ACADIA Pharmaceuticals Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. ACADIA is a biopharmaceutical company whose sole marketed product was NUPLAZID (pimavanserin), approved in the U.S. for hallucinations and delusions associated with Parkinson’s disease psychosis (PD Psychosis) and launched in May 2016. Unless otherwise noted, amounts below are in millions of dollars.
Financial results and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $30.5 | $0.1 | $45.8 | $0.1 |
| Operating expenses | $98.9 | $72.0 | $203.0 | $122.3 |
| Operating loss | $(68.4) | $(71.9) | $(157.2) | $(122.2) |
| Net loss | $(67.4) | $(71.3) | $(155.3) | $(121.1) |
| Basic and diluted loss per share | $(0.55) | $(0.63) | $(1.27) | $(1.08) |
| Cash used in operating activities | — | $(129.6) | $(98.0) |
- Q2 product sales were $30.5 million; cost of product sales was $2.2 million, or about 7% of sales, before license fees and royalties. For the first half, cost of product sales was $4.5 million, or about 10% of sales.
- R&D expense was $34.2 million in Q2 and $69.6 million for the first half; SG&A was $61.5 million and $127.3 million, respectively. Both increased year over year, reflecting clinical development and commercialization investments.
- At June 30, cash and cash equivalents were $143.8 million and available-for-sale investments were $273.5 million, totaling $417.3 million, versus $529.0 million at December 31, 2016. Total assets were $456.3 million and total liabilities $41.2 million; the filing reports no debt balance.
- Current assets were $443.7 million and current liabilities $40.9 million. Cash, cash equivalents and investment securities declined $111.7 million during the first half. Financing activities provided $18.5 million in the period.
Material changes and unusual items
- Beginning April 1, 2017, ACADIA changed NUPLAZID revenue recognition from sell-through to sell-in, after determining it could reasonably estimate rebates and chargebacks. The change added $3.6 million of Q2 revenue from previously shipped product. Accordingly, reported 2017 revenue is not directly comparable with 2016, when sales were minimal and the product had only recently launched.
- First-half R&D spending rose to $69.6 million from $43.3 million, primarily due to clinical and personnel costs for pimavanserin programs beyond PD Psychosis. First-half SG&A rose to $127.3 million from $78.3 million, reflecting commercialization, medical education, and expanded sales-force costs.
- First-half operating cash use increased to $129.6 million from $98.0 million. Net loss increased year over year, partly offset in the cash-flow reconciliation by higher noncash stock-based compensation.
- The company adopted stock-compensation accounting guidance in Q1 2017; it recorded a $36.8 million increase in deferred tax assets with a corresponding valuation allowance, with no material net tax benefit indicated.
Outlook, management commentary and risks
- Management said existing cash, cash equivalents and investments were expected to fund planned operations for at least the next 12 months. It also warned that significant additional financing may be needed; future cash needs depend on sales, clinical and post-marketing costs, and other factors. No specific revenue or earnings guidance was provided.
- ACADIA expected R&D and SG&A expenses to remain substantial or increase as it commercializes NUPLAZID, conducts FDA-required post-marketing studies and develops pimavanserin for Alzheimer’s disease psychosis and agitation, schizophrenia, and major depressive disorder. The planned Phase III Alzheimer’s psychosis study was expected to begin in the second half of 2017.
- Key business risks include dependence on NUPLAZID as its only approved product, uncertain market adoption and reimbursement, a boxed warning regarding increased death risk in elderly patients with dementia-related psychosis, regulatory and post-marketing-study outcomes, clinical-trial failure, and reliance on single suppliers for NUPLAZID active ingredient and drug product.
- A securities class action related to earlier statements about the NUPLAZID NDA timeline had a proposed settlement preliminarily approved by the court in June 2017. A final approval hearing was scheduled for October 3, 2017; the filing does not state a settlement amount.
- Management concluded disclosure controls were effective as of June 30, 2017 and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Underlying NUPLAZID demand and sales trends, separating ongoing sell-in sales from the $3.6 million one-time revenue adjustment and monitoring sales allowances.
- Cash burn, investment balances and whether operating cash use remains consistent with management’s at-least-12-month liquidity expectation.
- Progress, timing and results of post-marketing commitments and pimavanserin trials, especially the planned Phase III Alzheimer’s psychosis study.
- NUPLAZID safety, prescribing acceptance, payer coverage and effects of the April 2017 price increase and shorter free-supply period.
- Final court approval and financial terms, if any, of the securities class-action settlement.