ACADIA Pharmaceuticals Inc (ACAD) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals fourth quarter 2005 results conference call. My name is Minotia, and I will be your coordinator for today. [OPERATOR INSTRUCTIONS] I would now like to turn the presentation over to Ms. Lisa Barthelemy, Director of Investor Relations at ACADIA Pharmaceuticals, who will review the Company's forward-looking statements. Please proceed.

Good afternoon, and welcome to ACADIA Pharmaceuticals fourth quarter 2005 conference call. This call is being recorded, and an archived copy will be available on our website at www.acadia-pharm.com through March 15th. Joining us on the call today from ACADIA is Dr. Uli Hacksell, Chief Executive Officer; and Tom Aasen, Chief Financial Officer.

Before we proceed, I would first like to remind you that during our call today, we will be making a number of forward-looking statements, including statements regarding our financial results and our research and development program. These forward-looking statements are based on current information and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause our actual results to differ materially from those contained in the forward-looking statements. These factors and other risks associated with our business can be found in our filings made with the SEC, including our annual report on Form 10-K for the year ended December 31st, 2004, and subsequent filings. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date. ACADIA disclaims any obligation to update these forward-looking statements.

Additionally, the year-end information contained in our press release reflects preliminary financial results, as our integrated 2005 audit has not yet been completed, and will not be completed until near the date that we file our annual report on Form 10-K with the SEC.

It is my pleasure now turn over the call to Dr. Uli Hacksell, our Chief Executive Officer.

Thank you, Lisa. And let me first take this opportunity to thank all of you for joining us on today's conference call. Looking back, 2005 was a year of enormous progress for ACADIA. It was highlighted by our major advances in all four of our Phase II clinical programs and the achievement of important business and financial milestones. With this solid foundation, we believe that ACADIA's well positioned for a transforming year in 2006.

During our call today, I will provide you with an update on our clinical pipeline and other key areas of our business. In addition, to an update on our most advanced drug programs, I will share with you exciting progress on a previously unannounced clinical trial with ACP-103, and also report on an extension of our discovery collaboration with Allergan.

First, I will ask Tom Aasen, our Chief Financial Officer, to discuss our recent financial results.

Thank you, Uli, and good afternoon. I will provide you with a brief overview of our financial results for the fourth quarter and year ended December 31st, as reported in our press release issued earlier today.

As expected, our results for the fourth quarter reflect an increased investment in our three proprietary Phase II clinical programs, which is consistent with the maturation of our clinical pipeline. Our cash, investment securities, and restricted cash totaled 55.5 million at December 31st, 2005, or slightly above our guidance of 52 to 55 million for year-end 2005. The year-end cash balance did not include Sepracor's second $10 million equity investment, which we received in January 2006. The increase in cash during 2005 was primarily due to proceeds from sales of our equity securities, including 34 million raised in a private placement in April 2005, and the initial $10 million equity investment made by Sepracor in January 2005, partially offset by cash used to finance our operations during the year.

We reported a net loss of 10.2 million for the fourth quarter of 2005, compared to a net loss of 7.3 million for the fourth quarter of 2004. For the year ended December 31st, 2005, we reported a net loss of 34.1 million, compared to a net loss of 25.9 million for 2004. The net loss for the fourth quarter and the year included a non-cash provision of 360,000 and 6.2 million, respectively, for a loss for previously-disclosed litigation.

Our revenues increased to 2.4 million for the fourth quarter of 2005, compared to 1.1 million for the fourth quarter of 2004. This increase was primarily due to revenues recognized from our collaboration with Sepracor, which began in January 2005, as well as revenues from our development agreement with the Stanley Medical Research Institute. Our collaborations with Allergan contributed 1.1 million to our revenues during both the fourth quarter of 2005 and the comparable quarter of 2004. Revenues increased to 11.0 million for the year ended December 31st, 2005, from 4.6 million for 2004.

