ACADIA Pharmaceuticals Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Comparisons are with Q1 2019 unless stated otherwise. Amounts are in U.S. dollars; financial statement figures are in millions unless noted. ACADIA is a biopharmaceutical company whose only marketed product is NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Product revenue | $90.1 | $63.0; up 43.1% |
| Operating expenses | $179.6 | $150.6 |
| Operating loss | $(89.5) | $(87.6) |
| Net loss | $(88.0) | $(85.3) |
| Net loss per share, diluted | $(0.57) | $(0.59) |
| Net cash used in operations | $(49.0) | $(64.2) |
NUPLAZID unit sales grew approximately 32%; a higher average selling price also contributed to revenue growth. Cost of product sales was $2.8 million, about 3% of net sales versus 5% a year earlier. Reported product gross margin before royalties and other expenses was therefore approximately 97%.
Research and development expense rose to $72.6 million from $52.9 million, including a $10.0 million upfront payment for the Vanderbilt M1 PAM license and higher trofinetide development costs. Selling, general and administrative expense increased to $102.0 million from $93.1 million. A $1.5 million loss on a strategic investment contributed to other expense, compared with $0.2 million a year earlier.
At March 31, 2020, cash and cash equivalents were $173.1 million and available-for-sale investments were $478.3 million, totaling $651.4 million. Current assets were $724.4 million and current liabilities $99.7 million. Operating cash use declined year over year; cash, cash equivalents and restricted cash decreased by $15.6 million during the quarter. The filing reports no borrowings; operating lease liabilities totaled $9.0 million. Management said available cash and investments should fund planned operations for at least 12 months, while noting possible future financing needs.
Material changes and business developments
- Accrued liabilities increased to $93.1 million from $67.6 million, including accrued sales allowances of $27.6 million versus $11.3 million at year-end. Total sales allowance accruals rose to $31.0 million from $14.2 million.
- ACADIA licensed worldwide rights to Vanderbilt’s M1 PAM program in March 2020, paying $10.0 million upfront. The agreement includes up to $515.0 million in potential clinical and commercial milestones plus tiered royalties.
- The company amended its San Diego office lease to add approximately 30,608 square feet, with minimum payments of $25.3 million over an initial term of about 10 years and 7 months. The lease had not commenced as of quarter-end and was expected to commence in Q3 2020.
- Net loss per share improved despite a higher total net loss, primarily reflecting a larger weighted-average share count.
Outlook, management commentary and risks
- COVID-19: No material effect on NUPLAZID net sales was observed in Q1, but management expected subsequent sales pressure from reduced in-person access to providers, telemedicine and possible declines in diagnoses and new prescriptions. The company said supply was uninterrupted and it did not anticipate near-term NUPLAZID supply disruptions.
- New enrollment in clinical trials was temporarily paused because of the pandemic. LAVENDER enrollment was paused; management continued to expect results in 2021, while acknowledging timing uncertainty. For the CLARITY Phase 3 depression studies, enrollment had been paused and management was ready to resume, but was considering combining the two studies and planned to discuss the proposal with FDA in Q2. ADVANCE-2 for schizophrenia was planned for the second half of 2020, subject to pandemic-related uncertainty.
- Following a March 2020 FDA meeting, ACADIA planned to submit a supplemental NDA for dementia-related psychosis in summer 2020. The Phase 3 HARMONY study met its primary endpoint, reducing relapse risk 2.8-fold versus placebo (HR 0.353; one-sided p=0.0023). Approval is not assured.
- The filing says 2020 financial guidance had recently been revised to reflect expected COVID-19 sales impacts, but the supplied filing text does not provide a clear value for the revised guidance. Management expects continued operating losses for the next few years and substantial R&D spending.
- Key risks include reliance on NUPLAZID as the sole commercial product; clinical, regulatory and commercialization uncertainty for pipeline candidates; COVID-19 effects on sales and trials; possible financing constraints and dilution; drug pricing and reimbursement pressures; and manufacturing dependence on third parties.
- ACADIA disclosed a pending securities class action and a derivative action stayed pending the class-action dismissal ruling. It could not estimate possible losses and had accrued no amounts other than legal fees. A DOJ civil investigative demand concerning NUPLAZID sales and marketing remained under investigation; the company was cooperating, and timing and outcome were uncertain.
Important facts for investors to verify
- Whether NUPLAZID revenue growth and the increased sales allowance accruals translate into sustained net sales and cash generation.
- The specific revised 2020 financial guidance, which is not stated clearly in the supplied filing text, and subsequent COVID-19 effects on commercial activity and trial timelines.
- FDA progress and the timing and evidentiary requirements for the planned dementia-related psychosis sNDA.
- Developments in the DOJ investigation, securities litigation and derivative action, including any change in potential exposure.
- Future R&D spending, milestone obligations, lease commencement and the adequacy of liquidity if sales or development plans underperform.