ACADIA Pharmaceuticals Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited interim results; amounts below are in millions unless noted. ACADIA is a biopharmaceutical company focused on central nervous system disorders. NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis (PDP), was its only commercial product.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue (NUPLAZID product sales) | $115.2 | $110.1 | $221.8 | $200.2 |
| Cost of product sales | $2.5 | $2.9 | $4.7 | $5.7 |
| Research and development | $56.9 | $64.3 | $113.9 | $136.9 |
| Selling, general and administrative | $96.8 | $84.3 | $208.5 | $186.3 |
| Operating loss | $(43.7) | $(44.0) | $(110.5) | $(133.5) |
| Net loss | $(43.9) | $(42.1) | $(110.3) | $(130.2) |
| Net loss per share, diluted | $(0.27) | $(0.27) | $(0.69) | $(0.83) |
Q2 product gross margin was approximately 97.8%, compared with 97.4% a year earlier. Revenue increased 4.6% in Q2 and 10.8% in the first half, primarily on approximately 5% unit growth and a higher average gross selling price. Q2 operating loss narrowed slightly, but net loss increased as interest income fell. First-half net loss narrowed mainly alongside lower R&D expense.
Cash and liquidity: Cash, cash equivalents and available-for-sale investments totaled $556.9 at June 30, 2021, down from $632.0 at December 31, 2020. Cash and cash equivalents were $267.0; investment securities were $290.0. First-half operating cash use was $85.5, versus $85.9 in 2020; investing activities provided $13.7 and financing activities provided $12.7. The company said existing cash, equivalents and investments should fund planned operations for at least 12 months, while noting possible future financing needs.
Debt and obligations: The balance sheet reports no financial borrowings; operating lease liabilities totaled $66.7, including $7.5 current. Cash and investments exceed reported liabilities, but this does not capture contingent development and royalty commitments. Potential milestone payments under agreements were up to $2.2 billion in aggregate as of June 30.
Material changes and business developments
- SG&A rose 14.8% in Q2, primarily due to advertising and promotion, corporate support and stock-based compensation. First-half SG&A increased 11.9%, including preparations for a potential dementia-related psychosis launch.
- R&D fell 11.4% in Q2 and 16.8% in the first half. The filing attributes the first-half decline mainly to cessation of MDD development and lower DRP and trofinetide costs, partly offset by higher ACP-044 development spending.
- The FDA issued a complete response letter in April 2021 on the NUPLAZID supplemental application for dementia-related psychosis (DRP). It cited subgroup statistical results and limited numbers of patients in some dementia subtypes. The FDA advised that an additional study may be the best path, while remaining open to further analyses; ACADIA planned further discussions with the FDA later in 2021.
- The Phase 3 LAVENDER trial of trofinetide for Rett syndrome completed enrollment; results were expected in Q4 2021. Phase 2 studies of ACP-044 for postoperative pain and osteoarthritis were underway, with postoperative-pain results expected in Q4 2021. The Phase 3 ADVANCE-2 study of pimavanserin for negative symptoms of schizophrenia was also underway.
Outlook, risks and unusual items
- No specific financial guidance for revenue, expenses or earnings is provided in the filing. Management expects continued operating losses for the next few years and substantial R&D and commercial spending; future operating cash use is expected to increase.
- COVID-19 reduced patient office visits and long-term-care occupancy, weighing on first-half NUPLAZID sales. Some factors improved in Q2 but remained meaningfully below pre-pandemic levels. ACADIA reported uninterrupted product supply and did not anticipate near-term supply disruption, while cautioning that the pandemic’s effects remain uncertain.
- Key risks include dependence on NUPLAZID as the sole marketed product, uncertainty around the DRP regulatory path, clinical-trial and regulatory risk across the pipeline, financing needs, reimbursement and pricing pressures, third-party manufacturing dependence, and potential generic competition.
- Patent litigation over generic NUPLAZID applications remained pending against several manufacturers; joint trial was scheduled for May 2023. ACADIA settled with Hetero, permitting launch on July 27, 2038, subject to specified triggers for earlier launch.
- Other litigation includes securities and stockholder derivative actions. Management said it did not believe the pending matters were likely to have a material adverse effect, but could not predict outcomes or estimate possible losses; no amounts were accrued other than incurred legal fees.
- Royalty payments to Ipsen are 2% of NUPLAZID net sales and terminate in 2021. A first-half change in estimate for performance-based awards reduced stock-based compensation expense by approximately $6.1.
- Management concluded disclosure controls were effective as of June 30, 2021 and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Current FDA feedback, next steps, timing and potential costs for any DRP resubmission or additional clinical study.
- Trofinetide Q4 2021 trial results and the progress and costs of ADVANCE-2 and ACP-044 studies.
- NUPLAZID prescription, unit-sales and net-price trends, including the continuing COVID-19 effects and payer rebates.
- Cash burn relative to the $556.9 million liquidity position, contingent milestone obligations, and any future financing or dilution.
- Developments in generic-patent litigation, including settlement terms, trial timing and potential earlier-launch triggers.
- Whether actual results and program spending remain consistent with management’s stated 12-month liquidity assessment and expectation of continued losses.