ACADIA Pharmaceuticals Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. The filing also reports fourth-quarter results. ACADIA is a CNS-focused biopharmaceutical company; NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis (PD Psychosis), was its only marketed product.
Financial performance and liquidity
Amounts below are in millions of U.S. dollars, except per-share data.
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Net product revenue | $223.8 | $124.9 |
| Gross profit | $211.4 | $115.8 |
| Gross margin | 94.5% | 92.7% |
| Research and development | $187.2 | $149.2 |
| Selling, general and administrative | $265.8 | $255.1 |
| Operating loss | $(247.4) | $(292.4) |
| Net loss | $(245.2) | $(289.4) |
| Net loss per share, diluted | $(1.94) | $(2.36) |
| Cash used in operating activities | $(167.5) | $(217.8) |
- NUPLAZID revenue rose 79% year over year; unit sales increased approximately 43%, with a higher average gross selling price also contributing.
- At year-end, cash, cash equivalents and investment securities totaled $473.5 million, up from $341.3 million. Working capital was $466.5 million; total liabilities were $61.1 million. The balance sheet shows no borrowings or debt line item.
- Cash from financing activities was $306.6 million, primarily reflecting approximately $298.5 million of net proceeds from a November 2018 stock offering. Cash used in investing activities was $71.5 million.
- Fourth-quarter revenue was $59.6 million and net loss was $65.5 million, or $0.50 per share, compared with revenue of $43.6 million and net loss of $68.9 million, or $0.55 per share, in fourth-quarter 2017.
Material changes and business developments
- In June 2018, the FDA approved a single-capsule 34 mg NUPLAZID formulation and a 10 mg tablet for patients taking strong CYP3A4 inhibitors.
- In October, ACADIA reported positive top-line Phase 2 CLARITY results for pimavanserin as adjunctive treatment for major depressive disorder (MDD); the company said it planned to begin Phase 3 in the first half of 2019.
- ACADIA licensed North American rights to trofinetide from Neuren in August 2018 for Rett syndrome and other indications. It expensed a $10 million upfront payment and planned a Phase 3 Rett syndrome study in the second half of 2019.
- Research and development expense increased 25% to $187.2 million, driven mainly by clinical-development costs and the trofinetide license payment. SG&A increased 4% to $265.8 million; advertising expense was $39.8 million versus $15.6 million in 2017.
Outlook, risks and unusual items
- Management expected operating losses to continue for at least the next few years and stated that year-end cash resources were expected to fund planned operations for at least the next 12 months. No specific revenue, earnings or profitability guidance was provided.
- Key pipeline milestones cited were HARMONY, a Phase 3 dementia-related psychosis study; expected mid-2019 top-line results from the ENHANCE Phase 3 schizophrenia study; planned Phase 3 development in MDD; and planned Phase 3 development of trofinetide in Rett syndrome.
- ACADIA recorded a $2.7 million inventory write-down and a $1.8 million loss on a strategic equity investment in 2018. Neuren may also receive up to $455 million in contingent development and sales milestones, plus tiered double-digit royalties; these amounts are not recorded as current debt or included in contractual-obligation totals.
- Material risks include reliance on NUPLAZID for commercial revenue, continuing losses and cash consumption, clinical and regulatory uncertainty, the product’s boxed warning and post-marketing obligations, reimbursement and drug-pricing pressures, and dependence on a limited number of distribution customers and contract manufacturers.
- In September 2018, the company received a Department of Justice civil investigative demand concerning NUPLAZID sales and marketing and said it was cooperating. Three securities class-action complaints alleging misleading disclosures were consolidated in January 2019. ACADIA said it could not predict outcomes or estimate possible losses and had accrued no amounts for the suits beyond ongoing legal fees.
- The FDA stated in September 2018 that its review of reported deaths and serious adverse events found no new or unexpected safety findings and that NUPLAZID’s benefits continued to outweigh its risks for the approved PD Psychosis use.
Most important facts for investors to verify
- Whether NUPLAZID sales growth, pricing, patient access and gross-to-net deductions remain sustainable.
- Cash burn against the stated runway, including the cost and timing of commercial expansion, post-marketing studies and pipeline trials.
- Clinical and regulatory results and timelines for HARMONY, ENHANCE, MDD and trofinetide.
- Developments in the DOJ investigation and securities litigation, including any resulting liabilities or business restrictions.
- Customer and supplier concentration, contingent Neuren milestones and royalties, and the effect of stock issuance on dilution.