ACADIA Pharmaceuticals Inc. — Q2 2020 Form 10-Q
Business context and reporting period. This quarterly report covers the three and six months ended June 30, 2020. ACADIA is a CNS-focused biopharmaceutical company; NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis, was its only commercial product. Financial figures below are in U.S. dollars; dollar amounts are in millions unless stated otherwise.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Product revenue | $110.1 | $83.2 | $200.2 | $146.2 |
| Operating expenses | $154.1 | $140.3 | $333.7 | $290.9 |
| Operating loss | $(44.0) | $(57.1) | $(133.5) | $(144.7) |
| Net loss | $(42.1) | $(54.9) | $(130.2) | $(140.2) |
| Net loss per share, diluted | $(0.27) | $(0.38) | $(0.83) | $(0.97) |
| Operating margin | -40.0% | -68.6% | -66.7% | -99.0% |
- Revenue was entirely NUPLAZID sales. Management attributed the increase to unit growth of approximately 17% in Q2 and 24% in the first half, plus higher average gross selling prices.
- Cost of product sales was $2.9 million in Q2 and $5.7 million for the first half, approximately 3% of sales in both periods. These figures do not include license fees and royalties, reported separately.
- Research and development expense was $64.3 million in Q2 and $136.9 million for the first half. Selling, general and administrative expense was $84.3 million and $186.3 million, respectively.
- Cash used in operating activities was $85.9 million for the first half, compared with $102.6 million in 2019. Investing activities provided $156.5 million, primarily reflecting net maturities of investment securities; financing activities provided $51.2 million, primarily from employee stock-option exercises.
- Cash, cash equivalents and investment securities totaled approximately $658.6 million at June 30, 2020, versus $697.4 million at year-end 2019. The company reported that these resources should fund planned operations for at least the next 12 months, while noting that future additional financing may be needed.
- No conventional borrowings are reported on the balance sheet. Total liabilities were $96.6 million, including $8.3 million of operating lease liabilities. Current assets were $735.7 million versus current liabilities of $86.4 million.
Material changes versus comparable periods
- Q2 revenue increased 32% year over year; first-half revenue increased 37%. Net losses narrowed in both comparisons, while operating expenses rose 10% in Q2 and 15% for the first half.
- Q2 R&D expense declined $3.0 million year over year, mainly because of lower external costs for pimavanserin development. First-half R&D increased $16.7 million, including a $10.0 million upfront Vanderbilt license payment and higher trofinetide development costs.
- Q2 SG&A increased $16.4 million, primarily due to higher external commercial costs, including direct-to-consumer advertising, and increased personnel costs. First-half SG&A rose $25.2 million, reflecting higher personnel, medical-affairs and Phase IV study costs.
- Cash and cash equivalents increased to $310.4 million from $189.7 million at December 31, 2019, while available-for-sale investments declined to $348.1 million from $507.7 million. Total cash, cash equivalents and investments nevertheless decreased over the six-month period.
Outlook, developments and risks
- In May 2020, ACADIA reduced its 2020 revenue guidance because of expected COVID-19 effects. The filing does not provide a clear numeric guidance value. Management said first-half NUPLAZID sales had not been materially affected, but warned that telemedicine, reduced access to care settings and fewer diagnoses could weigh on sales. Supply remained uninterrupted, with no disruption anticipated at the filing date.
- ACADIA submitted an sNDA for NUPLAZID in dementia-related psychosis in June. In July, the FDA accepted the application and set an April 3, 2021 PDUFA date; the FDA had not identified potential review issues at that point and was not planning an advisory committee meeting. Approval is not assured.
- In July, the Phase 3 CLARITY study of pimavanserin for adjunctive major depressive disorder did not meet its primary endpoint; ACADIA said it did not plan further Phase 3 studies for that indication. The Phase 3 ADVANCE-2 schizophrenia study began in August, after quarter-end. Results from the trofinetide LAVENDER Rett syndrome study were expected in the second half of 2021, subject to possible pandemic delays.
- Management expects operating losses to continue for the next few years, with substantial spending on NUPLAZID commercialization, post-marketing studies, pimavanserin development, trofinetide and the M1 PAM program. License agreements could require up to $1.1 billion in aggregate milestone payments; these are contingent, not current debt.
- Five generic manufacturers filed ANDAs for NUPLAZID. ACADIA filed patent-infringement suits in July 2020. The company also disclosed securities and derivative litigation and a DOJ civil investigative demand concerning NUPLAZID sales and marketing. Management did not expect pending claims as of June 30 to have a material adverse effect, but said outcomes and potential losses could not be predicted or estimated.
- Key risks include dependence on NUPLAZID, its boxed warning and ongoing post-marketing obligations, clinical and regulatory uncertainty, generic patent challenges, COVID-19 effects, pricing and reimbursement pressure, third-party manufacturing concentration, and possible need for financing on uncertain terms.
Important facts for investors to verify
- Current NUPLAZID sales trends, the assumptions underlying the revised 2020 revenue outlook, and the effects of access restrictions and gross-to-net allowances.
- FDA review milestones and any regulatory requests or changes affecting the dementia-related psychosis sNDA.
- Progress and cash requirements for trofinetide, ADVANCE-2, post-marketing studies and the M1 PAM program.
- Developments in generic ANDA patent litigation, the DOJ investigation and shareholder lawsuits, including any change to the company’s loss assessment.
- Cash burn and financing needs relative to management’s stated runway, as well as the potential dilution from future equity financing.