Research and development expenses increased to 10.1 million for the fourth quarter, up from 6.4 million in the comparable quarter of 2004. This increase reflected increased clinical development expenses associated with our advanced programs and costs related to expansion of our R&D organization. Our external service costs, which are largely related to ongoing clinical trials, increased to 4.8 million in the fourth quarter of 2005, compared to 2.4 million in the fourth quarter of 2004. This increase was attributable to expanded clinical trial activity for both ACP-103 and ACP-104, including increased costs associated with our ongoing schizophrenia trials and costs related to an additional trial for ACP-103, a combined positron emission tomography and polysomnography sleep study that Uli will review later in this call. Research and development expenses increased to 30.8 million for the year ended December 31st, from 23.5 million for 2004.

General and administrative expenses increased to 2.6 million for the fourth quarter, up from 1.8 million in the comparable quarter of 2004, reflecting increased audit and other professional fees associated with our Sarbanes-Oxley compliance efforts at both of our corporate sites, as well as costs related to expansion of our G&A infrastructure. G&A expenses totaled 8.4 million for the year ended December 31st, compared to 4.9 million for 2004.

As I previously mentioned, our financial results for the fourth quarter and year included a non-cash provision for loss from litigation. While we have appealed the verdict in this litigation, the provision covers the full amount of damages and related fees and costs awarded, plus accrued interest recorded during the fourth quarter, net of the insurance proceeds that we may receive.

Finally, to update you on our outstanding shares and our cash outlook. We closed the year with a total of 23.5 million shares of common stock outstanding. The outstanding shares at year end do not reflect the second $10 million equity investment made by Sepracor in January 2006 at a 25% premium to the 30-day trailing average price, which resulted in the issuance of an additional 813,000 shares of our common stock.

We also had outstanding warrants to purchase an aggregated 1.4 million shares and outstanding stock options to purchase approximately 2.2 million shares of our common stock at year end. As previously mentioned, our aggregate cash position was 55.5 million at December 31st, 2005, and we subsequently received an additional 10 million from Sepracor's second equity investment in January. We continue to anticipate that our current cash resources, included expecting payments from our existing collaborations will be sufficient to finance our operations through at least mid-2007.

I'll now turn the call back over to Dr. Hacksell.

Thank you, Tom. I'll now proceed to provide you with an update on our development programs and touch on some of our recent corporate highlights. I'm pleased to report today that we remain on track to report important clinical milestones in all three of our proprietary Phase II clinical programs during 2006. The ACADIA pipeline includes four Phase II clinical programs, three of which are proprietary programs -- first, ACP-103 for treatment-induced dysfunctions in Parkinson's disease; second, ACP-103 as an adjunctive therapy for schizophrenia; and, third, ACP-104, as a stand-alone treatment for schizophrenia.

In addition to these three internal clinical programs, we have a neuropathic pain program in Phase II clinical trials in collaboration with Allergan. In our first clinical program, we are developing ACP-103 as a therapy for treatment-induced dysfunctions in Parkinson's disease. The standard of care for Parkinson's disease currently and for the foreseeable future consists of L-dopa and other dopamine replacement therapies. These therapies result in treatment-induced psychiatric and motor dysfunctions, and there is currently no approved therapy in the United States for these dysfunctions.

We believe that ACP-103 has the potential to make an important difference in the standard of care for patients with Parkinson's disease by effectively treating these dysfunctions. We have completed a Phase IB-IIA clinical trial in this program. That trial demonstrated safety and tolerability of ACP-103 in patients with Parkinson's disease.

We also announced in November 2005 that we had completed enrollment of a multi-center, double-blind, placebo-controlled, 28-day dose escalation Phase II clinical study which was designed to evaluate the efficacy and tolerability of ACP-103 in a total of 60 Parkinson's disease patients suffering from treatment-induced psychosis. You may recall that in June 2005 we announced encouraging results from an interim trend analysis of this trial based on data from the first 30 patients to complete the study.

This interim trend analysis showed a greater reduction in psychotic symptoms in the ACP-103 treatment group relative to the placebo group on two standard rating scales used in the trial. In addition, there were no serious adverse events reported. We remain on track to report the results from the complete Phase II trial this month, in line with our previous guidance.

In conjunction with this PD psychosis trial, we also have an ongoing open-label study involving the extended use of ACP-103. This study is designed to determine the safety of ACP-103 during long-term administration, and involves patients who have completed the aforementioned Phase II trial, and who may, in the opinion of the treating physician, benefit from continued treatment with ACP-103. We believe that this open-label study provides us with an exciting opportunity to evaluate the safety of long-term use of ACP-103 in patients and will help us in establishing a safety database. We expect to provide an update on the status of this open-label study when we report results from the Phase II trial.

