ACADIA Pharmaceuticals Inc. — Q2 2011 Form 10-Q
Business context and reporting period. This unaudited quarterly filing covers the three and six months ended June 30, 2011. ACADIA is a clinical-stage biopharmaceutical company focused on central nervous system disorders, with no product sales to date. Its lead candidate, pimavanserin, was in Phase III development for Parkinson’s disease psychosis; other programs included chronic pain, glaucoma and an IND-track collaboration program.
Financial performance and position
- Revenue: Collaboration revenue was $0.46 million in Q2 2011 versus $2.30 million in Q2 2010; first-half revenue was $0.90 million versus $4.43 million. The filing reports no product-sales revenue.
- Profit and expenses: Q2 net loss was $6.56 million ($0.12 per share), compared with $4.29 million ($0.11 per share). First-half net loss was $12.39 million ($0.24 per share), versus $9.78 million ($0.25 per share). Q2 operating expenses were $7.04 million: R&D $4.32 million and G&A $2.73 million. First-half operating expenses were $13.34 million: R&D $8.73 million and G&A $4.61 million. Operating margins are not meaningfully comparable given the absence of product sales and low collaboration revenue.
- Cash flow: First-half operating cash use was $10.39 million, down from $12.79 million a year earlier. Investing activities used $2.31 million, compared with $3.76 million provided in the prior-year period. Financing provided $13.86 million, principally from the January 2011 private placement. Cash and cash equivalents increased $1.17 million to $8.02 million.
- Liquidity and debt: Cash, cash equivalents and available-for-sale investments totaled $40.36 million at June 30, 2011, versus $37.09 million at year-end 2010. Current liabilities were $5.95 million and total liabilities $8.49 million. The contractual-obligations table reported $56,000 of long-term debt, including $43,000 due within one year; the balance sheet separately shows a $40,000 current portion of debt. Management expected available funds and anticipated collaboration payments to support operations at least into the first half of 2013, but said significant additional financing would be needed.
Material changes versus the prior comparable period
- Revenue fell sharply because the Biovail collaboration ended in October 2010. ACADIA had recognized $1.8 million of Biovail revenue in Q2 2010 and $3.2 million in the first half of 2010; there was no comparable 2011 revenue. Allergan revenue was broadly comparable year over year.
- R&D expense declined 14% in Q2 and 20% in the first half, largely reflecting lower pimavanserin external development costs and lower internal facility/personnel costs.
- G&A expense rose 76% in Q2 and 37% in the first half, primarily due to a $1.1 million net charge related to terminating the Swedish facility lease. The company reported expected annual facilities-related savings of approximately $1.5 million.
- January’s private financing generated approximately $13.8 million in net proceeds and included 12.6 million common shares plus warrants. Common shares outstanding were 52.8 million at July 31, 2011.
Outlook, commentary, risks and unusual items
- ACADIA expected operating losses to continue for at least several years and said it had an accumulated deficit of $336.5 million. Further funding availability and terms were uncertain; failure to raise capital could force program delays, reductions or relinquishment of rights.
- Pimavanserin was wholly owned and ACADIA was responsible for its future development costs after regaining rights from Biovail. The company cited a disappointing Phase III result in 2009 and identified the ongoing Phase III -020 study as a material risk; an unfavorable result could substantially set back the program.
- Allergan’s research term under one collaboration extended through March 2012. The filing also said Allergan was seeking a partner for the chronic-pain program, with a risk it might not continue development. Meiji Seika Pharma was responsible for the first $15 million of designated AM-831 development expenses; approximately $1.5 million had been incurred by June 30.
- A May 2011 NINDS grant provided up to $2.4 million over several years for development of novel ER-beta agonists for neuropathic pain.
- ACADIA had up to approximately $9.0 million of future contract research and external-service obligations, generally stoppable on short notice without full payment. Potential Ipsen milestone payments of $10.5 million were contingent and excluded from the contractual-obligations table.
- Management cited clinical, regulatory, collaboration, intellectual-property, competition and financing risks. It reported disclosure controls and procedures were effective at the reasonable-assurance level as of June 30, 2011.
Most important facts for investors to verify
- Progress, safety and results of the pimavanserin -020 Phase III study, and the funding needed to complete development.
- Cash burn, collaboration receipts and whether the stated runway into the first half of 2013 remains achievable.
- Allergan’s plans for chronic pain and the status or renewal of collaboration research terms.
- Whether the NINDS grant is received and used as anticipated, and how much AM-831 development cost remains subject to partner funding.
- Changes in share count, warrant exercises and potential dilution from future capital raises.