ACADIA Pharmaceuticals Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Acadia is a biopharmaceutical company focused on CNS disorders and rare diseases. Its U.S. commercial products are NUPLAZID for Parkinson’s disease psychosis and DAYBUE for Rett syndrome; DAYBUE launched in April 2023.
Financial performance
Amounts are in millions, except per-share data and percentages. Comparisons are with the corresponding 2022 period.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Product sales, net | $211.7 | $130.7 | $495.4 | $380.7 |
| Cost of product sales | $14.6 | $2.1 | $23.7 | $7.8 |
| Gross margin, calculated | 93.1% | 98.4% | 95.2% | 98.0% |
| Research and development | $157.0 | $81.3 | $284.9 | $285.8 |
| Selling, general and administrative | $97.9 | $78.1 | $295.1 | $264.7 |
| Operating loss | $(57.8) | $(30.9) | $(108.3) | $(177.5) |
| Net loss | $(65.2) | $(27.2) | $(107.1) | $(174.3) |
| Net loss per share, diluted | $(0.40) | $(0.17) | $(0.65) | $(1.08) |
| Cash used in operating activities | Not reported quarterly | Not reported quarterly | $(68.7) | $(90.2) |
- Product mix: Q3 sales were $144.8 million for NUPLAZID and $66.9 million for DAYBUE. Nine-month sales were $405.3 million and $90.1 million, respectively. NUPLAZID sales rose year over year on higher unit sales and average net selling price.
- Cash and liquidity: At September 30, cash and cash equivalents were $98.2 million and available-for-sale investments were $247.7 million, totaling $345.9 million. Current assets were $499.2 million and current liabilities were $209.6 million. Management expected available cash, equivalents and investments to fund planned operations through and beyond the next 12 months.
- Debt and obligations: The balance sheet reports no borrowings. Operating lease liabilities totaled $57.1 million, including $9.0 million current. Total liabilities were $270.4 million.
- Cash flow: Nine-month investing activities provided $32.3 million and financing activities provided $19.7 million. Cash, cash equivalents and restricted cash declined $16.7 million to $104.0 million. Cash plus investments fell $70.9 million from year-end 2022 to $345.9 million.
Material changes and unusual items
- Q3 revenue increased 62% year over year, reflecting DAYBUE’s launch and 11% growth in NUPLAZID sales. Nine-month revenue increased 30%.
- Q3 R&D expense rose by $75.6 million, primarily because Acadia expensed a $100.0 million upfront payment under its expanded Neuren license agreement. Nine-month R&D was approximately flat year over year.
- Q3 SG&A rose by $19.8 million, mainly due to DAYBUE launch costs. Nine-month SG&A rose by $30.4 million for the same primary reason.
- DAYBUE cost of sales was affected by pre-launch inventory whose manufacturing costs had previously been expensed as R&D. Acadia said using that “zero cost” inventory reduced reported cost of sales; it estimated that including those costs would have added $3.9 million in Q3 and $5.3 million year to date. Management estimated future cost of product sales at mid-single-digit to high-single-digit percentages of total product sales once the zero-cost inventory is depleted.
- In July, Acadia expanded its Neuren agreement to obtain trofinetide rights outside North America and global rights to NNZ-2591 for Rett and Fragile X syndromes. It paid $100.0 million upfront; further milestones could total up to $426.3 million for trofinetide outside North America and $831.3 million for NNZ-2591, in addition to royalties.
- Acadia capitalized a $40.0 million DAYBUE approval milestone and an estimated $29.6 million obligation to Neuren related to the Rare Pediatric Disease Priority Review Voucher as intangible assets. The latter was recorded as an accrued contingent payment.
Outlook, risks and contingencies
- Management expected continued operating losses for the next few years, with substantial spending on commercialization and development. It said additional financing may be needed in the future, although current resources were expected to cover planned operations beyond 12 months.
- Acadia expected top-line results from the Phase 3 ADVANCE-2 pimavanserin study in negative symptoms of schizophrenia in Q1 2024. At the time of filing, it planned to initiate Phase 3 ACP-101 testing for Prader-Willi syndrome and a Phase 2 ACP-204 study for Alzheimer’s disease psychosis in Q4 2023.
- The filing identifies commercialization and reimbursement of NUPLAZID and DAYBUE, clinical and regulatory outcomes, third-party manufacturing and supply, intellectual-property protection, and financing access as key risks. Management also cited macroeconomic and geopolitical uncertainty.
- Patent litigation concerning generic NUPLAZID remains active against MSN; MSN’s validity challenge was under summary-judgment review, and a separate claim-construction hearing involving remaining defendants was scheduled for December 2023. A stockholder securities class action was in discovery, with a class-certification motion pending. Management said it could not estimate possible losses and had not accrued litigation amounts other than incurred legal fees; it did not then expect the matters to have a material adverse effect, but noted outcomes were unpredictable.
- Potential milestone payments under pipeline agreements were up to $2.8 billion in aggregate as of September 30, 2023. These are contingent obligations, not current debt.
- The filing provides no clear numerical revenue or earnings guidance for 2023. It says results may fluctuate and does not provide a definitive forecast of when profitability will be achieved.
Important facts for investors to verify
- DAYBUE’s launch trajectory, patient uptake, payer coverage, sales allowances and net sales relative to expectations.
- NUPLAZID sales trends, pricing and the effect of generic-entry litigation and patent settlements on potential competition timing.
- Cash burn and the $345.9 million cash-and-investments balance, including the effect of commercialization, licensing, milestones and contingent payments on future liquidity.
- ADVANCE-2 results and the timing and progress of the planned ACP-101 and ACP-204 studies.
- The size and timing of Neuren royalties and contingent payments, and the eventual disposition or use of the Priority Review Voucher.
- Developments in the NUPLAZID patent cases and securities class action, and any resulting financial or commercial impact.