ACADIA Pharmaceuticals Inc. — Q3 2014 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2014. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
ACADIA is a development-stage biopharmaceutical company with no product sales to date. Its lead candidate, pimavanserin (NUPLAZID), is being developed for Parkinson’s disease psychosis (PDP). The company reported positive pivotal Phase III results, received FDA Breakthrough Therapy designation in September 2014, and planned to submit an NDA in the first quarter of 2015. Pimavanserin was also in Phase II development for Alzheimer’s disease psychosis; a Phase II schizophrenia co-therapy study had been completed. Chronic pain and glaucoma programs were partnered with Allergan.
Financial performance
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $0.015 | $0.240 | $0.072 | $1.108 |
| Research and development expense | $16.952 | $7.254 | $42.420 | $18.797 |
| General and administrative expense | $8.057 | $3.797 | $22.328 | $8.444 |
| Operating loss | $(24.994) | $(10.811) | $(64.676) | $(26.133) |
| Net loss | $(24.786) | $(10.695) | $(64.109) | $(25.899) |
| Net loss per share | $(0.25) | $(0.12) | $(0.66) | $(0.31) |
- Revenue was primarily from collaborations and grants; the company had not generated product revenue. The nine-month revenue decline largely reflected the conclusion of an Allergan research collaboration in March 2013 and lower grant activity.
- R&D spending rose substantially, principally due to third-party costs for NUPLAZID development and NDA preparation. NUPLAZID external service-provider costs were $31.0 million for the nine months, versus $12.1 million a year earlier.
- G&A growth reflected expanded administrative and pre-commercial activities, personnel costs, professional services, and higher stock-based compensation. Nine-month stock-based compensation included $1.7 million related to the former CFO’s option modification.
- Operating margins are not meaningful given negligible revenue and the company’s development-stage losses.
Liquidity, cash flow and capital
- At September 30, 2014, cash and cash equivalents were $36.4 million and available-for-sale investments were $301.4 million, totaling $337.8 million, compared with $185.8 million at December 31, 2013.
- Current assets were $341.1 million and current liabilities $11.3 million. The balance sheet reported no debt balance; long-term liabilities were $0.021 million.
- For the first nine months, operating cash use was $48.6 million (versus $21.5 million in 2013), investing cash use was $127.7 million (versus $135.6 million), and financing provided $201.0 million (versus $111.1 million).
- Financing included $196.8 million net proceeds from a March 2014 public offering. Shares issued and outstanding increased to 99.7 million at quarter-end from 91.1 million at year-end 2013.
- Management expected available cash, cash equivalents, and investments to fund planned operations at least into the second half of 2016, while cautioning that additional financing may be required. No product-sales or profitability guidance was provided.
Outlook, risks and contingencies
- Management expected R&D and G&A expenses to increase as it completed NDA-enabling work, prepared for a potential NUPLAZID launch, and advanced other pimavanserin studies. It could not reliably estimate development costs or completion dates.
- NUPLAZID approval and commercialization remained uncertain: FDA review would assess the complete NDA package, approval and labeling were not assured, and ACADIA had not previously launched a product. The company planned to build a specialty sales force if approved.
- ACADIA bore responsibility for the global pimavanserin program. Key risks included regulatory and clinical outcomes, manufacturing and supply readiness, reimbursement and market acceptance, financing needs, intellectual-property protection, and dependence on external research/manufacturing providers.
- Allergan could terminate the ongoing collaborations. The filing noted Allergan was seeking a partner for chronic pain development and had announced workforce reductions and restructuring, which could affect resources devoted to partnered programs.
- Future service commitments to contract research organizations and other providers were up to approximately $19.3 million, generally subject to cancellation or adjustment. Potential Ipsen regulatory milestone payments totaled $10.5 million and depended on future regulatory events.
- The company reported an accumulated deficit of $469.8 million and expected operating losses for at least the next few years. It warned that inability to obtain financing could force delays, scope reductions, program cancellations, or licensing of rights on less favorable terms.
- Available-for-sale investments had no identified other-than-temporary impairment. Management stated a 10% interest-rate change would not have materially affected portfolio fair value. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting identified.
Most important facts for investors to verify
- Whether the planned Q1 2015 NUPLAZID NDA submission occurred, and the FDA’s filing, review, and approval decisions.
- Whether the stated cash runway into the second half of 2016 remains supported by actual spending, development costs, and commercial-preparation needs.
- Progress and results of the Alzheimer’s disease psychosis and other pimavanserin studies, including any safety, efficacy, or manufacturing issues.
- Changes in Allergan’s commitment to the chronic pain and glaucoma collaborations and the likelihood of milestone or royalty payments.
- Potential dilution from further equity financing, along with the timing and terms of any financing or licensing transactions.