Finally, in this program, we also have an ongoing clinical pharmacology study in collaboration with the NIH to assess the ability of ACP-103 to treat levadopa-induced dyskinesias in patients with Parkinson's disease.

Before we move to our two internal Phase II schizophrenia programs, I'm excited to report today that we have completed enrollment in a previously-unannounced clinical trial with ACP-103. This is a double-blind, placebo-controlled, combined positron emission tomography and polysomnography sleep clinical study with ACP-103 in healthy, older volunteers. The purpose of this trial is twofold -- first, to provide us with additional pharmacokinetic information by assessing the relationship between steady state plasma levels of ACP-103 after two weeks, 14 days, of oral administration and occupancy 5-HT2A receptors in the brain; and, second, to evaluate the effect of 14-day sub-oral administration of ACP-103 on deep or slow wave sleep, as determined by polysomnography, or PSG.

These combined PET, PSG clinical study includes a total of 45 healthy volunteers ranging in age from 40 to 75 years old. Subjects in the study were randomized to several different study arms, and each study group was administered a different dose of ACP-103 or placebo for 14 consecutive days. PET examinations were performed on 20 of the subjects. PSG evaluations were conducted for all subjects at baseline and again at plasma study states. We expect to report results from this clinical study during the second quarter of 2006.

We believe that ACP-103 and 5-HT2A inverse agonists in our serotonin program have the potential to treat insomnia symptoms and to improve sleep maintenance, which is frequently disturbed in older adults because of decreased slow wave sleep. This opportunity has interesting synergies with our existing clinical programs with ACP-103. In particular, sleep disturbances are very common in patients with Parkinson's disease. They range from insomnia to excessive sleepiness.

If ACP-103 is successful in improving sleep maintenance, we believe that this would further enhance the potential of ACP-103 as a therapy for treatment-induced dysfunctions in Parkinson's disease. Furthermore, we believe that the sleep indication itself may provide an exciting commercial path for us to explore with potential partners in addition to the use of ACP-103 adjunctive in schizophrenia.

Let's now move to our two schizophrenia programs. First, we are developing ACP-103 as an adjunctive therapy for schizophrenia. We believe that ACP-103, when given together with antipsychotic drugs, has the potential to improve the efficacy profile and to reduce the side effects of the antipsychotic treatments, thereby offering a major advance in schizophrenia therapy.

We've previously reported results from the first two trials in our Phase II clinical program with ACP-103 as an adjunctive therapy for schizophrenia -- one in schizophrenia patients and one in healthy volunteers -- where we showed that ACP-103 reduced motor disturbances associated with treatment with haloperidol, a typical antipsychotic drug. We are currently conducting a large double-blind, placebo-controlled, Phase II clinical trial in these program, which is designed to evaluate the ability of ACP-103 when used in conjunctively with other antipsychotic drugs to provide an improved therapy for patients with schizophrenia.

This Phase II clinical trial will explore the potential dose sparing and efficacy-enhancing effects of ACP-103 when given adjunctively with [each of] risperidone, a commonly prescribed, atypical antipsychotic drug and haloperidol. The trial is designed to enroll up to 400 patients with schizophrenia who will be randomly assigned to five treatment arms, two arms using ACP-103 adjunctively with low doses of risperidone or haloperidol; and three additional arms, each combined with placebo -- low-dose haloperidol and low- and high-dose risperidone.

The study involves a 42-day treatment schedule. We are using industry-standard rating scales to assess clinical endpoints for positive and negative symptoms in schizophrenia as well as tolerability measures. The study is also designed to include a formal interim analysis after 200 patients have completed the treatment schedule. We began enrolling patients in this trial during the fall last year, and we believe that we are on track to complete enrollment of the initial 200 patients by about mid-2006, and to report results from the interim analysis during the second half 2006. We are very excited about this clinical trial, and we believe that this study this time provides an excellent opportunity to demonstrate the advantages of adjunctive therapy with ACP-103.

