ACADIA Pharmaceuticals Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017; balance-sheet figures are compared with December 31, 2016. ACADIA is a biopharmaceutical company commercializing NUPLAZID (pimavanserin), approved in the U.S. for Parkinson’s disease psychosis (PD Psychosis), while developing it for other indications.
Financial performance and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $35.6 million | $5.3 million | $81.3 million | $5.4 million |
| Operating loss | $66.3 million | $72.4 million | $223.6 million | $194.6 million |
| Net loss | $65.2 million | $71.6 million | $220.5 million | $192.7 million |
| Net loss per share | $0.53 | $0.61 | $1.81 | $1.69 |
| Research and development | $36.4 million | $25.8 million | $106.0 million | $69.1 million |
| Selling, general and administrative | $62.3 million | $50.5 million | $189.5 million | $128.8 million |
- NUPLAZID product sales were the company’s principal revenue. Cost of product sales was 6% of net sales in Q3 and 8% for the nine-month period, versus 16% and 26%, respectively, in 2016.
- Cash and cash equivalents were $112.6 million and available-for-sale investments were $254.0 million at September 30: $366.6 million combined, down from $529.0 million at year-end 2016. Total current assets were $402.0 million; current liabilities were $36.1 million.
- Operating cash use was $188.0 million for the first nine months, versus $147.2 million in 2016. Investing activities provided $110.6 million, principally reflecting net investment maturities; financing activities provided $26.4 million. No material debt balance is reported; total liabilities were $36.4 million.
- Accumulated deficit was $1.155 billion. Common shares outstanding were 122.7 million at September 30 and 124.2 million at October 31, 2017.
Changes and notable items
- Revenue rose substantially as NUPLAZID sales grew following its May 2016 launch. Comparisons are also affected by the company’s Q2 2017 change from sell-through to sell-in revenue recognition. A one-time Q2 adjustment recognized revenue on previously shipped product; the filing says it did not affect Q3 revenue.
- Q3 net loss narrowed year over year, but the nine-month net loss increased. Higher R&D reflected clinical development and expansion of the research organization; higher SG&A reflected commercialization, sales-force and other costs.
- Operating cash use increased by $40.8 million year over year for the nine-month period. 2016 financing cash flows included approximately $497.5 million of net proceeds from follow-on offerings; there were no comparable offering proceeds in 2017.
Outlook, risks and contingencies
- Management expected available cash, cash equivalents and investments to fund planned operations for at least the next 12 months, while warning that significant additional financing may be needed later. The company expected operating cash use, R&D and SG&A to remain substantial; it gave no specific revenue or profitability forecast and expected losses for at least the next few years.
- Development priorities included a Phase III HARMONY study in dementia-related psychosis, initiated in October 2017; the FDA granted pimavanserin Breakthrough Therapy Designation for this indication. ACADIA stopped enrolling new patients in its Phase II SERENE Alzheimer’s agitation study to focus resources on HARMONY; existing SERENE participants were to complete the study. Other programs included schizophrenia and adjunctive treatment of major depressive disorder.
- NUPLAZID was the company’s only approved product and was approved only for PD Psychosis in the U.S. Commercial uptake, reimbursement, pricing, patient adherence, safety findings and post-marketing study results were significant uncertainties. Its label included a boxed warning regarding increased risk of death in elderly patients with dementia-related psychosis; the product was not approved for that broader use.
- The company cited clinical-trial, regulatory, manufacturing and single-supplier risks, as well as possible dilution or constrained development if financing is unavailable. It also faces rebate and chargeback estimation risk, healthcare regulation and competition from off-label treatments.
- A putative securities class action had a proposed settlement preliminarily approved, but final approval remained pending. The final approval hearing was continued to January 8, 2018. The company also disclosed a $2.0 million letter of credit secured by restricted cash.
- Management reported disclosure controls were effective at the reasonable-assurance level as of September 30, 2017, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether NUPLAZID sales growth and net revenue quality persist, including the effects of gross-to-net deductions and sell-in recognition.
- Cash runway relative to the stated 12-month expectation, ongoing cash burn and potential financing or dilution needs.
- Clinical and regulatory progress, safety data and post-marketing commitments for NUPLAZID and the additional pimavanserin indications.
- Commercial access, reimbursement, pricing and the impact of the boxed warning on prescribing and patient use.
- Final court approval and financial terms of the securities-litigation settlement.