ACADIA Pharmaceuticals Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. Unaudited results; dollar amounts below are in millions unless otherwise noted. ACADIA is a clinical-stage biopharmaceutical company focused on neurological and central nervous system disorders. It had no approved products and had generated no product sales.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $0.004 | $0.030 |
| Research and development expense | $16.295 | $11.668 |
| General and administrative expense | $24.261 | $6.320 |
| Total operating expenses | $40.556 | $17.988 |
| Net loss | $(40.375) | $(17.828) |
| Net loss per share, basic and diluted | $(0.40) | $(0.19) |
| Net cash used in operations | $(25.346) | $(14.182) |
Revenue consisted of collaboration-related amounts; there were no product sales. Gross profit and operating margins are not meaningful for this period because revenue was negligible and the company reported an operating loss. Interest income, net, was $0.177 million, compared with $0.130 million a year earlier.
At March 31, 2015, cash and cash equivalents were $76.424 million and available-for-sale investments were $221.469 million, totaling approximately $297.9 million, versus $322.5 million at December 31, 2014. Current assets were $299.9 million; current liabilities were $16.7 million. Total liabilities were $16.9 million, with no debt balance reported. Accumulated deficit was $538.5 million.
Cash provided by investing activities was $38.473 million, mainly reflecting investment maturities exceeding purchases; financing provided $1.439 million. Cash and cash equivalents increased $14.570 million during the quarter. Operating cash use increased by $11.2 million year over year. The company reported $6.9 million of operating lease obligations and up to approximately $27.1 million of future external-service commitments, generally stoppable on short notice. Potential Ipsen payments include $2.5 million upon FDA filing and $8.0 million upon first FDA approval, plus royalties of up to 2% of future net sales if applicable.
Material changes and unusual items
- Revenue fell to $4,000 from $30,000, primarily because certain grant-funded activities had ended.
- R&D expense rose $4.6 million, reflecting higher personnel costs and stock compensation, as well as external costs for NUPLAZID manufacturing quality-system preparations.
- G&A expense rose $17.9 million. This included $9.6 million of expense related to former CEO Uli Hacksell’s March 2015 transition agreement, including a $9.0 million stock-based compensation charge. Total stock-based compensation was $14.5 million, versus $3.2 million in Q1 2014.
- The prior-year quarter included $198.0 million of financing cash inflow, primarily from the March 2014 public offering; Q1 2015 financing inflow was $1.4 million.
Business outlook, commentary, and risks
ACADIA planned to submit an NDA for NUPLAZID (pimavanserin) for Parkinson’s disease psychosis in the second half of 2015. The timing had shifted after additional time was needed to prepare manufacturing quality systems for commercial supply and FDA review. The company reported positive pivotal Phase III results and FDA Breakthrough Therapy designation, but approval, timing, labeling, and commercial success remained uncertain.
Management expected operating losses and substantial R&D and G&A spending to continue for at least several years, with spending rising as the company prepared for a potential launch and advanced pimavanserin studies in Alzheimer’s disease psychosis and other indications. ACADIA estimated existing cash, cash equivalents, and investments would fund planned operations at least into the second half of 2016; additional financing may be needed, and availability on acceptable terms was uncertain.
Other material risks include reliance on third-party manufacturers (the filing identifies a single supplier for the active pharmaceutical ingredient and a single tablet supplier), FDA and commercialization uncertainty, and dependence on Allergan collaborations for chronic pain and glaucoma programs. The filing notes Actavis’s March 2015 acquisition of Allergan and the possibility that resources for those programs could be reduced or programs discontinued. Two putative securities class actions filed in March 2015 allege misleading statements about the planned NDA timing; ACADIA said it could not estimate potential losses and had accrued no amount other than ongoing legal fees. Management concluded disclosure controls were effective as of March 31, 2015 and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the NDA was submitted on the stated second-half 2015 timetable and the FDA’s subsequent filing and review decisions.
- Cash runway assumptions against the continued operating cash burn and planned pre-commercial spending.
- The scale and recurrence of stock-based compensation and executive-transition costs.
- Manufacturing readiness, supplier concentration, and any changes to the NUPLAZID launch plan.
- Developments in the securities litigation and the status of Allergan-partnered programs and related potential payments.