Let me now turn to our third proprietary Phase II clinical program, where we are developing ACP-104 as a stand-alone treatment for schizophrenia, with the added potential benefit of enhancing cognition. Cognition is one of the major challenges in schizophrenia therapy today, and we believe that ACP-104 may represent the promising new therapy that addresses this unmet medical need.

ACP-104 combines M1 muscarinic agonist, 5-HT2A inverse agonist, and D2 and D3 dopamine partial agonist in a single molecule, thereby uniquely addressing what we believe are the three most promising target mechanisms for treating positive and negative symptoms in schizophrenia.

We are currently conducting three initial studies in our Phase II program for ACP-104 in patients with schizophrenia. These studies are being conducted in collaboration with Professor Carol Tamminga, one of the world's leading clinicians in the area of schizophrenia.

The first of these clinical studies is a randomized, double-blind, placebo-controlled, single ascending-dose study in patients with schizophrenia. It is designed primarily to evaluate the safety, tolerability, and pharmacokinetics of ACP-104. During the fourth quarter of 2005, we reported initial results from this study based on a total of 10 patients, showing that ACP-104 was safe and well tolerated at each of the initial doses tested, and no dose-limiting or serious adverse events were observed.

We were encouraged with the tolerability and patient responses to ACP-104, based on the initial results from this first study, and have expanded the single-dose trial to evaluate higher doses.

ACP-104 is also being evaluated in an ongoing, 14-day, steady-state, double-blind, placebo-controlled, multi-ascending-dose study -- multiple ascending-dose study in schizophrenia patients. This study is designed to evaluate the safety, tolerability and pharmacokinetics of ACP-104, as well as to provide preliminary indications of antipsychotic efficacy.

We are also currently conducting a single dose positron emission tomography study in patients, designed to provide us with data regarding the relationship between plasma levels of ACP-104 and brain receptor occupancy in patients. We expect to report results from these ongoing clinical studies, including a total of about 50 patients during the second quarter 2006. Following the completion of these initial trials, we plan to begin an additional Phase II clinical trial to further evaluate the availability of ACP-104 to treat positive and negative symptoms of schizophrenia.

I will now turn to a brief update on our collaborative programs. Starting with Allergan, I'm pleased to report that our ongoing collaborations continue to progress favorably, including our collaborative clinical program in the area of neuropathic pain. This Phase II program is based on the discovery of a previously-unappreciated alpha adrenergic agonist to treat neuropathic pain that we made in collaboration with Allergan. Effective neuropathic pain therapy represents one of the largest unmet medical needs, and we believe that our small molecule drug candidates provide the potential to effectively treat a range of neuropathic pain conditions.

Allergan has completed Phase I studies for two orally active small molecule drug candidates, and they initiated the first Phase II study in this program in the fourth quarter of 2005. Multiple drug candidates are currently being evaluated in Phase II clinical trials. Allergan is responsible for conducting and funding the clinical development in this program. We are entitled to receive milestones and royalties on products successfully developed.

Based on the compelling, preclinical profile of these drug candidate and the results of the Phase I studies, we believe that this program may provide a new class of highly-effective and safe therapeutics for neuropathic pain.

The neuropathic pain program with Allergan emanates from one of three separate collaborations we have ongoing with Allergan. I'm delighted to report today that Allergan and we have extended the research term of the March 2003 discovery collaboration by two years. This this extends the collaboration which was scheduled to end late this year through March, 2008. The extension will focus joint research efforts in the area of pain and the parties may elect to pursue additional discovery activities in ophthalmic or other indications.

The research in the pain area will support our collaborative Phase II clinic program in neuropathic pain. We have had a long-standing and successful relationship with Allergan and we are grateful for the opportunity to continue to work closely in this collaboration with their high-quality R&D organization.

In addition to our Allergan collaborations, we continue to be pleased with the progress in our collaboration with Sepracor, which began in January of 2005. This alliance encompasses two exciting areas -- first, exploration of potential clinical candidates resulting from our preclinical muscarinic program, which is targeted towards CMS and other diseases; and, second, an opinion to select a preclinical compound from our serotonin 5-HT2A program for use in combination with Lunesta for sleep-related indications.

