ACADIA Pharmaceuticals Inc (ACAD) 2006 Q1 法說會逐字稿

Welcome to ACADIA Pharmaceuticals 2006 conference call.

[OPERATOR INSTRUCTIONS]. I would now like to turn the conference 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' first quarter 2006 financial results conference call. This call is being recorded and an archived copy will be available on our website at www.acadia-pharm.com through May 24th. 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 like to first remind you that during our call today, we will be making a number of forward-looking statements, including statements regarding our anticipated 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, 2005, 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.

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

Let me first take this opportunity to thank all of you for joining us on today's conference call.

We have had a very successful start to the 2006 year with the achievement of a number of key milestones. Importantly, we announced positive clinical trial results in two of our proprietary Phase II stage programs. First, our Phase II trial in Parkinson's patients in treatment of psychosis demonstrated that ACP-103 and antipsychotic effects and was well tolerated. More recently we obtained outstanding results in our proof-of-concept clinical sleep trial with ACP-103. In addition to these key clinical milestones to date, we have significantly strengthened our financial position with our equity investment from Sepracor in January of this year and a recent public offering where we received net proceeds of $85.6 million.

With these positive clinical results and added cash runway, we intend to further advance our clinical pipeline, including plans to initiate pivotal clinical trials of our proprietary Phase II stage programs during the next 12 months. In addition, I'm pleased to report today that we remain on track to reach our previously announced milestones for the remainder of 2006, in both of our proprietary Phase II schizophrenia programs. We continue to believe that 2006 has the potential to be a transforming year for ACADIA.

Before I discuss our clinical programs and other key areas of our business, I will ask Tom Aasen, our Chief Financial Officer, to discuss our financial results.

I will provide with you a brief overview of our unaudited financial results for the first quarter of 2006, as reported in our press release issued earlier today.

I'm pleased to report that our financial results for the first quarter were in line with our expectations. As planned, our results reflected a continued investment in our proprietary phase II stage clinical programs while we have continued to carefully manage our operating expenses. We reported a net loss of 9.5 million for the first quarter of 2006 compared to a net loss of 5.6 million for the first quarter of 2005. The net loss for the first quarter 2006 included $900,000 in noncash stock-based compensation expense, reflecting adoption of the new fair value accounting standard effective January 1, 2006.

Revenues totaled 2.5 million for the first quarter compared to 2.3 million for the first quarter of 2005. This increase in revenues reflected increases in our collaboration with Sepracor and Allergan as well as continued revenues from our development agreement with the Stanley Medical Research Institute. Research and development expenses totalled $10.1 million for the first quarter 2006 including 559,000 in stock-based compensation compared to 6.3 million for the comparable quarter in 2005 including 211,000 in stock based compensation. This increase was primarily attributable to increased external clinical costs associated with our proprietary phase 2 programs with ACP-103 and ACP-104, including costs related to our ongoing schizophrenia clinical trials and recently completed Parkinson's Disease and sleep trials as well as costs related to expansion of our R&D organization.

General and administrative expenses totaled 2.3 million including 341,000 in stock-based compensation, compared to 1.8 million for the first quarter 2005 including 160,000 in stock-based compensation. The increase reflects increased public company related fees as well as costs related to expansion of our G&A infrastructure. As I previously mentioned, we adopted the new accounting standard, Statement of Financial Accounting Standards number 123R during the first quarter 2006 to account for stock-based compensation under the fair value method. This adoption resulted in an aggregate of 900,000 of non cash stock-based compensation during the first quarter, which was included in R&D and G&A expenses. The comparable quarter of 2005 included 371,000 of stock-based compensation recorded pursuant to the old standard APB number 25.

Our net loss per common share, on a GAAP basis including non-cash stock based compensation totaled $0.39 for the first quarter of 2006, compared to a net loss per common share of $0.31 for the first quarter of 2005. Finally, to update you on our cash position and outlook, our cash investment securities and restricted cash totaled $56.2 million at March 31st, 2006, compared to 55.5 million at December 31st, 2005.

