ACADIA Pharmaceuticals Inc. — Q3 2011 Form 10-Q
Reporting period: Three and nine months ended September 30, 2011. The filing was dated November 9, 2011. ACADIA is a clinical-stage biopharmaceutical company with no product sales; revenue came primarily from collaborations and grants.
Financial results and liquidity
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $0.584 million | $2.301 million | $1.479 million | $6.731 million |
| Research and development expense | $4.158 million | $4.965 million | $12.885 million | $15.822 million |
| General and administrative expense | $1.519 million | $1.578 million | $6.132 million | $4.944 million |
| Operating loss | $5.093 million | $4.242 million | $17.538 million | $14.035 million |
| Net loss | $5.076 million | $4.227 million | $17.465 million | $14.002 million |
| Basic and diluted loss per share | $0.10 | $0.11 | $0.34 | $0.37 |
Gross margin is not presented; the filing reports collaboration revenue and operating expenses. For the nine months, net cash used in operations was $14.559 million, investing activities provided $2.165 million, and financing activities provided $13.847 million. The financing inflow primarily reflected the January 2011 private placement.
At September 30, 2011, cash and cash equivalents were $8.317 million and available-for-sale investments were $27.833 million. Management reported total cash, cash equivalents and investment securities of approximately $36.2 million, versus $37.1 million at December 31, 2010. Total assets were $37.022 million; total liabilities were $8.878 million; and stockholders’ equity was $28.144 million. Debt was small: the balance sheet showed $37,000 current long-term debt, and contractual debt obligations totaled $43,000. No separate interest-rate margin or gross-margin measure was reported.
Changes and notable items
- Revenue fell substantially year over year, mainly because the Biovail collaboration ended in October 2010 and remaining related revenue had been recognized in 2010. ACADIA reported no future obligations to Biovail.
- Nine-month R&D expense declined by $2.937 million, primarily due to lower external costs, including reduced spending on the pimavanserin Phase III program. Management expected R&D expense to increase as development continued.
- Nine-month G&A expense increased by $1.188 million, mainly reflecting a net $1.1 million charge associated with terminating the Swedish facility lease. The settlement included a $690,000 payment and 782,339 shares issued to the landlord.
- In January 2011, ACADIA raised approximately $13.8 million net through a private placement of 12.565 million common shares and warrants. Common shares outstanding increased from 39.351 million at year-end 2010 to 52.801 million at September 30, 2011.
- Accumulated deficit reached $341.6 million. The company reported an $806,000 non-cash lease-termination charge in operating cash-flow adjustments.
Outlook, risks and contingencies
- Management expected available liquidity and anticipated collaboration payments to fund operations at least into the first half of 2013, but said significant additional financing would be needed in the future. Financing may not be available on acceptable terms; absent funding, programs could be delayed, reduced or discontinued, or rights licensed on less favorable terms.
- ACADIA expected continuing operating losses for at least several years and did not provide revenue, earnings or clinical-development completion-date guidance. It said it could not reliably estimate program costs or timelines because of clinical-development uncertainty.
- Pimavanserin, ACADIA’s lead program and wholly owned worldwide following the Biovail agreement, was in Phase III development for Parkinson’s disease psychosis. The company highlighted its earlier unsuccessful Phase III trial and the risk that an unfavorable outcome in the ongoing -020 study could materially harm the program and financing prospects.
- Other programs included chronic pain and glaucoma candidates in collaboration with Allergan and a Phase I candidate with Meiji Seika Pharma. The Allergan research term was extended through March 2012; the filing noted that Allergan was seeking a partner for the chronic-pain program. In November 2011, after the quarter, ACADIA announced FDA clearance to proceed with a Phase I study of AM-831 for schizophrenia.
- Contractual obligations included $983,000 for leases and debt, plus up to approximately $7.3 million for future external research and development services; many service contracts could be stopped on short notice without paying their full stated amount. A separate Ipsen license could require up to $10.5 million in milestone payments, subject to conditions, and those amounts were excluded from the obligations table.
- Key risks include clinical-trial failure or delay, reliance on collaborators and contract research organizations, the need for further capital, competition, regulatory and reimbursement uncertainty, and intellectual-property challenges. Management reported disclosure controls were effective as of September 30, 2011 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, enrollment and results of the pimavanserin -020 Phase III study, and the cash cost and timeline to advance the program.
- Liquidity runway assumptions behind management’s “at least into the first half of 2013” estimate, including expected collaboration receipts and future development spending.
- Potential dilution from the January 2011 warrants and any further equity financing; verify current shares outstanding and warrant terms.
- Whether Allergan extends its research term or secures a partner for chronic pain, and the status and funding responsibilities for the Meiji collaboration and AM-831.
- Actual cash commitments under external-service contracts and the conditions, timing and potential amount of Ipsen milestone payments.