, 2013, cash and cash equivalents were $11.8 million and available-for-sale investments were $184.4 million, totaling $196.2 million in cash, cash equivalents and investments. Total liabilities were $7.9 million, with no material debt reported. Current assets were $198.7 million versus current liabilities of $7.9 million. Accumulated deficit was $393.6 million. No gross-margin figure is reported; the company had no product revenue.
Changes versus prior comparable periods
- Revenue fell sharply: Q3 revenue declined to $0.24 million from $3.48 million, mainly because the company recognized $3.0 million of remaining deferred Meiji Seika collaboration revenue in Q3 2012. Nine-month revenue decreased to $1.11 million from $4.53 million, also reflecting the ended Meiji collaboration.
- R&D and G&A expenses increased in both comparison periods, reflecting greater pimavanserin development activity, personnel costs and stock-based compensation. Nine-month stock-based compensation was $3.5 million versus $1.4 million.
- Net loss widened to $10.7 million for Q3 and $25.9 million for the first nine months. Nine-month operating cash use rose to $21.5 million from $15.3 million.
- Cash and investments increased to $196.2 million from $108.0 million at year-end 2012, principally following a May 2013 public offering that generated $107.9 million in net proceeds. The offering and warrant exercises increased common shares outstanding.
Outlook, risks and contingencies
- Management targeted an NDA submission for pimavanserin near the end of 2014, subject to further FDA interactions and completion of CMC work, registration-batch stability testing and supportive studies, including drug-drug interaction studies. A Phase II Alzheimer’s disease psychosis trial was expected to begin in November 2013.
- Management expected operating losses for at least several years and higher operating cash use in 2014 as development and pre-commercial activities advanced. It expected at least $183 million in cash, cash equivalents and investments at year-end 2013, and said existing resources were expected to fund operations at least through 2015. Future financing would still be required; availability and terms were uncertain.
- Revenue depends on collaborations, grants and milestone payments; the 2003 Allergan research collaboration ended in March 2013. Payments under the two ongoing Allergan agreements depend on program advancement, and Allergan may terminate them. Allergan was seeking a partner for the chronic pain program.
- Potential rescission rights relate to 1,855,637 shares sold under the ATM program in 2012 after the company became ineligible to use its shelf registration statement. The potential repayment exposure was approximately $10.7 million plus statutory interest; no claims had been made as of the filing, and the filing said the rights would expire during 2013. Possible regulatory enforcement, penalties or fines were also uncertain.
- Other disclosed exposures include up to $12.8 million in future contract research and external-service commitments, generally stoppable on short notice; $2.4 million in operating lease obligations; and up to $10.5 million of potential Ipsen milestone payments, excluded from the contractual-obligations table because timing and achievement were uncertain.
- Principal risks include clinical or regulatory setbacks for pimavanserin, manufacturing and commercialization execution, dependence on financing and collaborators, competition, reimbursement and market acceptance, and patent or product-liability claims. Management reported effective disclosure controls as of September 30, 2013, with no material quarterly change in internal control over financial reporting.
Investor facts to verify
- Whether the planned PDP NDA timing and remaining FDA/CMC requirements were achieved, and what subsequent FDA feedback required.
- Actual cash burn and runway relative to management’s forecast through 2015, including funding needs and dilution risk.
- Progress and funding responsibilities under the ongoing Allergan collaborations, including the chronic pain partnering plan.
- Resolution and expiration of the ATM share rescission exposure, including any claims, repayment or regulatory action.
- Whether the planned Alzheimer’s disease psychosis trial began and how clinical and development costs evolved.