Subsequent to quarter end, we received additional 55.6 million in net proceeds from our recent public offering which closed on May 3rd, 2006 . With this financing we have significantly strengthened our balance sheet and we believe that we are well positioned to advance our proprietary Phase II clinical programs. We anticipate that we will use between 38 million and 42 million of cash resources to fund our operations for the full year of 2006, consistent with our previous expectations of cash requirements. We expect that our existing cash resources, including expected payments from our collaborators, will be sufficient to fund our operations through at least mid-2008.

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

Thank you, Tom. I will now provide you with a brief overview of our clinical programs and touch on some of our recent corporate highlights. The clinical pipeline includes five Phase II stage clinical programs, four of which are proprietary programs. We are developing ACP-103, our proprietary selective selective [inaudible-accent] inverse agonist in three clinical programs, each targeting a different indication.

First, as a therapy for treatment for [dose dysfunctions] in Parkinson's disease. Second, as an adjunctive therapy for schizophrenia, and third, as a treatment of sleep maintenance insomnia. In our fourth proprietary clinical program we are developing ACP-104 as a stand-alone treatment for schizophrenia. In addition to these four internal clinical programs, we have a newer [herpetic] pain program in Phase II clinical trial in collaboration with Allergan.

Before I touch on our ongoing Parkinson's disease and schizophrenia programs I would like to first provide an update on our sleep maintenance insomnia program in which we recently announced positive clinical results with ACP-103. Let me start by addressing the market opportunity in sleep maintenance insomnia. Chronic insomnia affects about 10% of adults. Many patients with insomnia, especially older patients, those who have neurological, medical, or psychiatric conditions, suffer from sleep maintenance insomnia. This is the inability to stay asleep or to resume sleep after waking, and it's a major unmet medical need.

Deep [inaudible-accent] wave sleep decreases with age. This leads to superficial sleep and difficulties staying asleep. Most available sleep agents are sedatives that may impair daytime functioning, and that are ineffective in treating the symptoms of sleep maintenance insomnia. ACP-103, which deepens sleep by blocking the 5-HT2A receptors provides the opportunity for differentiation from currently available therapies by effectively creating the symptoms of sleep maintenance insomnia without inducing sleep or impairing daytime functioning. We recently announced positive results from the proof-of-concept clinical study, the effect of AWP 103 on healthy older volunteers using polysommnography. The trial was a double blind placebo-controlled study involving 45 healthy volunteers, ranging in age from 40 to 64.

The subjects were randomized to one of five treatment arms including placebo and four different doses of ACP-103 administered once daily for 14 days. Results of the study demonstrated that ACP-103 [inaudible-accent] used to statistically increase slow wave sleep that was dose related. This robust effect was demonstrated both acutely, that is after starter date 1, and after chronic health administration on starter date 13. ACP-103 also had a positive impact on measures for sleep maintenance, including decreases in the number of awakening after sleep onset and in the time awake after sleep onset.

In contrast to most currently marketed insomnia drugs, ACP-103 did not alter latency to sleep onset and did not impair daytime functioning. We believe that these data provide a powerful proof of concept of the ability of ACP-103 to improve the quality of sleep by increasing slow wave sleep. In addition to providing the opportunity for ACP-103 to be an improved therapy for sleep maintenance insomnia, this program is synergistic with our other two clinical programs for ACP-103, schizophrenia and treatment of psychosis Parkinson's disease. Patients in these indications often suffer from sleep disturbances and can benefit from the additional positive effects of ACP-103 for sleep maintenance insomnia.

The top-line results from this recent trial strongly support the potential of ACP-103 as a novel treatment for sleep maintenance insomnia. As for the next steps in this program we are in the process of analyzing the file data in detail, and are now planning another clinical trial in this program. We intend to design this next study to be sufficiently powered and to have the appropriate clinical end points, so that it may serve as one of the pivotal trials for this program. We intend to initiate this trial -- within the next 12 months.

