ACADIA Pharmaceuticals Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Unless noted otherwise, amounts below are in millions of dollars. ACADIA is a biopharmaceutical company whose only marketed product was NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue (NUPLAZID net product sales) | $120.6 | $94.6 | $320.7 | $240.8 |
| Operating loss | $(85.9) | $(45.4) | $(219.4) | $(190.1) |
| Net loss | $(84.7) | $(42.0) | $(214.8) | $(182.2) |
| Net loss per share, diluted | $(0.54) | $(0.29) | $(1.37) | $(1.26) |
| Net cash used in operating activities | — | — | $(108.7) | $(121.4) |
- Revenue grew 27.5% in Q3 and 33.2% for the first nine months year over year. Management attributed growth primarily to higher NUPLAZID unit sales—approximately 14% in Q3 and 21% year to date—and higher average gross selling prices.
- Cost of product sales was 1.7% of revenue in Q3 and 2.4% year to date, implying product gross margins of approximately 98.3% and 97.6%, respectively, before license fees and royalties.
- Research and development expense rose to $120.1 million in Q3 and $257.0 million year to date, including CerSci-related costs. Selling, general and administrative expense rose to $81.6 million and $267.9 million, respectively.
- At September 30, cash and cash equivalents were $452.4 million and available-for-sale investments were $192.1 million; together, $644.4 million, compared with $697.4 million at December 31, 2019. Cash, cash equivalents and restricted cash totaled $458.1 million at period end.
- Total liabilities were $140.8 million, including $49.2 million in operating lease liabilities. The filing does not report borrowings or a debt balance. Stockholders’ equity was $654.9 million; accumulated deficit was $1.9 billion.
Changes, outlook and notable items
- Despite revenue growth, quarterly and nine-month net losses widened year over year, reflecting higher operating expenses, including expanded R&D and commercial and corporate costs.
- Operating cash use improved to $108.7 million from $121.4 million for the comparable nine-month period. Investing activities provided $309.5 million, mainly from net maturities of investment securities; financing activities provided $62.9 million, primarily from employee stock exercises. The prior-year financing inflow included a $271.5 million public offering.
- Management expected cash, cash equivalents and investments to fund planned operations for at least the next 12 months, while noting that additional financing may be needed in the future. It expected operating losses and substantial R&D expense to continue for the next few years; profitability timing was not provided.
- The filing says the company reduced the high end of its 2020 revenue guidance in May due to potential pandemic effects, but the supplied filing text does not provide the numerical guidance range. Management reported no material pandemic impact on NUPLAZID sales through September 30, and said supply had remained uninterrupted. It cautioned that future sales and trial enrollment could be affected.
- The FDA accepted the supplemental application for NUPLAZID in dementia-related psychosis (DRP), with an April 3, 2021 target action date. The Phase 3 HARMONY study met its primary endpoint; approval remained uncertain. The Phase 3 LAVENDER trofinetide trial was expected to report results in the second half of 2021, subject to possible pandemic-related delays. ACADIA initiated the Phase 3 ADVANCE-2 schizophrenia study in Q3.
- The Phase 3 CLARITY study of pimavanserin for adjunctive major depressive disorder did not meet its primary endpoint; ACADIA said it did not plan additional Phase 3 studies for that indication. The company also reported a $45.7 million R&D charge for the upfront consideration in its CerSci asset acquisition; the acquisition involved approximately $52.8 million in upfront consideration and transaction costs, including $44.3 million paid in ACADIA shares. CerSci milestone payments could reach $887 million, plus royalties.
- Potential milestone payments under licensing and merger agreements could total up to $2.0 billion. Other cited commitments include up to $455 million under the Neuren agreement and up to $515 million under the Vanderbilt agreement, subject to milestones.
- Legal matters include a securities class action and related derivative suits, and patent litigation against generic applicants seeking to market NUPLAZID. Management said pending claims against ACADIA were not expected to have a material adverse effect, but outcomes and possible losses could not be estimated. In October 2020, the DOJ advised that it had concluded its NUPLAZID sales and marketing investigation and would take no further action on the CID at that time.
Important facts for investors to verify
- Current NUPLAZID revenue trajectory, gross-to-net allowances and the full 2020 guidance range, including the effect of COVID-19 on prescribing and access to care.
- FDA review progress and the April 3, 2021 target action date for the DRP application; clinical and regulatory milestones for trofinetide, ACP-044 and the M1 PAM program.
- Cash burn relative to management’s stated liquidity runway, expected R&D and commercial spending, and potential future financing or dilution.
- Developments in generic patent litigation, NUPLAZID safety and post-marketing commitments, and the securities and derivative litigation.
- Potential milestone and royalty obligations, including the contingent CerSci payments, and the effect of the expanded long-term office lease liabilities.