In January 2006, Sepracor completed their second $10 million equity investment in ACADIA in connection with this collaboration. Like Allergan, we have found Sepracor to be a valuable partner for ACADIA and we are gratified by the confidence they have expressed in our collaboration.

Behind our clinical pipeline, we have made considerable progress with our portfolio of assets in discovery and preclinical stages. In particular, we recently announced that we have nominated a non-steroidal and selective androgen receptor agonist, ACP-105, as a development candidate. Selective androgen receptor modulators, or SARMs, may advance the standard treatment for a variety of disorders, including muscle-wasting conditions and osteoporosis, with improved tolerability and fewer side effects as compared to current treatments based on testosterone replacements.

ACP-105 demonstrated a promising preclinical profile, and we are excited to have advanced this program into R&D tract developments.

We have also made significant advances in our preclinical cannabinoid CB1 receptor program. Our novel lead compounds in this program potently and selectively block the CB1 receptor. This receptor plays a key role in regulating appetite and other reward-based behaviors, and we believe that our compounds in this preclinical program may lead to novel treatments for obesity and substance abuse.

Finally, I want to take this opportunity to thank our talented and dedicated team of employees at ACADIA for the outstanding contributions they have made to our progress over the past year. As our drug discovery and development pipeline has matured, we have continued to add depth and experience to our management team, and we believe that this team provides a strong foundation to take ACADIA to the next stage of development.

That completes our update, and we will now be happy to entertain any questions that you may have.

[OPERATOR INSTRUCTIONS] Your first question will come from the line of Eun Yang of Jefferies & Company. Please proceed.

Thanks, very much. Two questions -- one on ACP-103 for Parkinson's disease. How long is the open-label study?

So, the open-label study will continue for the -- until we have a registration with it -- ACP-103.

Okay. And on top of that, I just want to ask you if you have any data presentation in upcoming medical meetings for the next several months?

Normally, we haven't planned for any news releases in connection with medical meetings. What we will do when it comes to announcing results from the clinical trials, the PD psychosis trial in March, as we were planning for, and the results from the ACP-104 clinical trials in the second quarter of this year, we intend to provide top-line results initially. And, then, eventually, present complete datasets in connection with medical meetings and publications of these data.

Are there going to be any data -- preclinical data or anything at the upcoming APA meeting in May?

I don't think that we will have anything at that meeting. Not to my knowledge.

Okay. And the second question is to Tom. Just the renewed research collaboration with Allergan, can we expect that the research you're funding would be approximately $8 million and amortize over the next two years?

Yes, Eun, what we have basically indicated, obviously, is that the research term which would have otherwise expired at the end of March will --

Right.

-- go forward for two more years. We're still operating under the original contract for the entire first quarter. And we haven't really announced any specifics as it relates to the extension of it. And, frankly, it will depend upon the level of activity. And as we mentioned, it will be focused in pain and also provide the opportunity for other areas. But we haven't given any specificity of funding as we get -- on a go-forward basis.

Okay. Thank you, very much.

Thanks.

Thank you.

And your next question comes from the line of Edward Tenthoff of Piper Jaffray. Please proceed.

Great. Thank you, very much. And congratulations on a very productive '05. I noticed, obviously, that R&D jumped pretty significantly in the fourth quarter. And, Tom, on the call, did you break out what the portion of that was attributed to clinical trials? There was actually some background noise when you were speaking, so I couldn't quite hear what you were saying. And can you give us a little bit of guidance in terms of what you think R&D might be like in 2006?

Sure, thanks, Ted. What we did say was that, of the R&D expenses in the quarter, about 4.8 million related to external services, and the majority of that is related to ongoing clinical trials. And that did compare to about 2.4 million in the prior year's quarter. So 4.8 in outside service expense. What we said is, really, it related to the ongoing schizophrenia programs with 103 and 104, principally. But, also, the additional PET and sleep study that Uli has outlined has played a contributing role, as well, during the quarter.

Got you. And what would you be expecting for R&D budget growth in 2006?

Ted, we haven't provided the specific expenditure guidance for the year. We really continue to focus our guidance just on the cash area in terms of what our, kind of, overall spending was planned to be. But we certainly have said before as it related to '06 relative to '05 on a go-forward basis, that the R&D expenses, as we got to the back end of '05 would continue to go up a bit over the previous quarters. And that reflects the fact that the trials were expanding and maturing. We have not given specific guidance on the top -- on the expenditure line items for 2006.