Let's now turn to another one of our internal phase 2 programs, while we are developing ACP-103 as the therapy for the treatment in dose 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 frequently result in treatments in dose psychosis, and in treatment in dose [inaudible-accent], disturbance in these patient, there's currently no approved therapy in the United States to treat this dysfunction. 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.

In March, we announced positive results from the multicenter double blind and placebo controlled Phase II clinical trial of ACP-103 in Parkinson's disease patients suffering from treatment-induced psychosis. The data demonstrated that ACP-103 had antipsychotic effects, was safe, and well tolerated, that it didn't worsen disease-related motoric functions in these patients. We were very impressed with the top-line results from this Parkinson's disease psychosis study, and are currently analyzing the full data set. As previously mentioned, following completion of this analysis we plan to request a meeting with the FDA to discuss our regulatory status before this program. Subject to discussions with the FDA we plan to initiate the clinical trial to further evaluate the efficacy of ACP-103 in patients with Parkinson's disease suffering from treatment induced psychosis.

In trying to design this study to be sufficiently powered, and to have the appropriate clinical end-point so that it may serve as one of the required pivotal trials for this development program. We intend to initiate this trial to begin within the next twelve months. Many of the patients from this trial have enrolled in an ongoing open-label extension study, which involves the administration of ACP-103 to patients who may in the opinion of the treating physician benefit from continued treatment with ACP-103. 26 patients are currently participating in this extension study, including 10 patients who have been treated with ACP-103 for more than six months, and 3 who have been treated for over one year. We're also conducting a clinical pharmacology study in collaboration with the NIH to evaluate the ability of ACP-103 to treat drug induced dyskinesia and motoric dysfunction in patients with Parkinson's disease.

Let us now turn to our third proprietary clinical program in which we are developing ACP-103 as an adjunctive therapy for schizophrenia. The anti-psychotic drug currently used to treat schizophrenia has substantial limitations, including severe side effects and lack of effect of on most of the negative symptoms of the disease. We believe that the use of ACP-103 conjunctively may increase the efficacy profile and reduce the side effects of current antipsychotic drugs, thereby offering a major advance in schizophrenia therapy.

We are currently conducting a large Phase II trial designed to evaluate the ability of ACP-103 when used conjunctively with other antipsychotic drugs to provide an improved therapy for patients with schizophrenia. More specifically the study is designed to evaluate the anti-psychotic and reduce [bearing effective] of ACP-103 when given conjunctively with each of low dose risperidone, a commonly prescribed atypical antipsychotic drug, and low dose haloperidol, a typical antipsychotic drug.

We plan to enroll up to 400 patients with schizophrenia in this study, which involves a 42-day treatment schedule. We use industry standard rating scales to assess clinical endpoint for positive and negative symptoms in schizophrenia as well as tolerability measures. We believe that this study is designed to provide an excellent opportunity to demonstrate the advantages of adjunctive therapies with ACP-103. The study is designed to include a formal interim analysis, up to 200 patients have completed the treatment schedules. We remain on track to complete enrollment of the initial 200 patients by mid 2006 and to report results from the interim analysis during the second half of 2006.

Let's move to our second schizophrenia program involving another one of our lead compounds, ACP-104. We are developing ACP-104 as a stand-alone treatment for schizophrenia with the added potential benefit of enhancing cognition. We believe that ACP-104 may offer unique combination of antipsychotic effects and cognitive benefits.

We are currently conducting three initial studies in our Phase II program for ACP-104 in patients with schizophrenia. The first clinical trial is a randomized double blind placebo controlled [inaudible-accent] dose study in patients with schizophrenia. The second trial is a 14 day double-blind placebo controlled multiple ascending dose study in schizophrenia patients as well. This study is designed to evaluate the safety, tolerability and pharmacokinetics of ACP-104, as well as to provide preliminary indications of antipsychotic effects. We are also conducting the positron-emission tomography study in schizophrenia patients. This study is designed to provide us with further data regarding the relationship between plasma levels of ACP-104 and brain receptor occupancy of the patients.

