ACADIA Pharmaceuticals Inc. — FY 2015 Form 10-K
Reporting period: Year ended December 31, 2015; fourth-quarter figures are identified separately below. Amounts are U.S. dollars unless stated otherwise.
Business context and reporting period
ACADIA is a clinical-stage biopharmaceutical company focused on central nervous system disorders. Its lead candidate, pimavanserin (NUPLAZID), had completed pivotal Phase III development for Parkinson’s disease psychosis (PDP), but was not approved and generated no product sales in 2015. The FDA accepted its NDA for priority review in October 2015, with a PDUFA goal date of May 1, 2016.
The company reported positive results from its pivotal PDP study, including reduced psychosis without worsening motor function. Other programs included a Phase II Alzheimer’s disease psychosis study, a planned Phase II Alzheimer’s agitation study, and further evaluation of schizophrenia opportunities.
Key financial metrics
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $0.061 million | $0.120 million |
| Research and development expense | $73.9 million | $60.6 million |
| General and administrative expense | $88.3 million | $32.7 million |
| Total operating expenses | $164.7 million | $93.4 million |
| Net loss | $164.4 million | $92.5 million |
| Basic and diluted loss per share | $1.63 | $0.95 |
| Net cash used in operating activities | $121.8 million | $66.4 million |
Fourth-quarter 2015 revenue was $17,000 and net loss was $45.8 million, or $0.45 per share. With virtually no revenue and continuing losses, conventional profit margins are not meaningful.
At December 31, 2015, cash and cash equivalents were $102.1 million and available-for-sale investments were $113.0 million, totaling $215.1 million. Working capital was $197.1 million; total assets were $221.9 million and stockholders’ equity was $199.8 million. Total liabilities were $22.1 million, chiefly accrued liabilities; the filing reports no borrowings or debt. Contractual operating lease and other long-term obligations totaled $8.6 million.
Operating cash use increased from $66.4 million to $121.8 million. Investing activities provided $147.6 million, primarily reflecting investment maturities, while financing activities provided $14.5 million, mainly from option exercises and employee stock purchases. The company reported an accumulated deficit of $662.6 million.
Material changes versus the prior comparable period
- Revenue fell to $61,000 from $120,000, reflecting the absence of meaningful collaboration income; the glaucoma collaboration with Allergan terminated in 2015.
- R&D expense rose 22% to $73.9 million, largely due to expanded personnel and related costs, including stock-based compensation.
- G&A expense rose to $88.3 million from $32.7 million as commercial-launch preparation expanded. It included $28.0 million of stock-based compensation and a $9.6 million charge related to the former CEO’s transition agreement, including $9.0 million of stock-based compensation.
- Cash, cash equivalents and investments declined by $107.4 million during 2015, primarily because of operating cash use, partly offset by equity-related proceeds.
- In January 2016, after year-end, ACADIA raised approximately $281.6 million net from a follow-on offering of 10.3 million shares. This subsequent financing is not included in December 31, 2015 cash or share balances.
Outlook, risks, contingencies and unusual items
- Management expected operating losses and substantial R&D and commercialization spending to continue for at least the next few years. It stated that year-end resources, together with the January 2016 offering, were expected to fund planned operations through at least the next 12 months.
- Management planned to build a U.S. specialty sales force of approximately 135 professionals, contingent on NUPLAZID approval. It expected to complete enrollment in the Alzheimer’s psychosis Phase II study around mid-2016, with top-line results expected in fourth-quarter 2016, and planned to start an Alzheimer’s agitation Phase II study in the first half of 2016.
- The FDA advisory committee was scheduled to discuss NUPLAZID’s risk-benefit profile on March 29, 2016. Priority review and Breakthrough Therapy designation do not assure approval. Approval, labeling, post-market requirements, payer coverage, pricing and commercial uptake remained uncertain.
- ACADIA relied on one supplier each for NUPLAZID active ingredient and drug product, creating supply and manufacturing-compliance risks. It also remained dependent on external providers for clinical trials and manufacturing.
- A consolidated securities class action relating to statements about the timing of the NDA submission was pending. The company had moved to dismiss; it could not estimate possible losses and had accrued no litigation amount other than ongoing legal fees.
- An Ipsen license milestone of $2.5 million was expensed in 2015 following NDA acceptance. FDA approval would trigger a further $8.0 million milestone and, if sales occur, royalties of up to 2% of net sales.
- Allergan’s continuing chronic-pain program was subject to partner and development uncertainty following corporate transactions and Allergan’s search for a development partner. ACADIA stated the impact was unclear.
- Management expected no dividends in the foreseeable future. The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of year-end.
Important facts for investors to verify
- FDA review outcome, advisory committee feedback, final labeling and any post-approval requirements for NUPLAZID.
- Cash use, quarterly operating costs and liquidity runway after incorporating the January 2016 offering and planned launch spending.
- Enrollment and data timing for the Alzheimer’s psychosis study, and progress of the Alzheimer’s agitation and other pipeline programs.
- Commercial manufacturing readiness, supplier continuity, payer access, pricing assumptions and launch execution if NUPLAZID is approved.
- Developments in the securities class action, the potential Ipsen approval milestone and royalties, and the status of the Allergan chronic-pain collaboration.