ACADIA Pharmaceuticals Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013. Unaudited interim financial statements; amounts below are in U.S. dollars. ACADIA is a clinical-stage biopharmaceutical company, with pimavanserin its lead candidate for Parkinson’s disease psychosis (PDP). It had no product sales.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | First half 2013 | First half 2012 |
|---|---|---|---|---|
| Revenue | $0.451 million | $0.599 million | $0.868 million | $1.049 million |
| Research and development | $7.112 million | $4.472 million | $11.542 million | $9.493 million |
| General and administrative | $2.496 million | $1.556 million | $4.647 million | $3.216 million |
| Operating loss | $9.157 million | $5.429 million | $15.321 million | $11.660 million |
| Net loss | $9.081 million | $5.419 million | $15.204 million | $11.637 million |
| Basic and diluted loss per share | $0.11 | $0.10 | $0.19 | $0.22 |
Operating margins are not meaningful given minimal collaboration revenue and the company’s substantial development spending. For the six months, comprehensive loss was $15.234 million.
- Cash flow: First-half operating cash use was $12.029 million, versus $10.030 million a year earlier. Investing activities used $131.702 million, primarily reflecting purchases of investment securities after the equity offering; financing provided $110.079 million.
- Liquidity: At June 30, cash and cash equivalents were $24.247 million and available-for-sale investments were $181.204 million, totaling approximately $205.5 million. Current assets were $206.761 million and current liabilities $7.776 million.
- Debt and obligations: The balance sheet reports no debt at June 30; the cash flow statement shows no first-half debt repayment. Contractual operating leases totaled $1.970 million, and future services under research and other provider agreements were up to approximately $12.3 million, generally terminable on short notice.
- Equity: May’s public offering of 9.2 million shares generated $107.9 million net proceeds. Common shares outstanding were 83.43 million at June 30. Accumulated deficit was $382.9 million.
Changes versus comparable periods
- Q2 revenue fell 25% year over year; first-half revenue fell about 17%. The Meiji Seika collaboration ended in 2012, and the research term of the 2003 Allergan collaboration ended in March 2013, reducing recurring collaboration funding.
- Q2 R&D expense rose about 59%, primarily from increased external costs for pimavanserin’s Phase III program. First-half R&D expense rose about 22%. G&A increased about 60% in Q2 and 45% in the first half.
- Q2 net loss widened from $5.419 million to $9.081 million; first-half net loss widened from $11.637 million to $15.204 million. The lower first-half loss per share versus 2012 reflects a higher weighted-average share count following equity financings, among other factors.
- Cash and investments increased from $108.0 million at December 31, 2012, chiefly supported by the May stock offering. Cash alone declined as funds were invested in securities.
Outlook, management commentary and risks
- The FDA agreed that the successful pivotal -020 PDP trial, together with supportive data, could support an NDA filing. ACADIA was completing supportive studies, including drug-drug interaction work, and CMC activities; it targeted an NDA submission near the end of 2014, subject to FDA interactions and further developments. FDA review and approval remained uncertain.
- Management expected cash, cash equivalents and investments of at least $183 million at year-end 2013 and believed existing resources would fund operations at least through 2015. It anticipated higher cash use in 2014 and continued substantial losses and R&D spending for several years.
- Planned development included continued PDP work and a planned Phase II pimavanserin study in Alzheimer’s disease psychosis. Management expected near-term collaboration revenue to decrease and fluctuate with milestones, grants and any new collaborations.
- ACADIA was responsible for all pimavanserin development costs and had no commercialization partner for the lead program. Financing beyond the stated runway would be needed; unavailable or unfavorable financing could force program delays, reductions, termination, or licensing rights on less favorable terms.
- Contingency: 2012 ATM sales of 5.347 million shares may carry rescission rights because ACADIA had become ineligible to use its shelf registration statement after a late Form 8-K filing. Potential repayment was described as up to $17.7 million plus statutory interest, with possible regulatory penalties. No stockholder had asserted a claim as of the filing, and the company could not predict claims or penalties.
- Other material risks include clinical or CMC setbacks, regulatory rejection or delay, reliance on third-party manufacturers and trial providers, collaborator termination or failure to advance programs, competition, intellectual-property disputes, reimbursement constraints and dilution from future fundraising.
Important facts for investors to verify
- Progress and results of pimavanserin’s remaining supportive studies and CMC work, and whether the targeted late-2014 NDA timing remained achievable.
- Actual cash use, investment liquidity and whether the projected runway through 2015 remained adequate as development and pre-commercial costs rose.
- Revenue and milestone prospects under the two continuing Allergan collaborations, including the status of the chronic-pain program and any new partnerships.
- Status and resolution of potential rescission rights related to the 2012 ATM share sales, including the expiry of those rights and any regulatory action.
- Share-count changes and potential dilution, including the effect of equity compensation and future capital raising.