ACADIA Pharmaceuticals Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014; financial statements are unaudited. ACADIA is a development-stage biopharmaceutical company focused on neurological and central nervous system disorders. It had no approved products and no product sales during the quarter.
Key financial metrics
| Metric | Q1 2014 | Q1 2013 or prior period |
|---|---|---|
| Revenue | $0.03 million | $0.417 million |
| Research and development expense | $11.668 million | $4.430 million |
| General and administrative expense | $6.320 million | $2.151 million |
| Total operating expenses | $17.988 million | $6.581 million |
| Operating loss | $17.958 million | $6.164 million |
| Net loss | $17.828 million | $6.123 million |
| Basic and diluted loss per share | $0.19 | $0.08 |
| Net cash used in operating activities | $14.182 million | $6.585 million |
Revenue was collaboration and grant-related; the filing reports no product revenue. Gross margin is not meaningful for this business and is not separately reported. Stock-based compensation was $3.162 million, up from $0.582 million.
At March 31, cash and cash equivalents were $96.455 million and available-for-sale investment securities were $272.830 million. Management reported total cash, cash equivalents, and investment securities of approximately $369.3 million, compared with $185.8 million at December 31, 2013. Total liabilities were $8.046 million; the balance sheet reports no debt. Current assets were $372.820 million and current liabilities $8.033 million.
Financing provided $198.042 million of net cash, principally from a March public offering that generated $196.8 million in net proceeds from 7.36 million shares. Shares outstanding were 98.836 million at March 31, up from 91.103 million at December 31.
Material changes versus the prior comparable period
- Revenue fell to $0.03 million from $0.417 million, primarily because the 2003 Allergan research collaboration ended in March 2013 and grant activity declined.
- R&D expense rose 164% to $11.7 million, mainly from higher external development costs for pimavanserin’s Phase III program and an expanded R&D organization.
- G&A expense rose 194% to $6.3 million, reflecting organizational growth, pre-commercial professional fees, and higher stock-based compensation.
- Net loss increased to $17.8 million from $6.1 million; operating cash use increased to $14.2 million from $6.6 million.
- Cash resources increased substantially following the equity offering. The company reported an accumulated deficit of $423.5 million.
Outlook, commentary, and risks
- ACADIA planned to submit an NDA for pimavanserin for Parkinson’s disease psychosis near the end of 2014, subject to completing supporting studies and CMC work and to further FDA interactions. The FDA had indicated that the pivotal Phase III -020 results, with supporting data, could support an NDA filing; approval was not assured.
- Management expected cash, cash equivalents, and investments to exceed $300 million at year-end 2014 and believed existing resources would fund operations at least into 2017. It expected operating losses and R&D and G&A expenses to continue increasing.
- Pimavanserin was in Phase II development for Alzheimer’s disease psychosis; the company had completed a Phase II schizophrenia co-therapy trial and was planning further studies. Allergan collaborations covered chronic pain and glaucoma; significant future payments depended on candidate advancement.
- Key risks include clinical, regulatory, manufacturing, and commercialization uncertainty; reliance on external trial and manufacturing providers; dependence on pimavanserin; and the possibility of needing additional financing. If funding is unavailable, ACADIA may need to reduce or delay programs or relinquish product rights.
- Allergan could terminate the ongoing collaborations. Allergan was seeking a partner for the chronic pain program, and a proposed Allergan acquisition announced in April 2014 could affect resources devoted to the collaborations.
- Contractual commitments included up to approximately $20.8 million for future external research and development services, generally stoppable on short notice, and $2.113 million in operating lease obligations. Potential Ipsen milestone payments of $10.5 million, subject to specified events and offset by sublicensing fees, were not included in the contractual-obligations table.
- The CFO retired on April 18, 2014. Q1 stock-based compensation included $0.531 million related to modification of his options; the company expected to record a further $1.1 million in Q2 2014.
- Management concluded disclosure controls were effective at a reasonable assurance level as of March 31, 2014 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress against the planned late-2014 NDA timetable, including completion of supportive studies, CMC work, and any additional FDA requirements.
- Whether the reported cash runway assumptions remain valid as clinical, regulatory, and planned commercialization spending increases.
- Clinical results and development timelines for pimavanserin in Parkinson’s disease psychosis, Alzheimer’s disease psychosis, and schizophrenia.
- Allergan’s continued commitment to the chronic pain and glaucoma programs, including any effects of partnership or ownership changes.
- Future share dilution, stock-based compensation, and any additional financing needs.