ACADIA Pharmaceuticals Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing, not a standalone fourth-quarter report; quarterly figures are included below where relevant.
Business context
ACADIA is a clinical-stage biopharmaceutical company developing small-molecule therapies for neurological and central nervous system disorders. It had no approved products and generated no product-sales revenue. Its lead candidate, pimavanserin, was in development for Parkinson’s disease psychosis (PDP); the company reported a successful pivotal Phase III trial and planned to file an FDA New Drug Application near the end of 2014. Other programs included pimavanserin for Alzheimer’s disease psychosis and schizophrenia, plus Allergan collaborations in chronic pain and glaucoma.
Financial results and liquidity
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue, primarily collaboration and grant revenue | $1.1 million | $4.9 million |
| Research and development expense | $26.7 million | $18.8 million |
| General and administrative expense | $12.7 million | $7.0 million |
| Net loss | $37.9 million | $20.8 million |
| Net loss per share, basic and diluted | $0.44 | $0.38 |
| Net cash used in operating activities | $31.8 million | $21.6 million |
| Cash, cash equivalents and investment securities at year-end | $185.8 million | $108.0 million |
| Working capital at year-end | $181.4 million | $102.6 million |
Revenue was entirely collaboration revenue; product gross margin was not applicable. Revenue fell mainly because the Meiji Seika Pharma collaboration ended in 2012 and a long-running Allergan research collaboration concluded in March 2013. Operating expenses rose as ACADIA expanded pimavanserin development and pre-commercial preparations. The 2013 net loss increased despite higher interest income.
Cash and investments rose chiefly after a May 2013 public offering that generated $107.9 million in net proceeds. Year-end cash and cash equivalents alone were $11.7 million; most liquid resources were in investment securities. ACADIA reported no long-term debt at year-end. Financing cash flow was $111.7 million, while investing cash outflow of $126.1 million mainly reflected purchases of investment securities, rather than operating expenditure. The company stated that cash resources were expected to fund operations at least through 2015 and forecast more than $120 million in cash, cash equivalents and investments at year-end 2014.
Fourth-quarter 2013 revenue was $37,000 and net loss was $12.0 million, or $0.13 per share, compared with fourth-quarter 2012 revenue of $380,000 and net loss of $6.8 million, or $0.11 per share.
Material changes and outlook
- R&D expense increased 42% to $26.7 million, largely due to higher external costs for pimavanserin’s Phase III program and increased personnel and stock-based compensation.
- G&A expense rose to $12.7 million from $7.0 million, reflecting organizational growth, stock compensation, professional fees and initial pre-commercial activity.
- Shares outstanding at year-end increased to 91.1 million from 73.3 million, following the public offering and other share issuances. The May offering provided $107.9 million net.
- Management expected operating cash use and R&D spending to increase in 2014 as development and pre-commercial activities continued. It expected continued losses for at least several years and said additional financing would ultimately be required.
- The FDA had indicated that the pivotal PDP study, together with supportive data, could support an NDA filing; this was not an approval or assurance that the filing would be accepted or the drug approved. Additional CMC work and supportive studies remained.
Risks, contingencies and unusual items
- The business depended heavily on pimavanserin, with regulatory, clinical, manufacturing, commercialization and market-acceptance risks. ACADIA had never launched a product and had not established a field sales force.
- Collaboration revenue was small and uncertain; future payments from ongoing Allergan agreements depended on development milestones and product commercialization. Allergan was seeking a partner for the chronic-pain program.
- ACADIA reported an accumulated deficit of $405.7 million. It warned that unavailable or unfavorable financing could require program reductions, delays or licensing rights on less favorable terms.
- Potential obligations included up to $19.1 million for contracted future services, largely terminable on short notice; $2.3 million in operating lease commitments; and up to $10.5 million in potential Ipsen milestone payments, contingent on regulatory events.
- Federal and state net operating loss and research-credit carryforwards were subject to ownership-change limitations; deferred tax assets were fully offset by a valuation allowance.
- The CFO announced plans to retire in January 2014. Management reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Key facts for investors to verify
- Whether the planned PDP NDA was filed near the end of 2014, accepted for review and ultimately approved, and what label or post-approval requirements applied.
- Results and timing of the Alzheimer’s psychosis Phase II study and any subsequent schizophrenia studies.
- Cash burn, investment liquidity, financing runway and the extent of future equity dilution or other capital needs.
- Progress of Allergan’s chronic-pain and glaucoma programs, including partnering, milestone potential and termination risk.
- Whether commercial launch preparations, manufacturing arrangements, reimbursement access and sales-force buildout proceeded as planned.