Got you.

And I would caution, too, within given quarters there can be fluctuations with -- related to the timing of various studies and so on.

Well, let me ask a different way, then. I mean, is the fourth quarter sort of a go-forward rate or was there some one-time stuff in the fourth quarter that might take a, kind of, aggregate rate down a little bit or the quarterly rate down a little bit?

I could really only comment, Ted, I think on the G&A side, and that is that we certainly did announce there that the -- that we included significant expenditures related to audit and other things, which are Sarbanes-Oxley related. And, typically, what most companies are experiencing is reduction in those type of expenditures in the subsequent years relative to the first year of implementation. So that's where we are on the G&A side. In R&D we haven't provided the specific guidance. Certainly, if you look at the overall year, we would anticipate, as we've said in our filings that the expenditures in the future year would be more than what they were in 2005 in R&D.

Okay. Good. That's helpful. And, then, just one last quick question -- With respect to 105, what are, kind of, the IND-enabling steps that you have planned for this year? And when do you think that might actually get into the clinic?

So, hi, Ed.

Hi, Uli.

When it comes to ACP-105, we will essential try to assemble a pretty smooth R&D package. It starts off with generation of GMP material, formulation, toxicology studies, et cetera. We haven't provided any guidance on when we expect to file the IND.

Great. Thanks, guys.

And your next question will come from the line of Michael King of Rodman & Renshaw. Please proceed. Mr. King, your line is open.

Sorry about that. Hi, guys.

Hi.

My apologies. I know that ACP-103 is not -- is not a drug for the treatment of insomnia. But I'm just wondering if that study you're going to be looking for similar endpoints to those seen with insomnia drugs? And think I might be curious as to whether or not are you looking for the next-day effects at all, see if there's any residual sedation in the next day?

Yes, so when it comes to primary endpoints, we have, in fact, [two] primary endpoints in this study. One primary endpoint has to do with the changes in slow wave sleep, so if we can see -- essentially, a significant change in slow wave sleep in treated patients as compared to non-treated patients. So that's a traditional polysomnography endpoint, and that's what we're using for the sleep pattern specifically here.

When -- we also have a second primary endpoint, and that's, in fact, related to us wanting to achieve a correlation between plasma levels and brain receptor occupancy, which is a key in the study because we really want to use that kind of data after chronic administration with ACP-103 to help us to design future doses of ACP-103 in clinical studies.

I can also mention that, again, we think that the sleep study's quite interesting. It provides us with, potentially, increased use of ACP-103 in the Parkinson's disease indication. And, furthermore, it provides us with an additional avenue for ACP-103 potentially.

Okay. But to get at the heart of it, no other sleep endpoints like total sleep time, wakefulness after sleep onset, that kind of stuff, you're not going to be looking at, just slow wave polysomnography?

This is the purpose of this study, slow wave sleep.

Question about -- sorry, remind me, 105 is the SARM or the CB1 antagonist?

ACP-105 is a SARM.

Can you talk a little bit about what properties that it may possess that differentiate it or make it unique?

Yes, it's quite an interesting molecule. We think it has an attractive small molecule feature so it's not a steroid. And it has demonstrated tissue selectivity, which we think is very important for this type of drug. So we have -- with ACP-105, we can reverse various markers of testosterone deficiency in preclinical animal testing like endocrine and bone-related markers, while we have had little effect on the size of the prostate. And that's the kind of tissue specificity that we want to see with a SARM compound.

Okay, so it's mostly centered in the hypothalamus and the adrenal or -- ?

Yes.

Okay.

And I think it's very important also to mention that we have very promising pharmacokinetic properties, oral activity, good bioavailability, and an attractive safety profile, as well.

Okay. And is it -- what is -- you mentioned you have some bone markers. Is there a direct effect on bone or indirect?

I don't want to go in more on that other that we have seen effects on -- reversal on endocrine markers and bone-related markers in castrated animals.

Okay. Great. And, then, finally, any help you can give us in terms of what your -- you may have answered this or not -- but Sepracor collaboration, when might we see first of [inaudible] with a compound from that collaboration?