We expect to report results from these ongoing clinical studies, including a total of about 50 patients with schizophrenia by mid 2006 consistent with our earlier guidance. We believe that these studies will lay the foundation for a subsequent Phase II-b study, which we intend to initiate following the completion of the initial studies. The key strength of ACADIA is our powerful and productive drug discovery. Our five Phase II stage drug programs all emanate from our own research, and are backed by a rich portfolio of preclinical and discovery programs which we continue to progress.

During the first quarter, we nominated ACP-105, a nonsteroidal and selective androgen receptor agonist as a development candidate. Selective androgen receptor agonists, or SARAs may improve the standard of care for a variety of disorders including muscle wasting conditions and osteoporosis. With improved tolerability and fewer side effects compared to current treatments we have based on testosterone replacements.

We also advanced our cannabinoid CD1 research into pre-clinical program patterns. Our novel lead compounds in this program potently and selectively block the CD1 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. Behind ACP-103 and ACP-104, we have strong preclinical programs, which provide ACADIA with a solid base of follow-on and backup candidates. These potential clinical candidates open up a variety of opportunities for ACADIA, in particular, in the case of ACP-103, where we are currently exploring three different indications, ACADIA will be well served to have access to pharmacologically related clinical candidates that may provide additional commercial flexibility, and may enhance our partnering opportunities.

In closing, I would like to reiterate that we have accomplished a great deal so far this year with the announcement of positive clinical trial results in our Phase II programs, and with the strengthening of our balance sheets. We are now well positioned to drive forward our Phase II clinical programs and preclinical programs and prepare for late-stage clinical development in selected programs. We intend to carry forward the momentum we have built earlier this year, through the remainder of 2006.

That completes our update. We will now be happy to entertain any questions you may have.

[OPERATOR INSTRUCTIONS]. Your first question is from the line of Edward Tenthoff with Piper Jaffray.

Great, thank you very much, and thanks for the update on the clinical programs as well. Just one quick question. I think I may have missed what you mentioned was sort of the next step with the sleep program.

Thanks, Ed. The next step is that we are currently analyzing in great detail the clinical trial, all aspects of it from all kinds of angles. Then we intend to design and initiate a pivotal study where we will study patients that have sleep maintaining insomnia as their clinical problem. That study will be designed as a study that can be pivotal so we will have the power to be sufficiently large to provide strong statistical significance, when it comes to its primary endpoint that will [inaudible - accent] . The length patients are awake after having fallen asleep during the sleep cycle. So we intend to move forward quite aggressively with this program.

And that would be into pivotal trials within the next twelve months or so?

This will be one of our two pivotal trials that we intend to start within the next twelve months. The other one is a pivotal study that we intend to start in the psychosis area.

Your next question comes from the line of Charles Duncan with JMP Securities. Please proceed.

Hey, good afternoon and congratulations on a good quarter of progress.

Thanks.

I had a couple of questions. The first is partnering. Seems like despite the stronger balance sheet, you've got a lot of things going on. Can you give us some thoughts as to both for 103 and 104, your logic behind whether or not you may partner those two drugs and at what time?

Our strategy here, Charles, is to try to take these programs to the optimal value point, both the programs with ACP-103 and the one with ACP-104. We differentiate here between the different programs because they address different market sizes. So in PD psychosis we believe that ACADIA has the opportunity to take the program all the way to the market and potentially take the full responsibility from marketing the program as well, because that is a specialist indication can be served with a relatively limited and very focused group of case representatives.

Then we come to the other indications where we are developing ACP-103. That is schizophrenia and sleep, and, of course, also schizophrenia for ACP-104. We talk about large markets, but you need to have substantial marketing muscle in terms of large sales forces. There we think it's ideal for ACADIA, first of all to partner so that we can complete a very strong preclinical program together with the partner and then that the partner can use its strong force to really optimize the value of the drug on the market.