Well, Mike, we have not provided any guidance on that so far.

Will you be giving us any milestones along the way like a declaration of a candidate or anything like that?

Mike, this is Tom. Really, what we've announced and talked about on that Sepracor collaboration, as you know, it deals with the two areas, the muscarinic program, where we'll be exploring candidates, and also the potential for them selecting one of our 5-HT2A compounds for the sleep area that they could combine with Lunesta. What we can say is there's, obviously, opportunities for the milestones, and they are traditional based, in that, you would typically start with a selection and then it would go forward from there. So at traditional kinds of marks.

But as Uli mentioned, we -- it's a three-year deal. We're one year now into it. But we have not provided a specificity of what we would -- the time frames for expecting those type of milestones.

Right. But, clearly, if you receive a milestone payment and it's material, you'll announce it?

Absolutely.

Okay. I had some others, but I'll jump back in the queue. Thanks.

Thank you.

And your next question will come from Joe Pantginis of Canaccord Adams. Please proceed.

Hi, guys. Can you provide some added color and remind us what the interim analysis on the first 200 patients for the 103 study will tell us? Will we basically see, primarily safety data, or will we see some interim efficacy analysis?

Thank you. Again, that interim study, we expect to do a full statistical analysis of the endpoints of the study. We expect to be able to report on the dose -- potentially dose-sparing effects of ACP-103. I think that's one of the key things that we measure in this study. And we should also be able to report on observed side effects in the study. But, clearly, we are going to specify effects related to the efficacy parameters.

Great. And if I could just follow up quickly? Can you remind us, really, of the importance surrounding the two PET studies? You told us about one today, and also, the ongoing one about why these studies are really important for your registration process?

I think in today's kind of environment, it's very important to do PET studies when you are developing CNS drugs. That study provides with an outstanding opportunity to really understand what kind of brain penetration you have the drug -- of the drug, what kind of amount of the drug that comes into the brain, and what the true effect in terms of receptor occupancy is. So for us, it's invaluable help to have that when it comes to designing the Phase III program eventually, and also when it comes to designing -- optimally designing studies. So it's something that we will continue to do. And as you're probably aware, all companies who are successful in CNS research are doing these studies.

Great. Thanks, guys.

Thanks.

And your next question is a follow-up from Eun Yang. Please proceed.

Thank you, very much. Now that you're looking at the sedative effect of ACP-103, I'm just wondering, given the fact that are you using a higher dose of the drug for the Parkinson's disease trial, are you expecting the sedation, could it be one of the possible side effects in this study?

Thank you, Eun. No, no we don't expect to see any sedation following ACP-103. So the kind of effect that we expect to see of ACP-103 in sleep is an effect on the sleep maintainers. So we should be able to have an effect on deep sleep. That itself will not, as we believe, have any impact on -- in the waking state, an impact. It's likely we really have an effect on sleep maintainers, that we will have an increased alertness, instead, during the daytime. So other than an increased sedation. So that's why we think that this may be particularly important in the Parkinson's disease population, where you have, say, a problem, all kinds of problems with sleep parameters.

Okay. So you're to more of the, like, architecture of the sleep, not the initiation or maintenance, anything like that?

Yes, the maintenance, we may affect by deepening the sleep. That's -- so people will probably sleep better on ACP-103. That's likely.

Okay. Thank you, very much.

Your next question will come from the line of Joe Aguilera of Biorevolution Capital. Please proceed.

Congratulations, Uli and Tom.

Thank you.

A question on ACP-104, Uli, for you. First of all, are we seeing any signs of any side effects, any loss of white blood cells or any weight gain, any serious side effects for ACP-104?

What we did announce in connection with us reporting on the first 10 subjects in the single ascending-dose study was that we didn't see any severe adverse effects. We essentially came out very well. Also, you would not expect, by the way, to see any effects on weight gain after single-dose administration, by the way. And when it comes to the effects after the two-week study, we will be able to assess that when we get the results here in the second quarter of this year.

And after we get the results in the second quarter, would we look to partner that, then, assuming the results are good? Or would we wait to do the additional Phase II, which you just mentioned?

It's a good question. Our kind of strategy here is to essentially try to get very strong evidence of safety and efficacy from our Phase II study, and then, when we have those data in hand, start to really explore strategic alliances. So, really, we would -- we are going to continue with ACP-104. We intend to run a larger efficacy clinical study using ACP-104. And then I think that we are ready to start to explore partnerships.

How many patients will that -- do you have the protocol for that yet, the additional study?

We haven't finalized the protocol for that larger study. But it's likely that it will be, say, a considerable sized study, with probably three arms. Probably around 200 patients.

And I'm assuming those results won't come until when? 2008, end of 2007?

We haven't provided any guidance on timing of that. But you should remember that when you try to assess timings here, it's not very difficult to recruit patients for schizophrenia clinical trials.

Okay.

But to answer -- what I can advise you to do is to use industry kind of time lines for -- if you want to get an understanding on where ACADIA may end up.

And the last question, Tom, you can hop in. While the environment's -- the window's been wide open here, is there any potential in us doing a small traunch while the environment's really good here?

You mean you're referring to financing?

Right.

Yes, what we have said, we don't have a specific plan at the moment. You may be aware we had put a shelf registration up very early in the year. And we announced then that we had no specific plans. We essentially just wanted to provide flexibility that we could look to finance in the future. We're, obviously, very excited about this year and excited about the future. We wanted to be -- we thought it would be a prudent step to prepare ourselves. Like most biotechs, we'll certainly consider financing it from time to time, but we don't have a specific plan. And it's really not our policy to comment or speculate on the future.

Right. And the last one, Uli, on ACP-103. We would look to partner that, obviously, sometime in the next 6 to 12 months? Is that a good time frame?

Again, I would -- we cannot provide you with a specific guidance. We haven't done that before. But what we have said is that we started the large adjunctive therapy trial with ACP-103 in schizophrenia last fall, that we intend to expect to recruit about 400 patients. And again, I can only tell you to consider what would be industry standard here. And, again, that our policy, or our thinking here is to start to explore potential strategic alliances when we have very strong demonstrations of efficacy as well as safety.

Thank you, Uli, and thank you, Tom.

Thank you.

And your last question will come from the line of Michael King. Please proceed.

Thanks for taking the follow-up. I just wanted to ask if -- do you feel the current Phase IIs for both 103 and 104 satisfy all of the expected requirements for drug-drug interaction studies? Or do you envision doing additional studies to examine drug-drug interactions? And I would just also apropos that the previous gentleman's question regarding partnership, not so much timing, but would those need to be satisfied before you would view partnership discussions appropriate?

It's a good question, Mike. So when it comes to drug-drug interactions, let me start by saying that we expect very little problems with drug-drug interactions when it comes to ACP-104. And that's where we are talking about drug-drug interactions. ACP-103, sorry. That's when -- where we are talking about drug-drug interactions, because we are giving it adjunctively in schizophrenia, and we are giving it on the top of dopamine replacement therapy in Parkinson's disease.

Our big advantage here is that there is very little metabolites of ACP-103. So, and that's normally, when you have drug-drug interactions, it's because two drugs are competing for the same end site, and we don't have that kind of problem here. We will, I'm sure, need to address drug-drug interactions, both preclinically and clinically, or with the development time, and it will be very interesting for us to learn what the FDA will require from us in terms of preclinical demonstrations here.

So we will -- when we interact with the FDA we will learn about the kind of requirements they have for us. Currently, we are, clearly, looking at plasma levels that come out from the ongoing clinical trials. We have looked at that previously, also. For example, we didn't see any drug-drug interacts between ACP-103 and haloperidol. So, again --

Clearly, those are not the only drugs that schizophrenics may be on.

You are right. And, so, it will be very interesting to see what kind of questions that we will get from the FDA here. And I say I don't expect it to be -- cause any problems for us. But we certainly will need to do some work here.

Okay. Great. Thanks, guys.

Thanks.

That concludes our question-and-answer session. I would like to turn the call over to Dr. Hacksell for closing remarks.

Okay. Thanks, again, to everyone for joining us on today's call and for your continued support. We look forward to the opportunity to update you again in the future on our ongoing progress. Thank you.

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Have a good day.