So basically, our strategy is that in the area of schizophrenia, we must be sure that we have taken our -- that's ACP-103 and ACP-104, to a stage where we have demonstrated efficacy very clearly and safety as well, and that stage is essentially when we have completed the Phase II programs for these drugs. That is, we believe, an optimal value point for ACADIA, and we believe, at that stage, we can start to explore potential alliances and obtain an optimal value of our programs.

So Uli, does that imply that at least for 103 in schizophrenia, you may be looking to potentially have discussions with partners yet this year as you finish up that schizophrenia trial?

Well, I think it's important to realize that the ongoing adjunctive therapy clinical trial in schizophrenia is a large, it will include up to 400 patients. The milestone that we will reach in that trial this year in the second half of this year, in fact, is in interim analysis. We believe that we should complete this clinical trial, have all the 400 patients enrolled, and therefore have an optimal strength in terms of demonstrating efficacy of ACP-103 in this particular clinical trial before we start to explore partnerships more aggressively.

it would seem that the speed with which you've enrolled that trial so far, you've probably see fully enrolled nearly by year-end, and it's like a 42-day exposure, so it sounds like maybe early next year you would be talking to partners?

We haven't provided any specific guidance on when we will have completed that clinical trial, but what I can advise to you think about, is essentially clinical -- industry standard time line for a clinical trial of that size in schizophrenia.

Okay. Then Uli, when you are moving on to the 104 program, what kind of safety things are you looking for in these early Phase II experience trials? Are you concerned about, say, seizuregenic activity or anything with 104?

What we are doing, it seems to be trying to understand what is -- we want to really, get as close as possible to the maximally tolerated does, and we are pretty open when it comes to what kind of potential side effects that that could limit the dosing of these patients. We are looking at all typical kind of side effects that you see acutely and relatively [sub comically], so that's psychotic drugs. These kind of things can include everything from, if you take the marked seizures that you have today, side effects include salivation, can be sedation, et cetera, and these are the typical kind of things that you would see early on in a dose escalation kind of a study.

And have you seen anything thus far, how does the drug look compared to say --

Clozapine? Well, the only thing I can tell you here, because we haven't analyzed the data yet, but we will do so immediately, we will provide the stats on the ongoing studies mid-this year, but what I can say is that we already, last year in November presented some initial data from the single ascending dose study on what we reported then was that we in fact could go to higher than expected single doses, acute doses, of ACP-104 and that it was more tolerated than we had expected. So that was encouraging.

Okay. Good deal. Final question is, partnered programs, both Allergan neuropathic pain and the earlier Cerrono programs, can you give us any more color on how things are going there?

What we have announced is, of course that in the neuropathic pain area with Allergan is moving forward with two clinical candidates in a Phase II clinical program for neuropathic pain. It's a new, previously unappreciated mechanist to deal effectively with pain and neuropathic pain. So we are very excited about hearing the data Allergan here is responsible for the development, and we are receiving milestones and royalties. We haven't provided any guidance. Allergan hasn't done that, either. When they will present results from the Phase II program.

Then Allergan also has another collaboration with ACADIA in the area of glaucoma, and there we are in the IND track development with a product that specifically stimulates receptors and provides a powerful reduction of intraocular pressure which is comparable to what you see with the most commonly used drugs today. Our second large collaboration is with Sepracor, as you know. And there we have a major effort to try to take our muscorenic avenues and develop them for neuropsychiatric and related indications.

That program moving forward aggressively and we are I think very happy with the collaboration with Sepracor , so we are in fact, complementing each other excellently in that program, and I'm excited about that collaboration. You may remember that we also have the other part of the Sepracor collaboration where Sepracor has the option to take one of our preclinical ACP-103 backouts and combine with Lunesta as a potential drug that enhanced sleep maintenance profile, and we have not provided any guidance on potential timing there, but we think that both the collaborations with Allergan and with Sepracor are quite successful and we are very excited about them.

Thanks, Uli. They don't have any reach-through rights to ACP-103?

No, that's not -- the only rights they have is the right to an option to take one of our preclinical compounds and combine it with Lunesta for sleep. We have kept all other rights for sleep, all other compounds.

Hope I didn't surprise with you the Sepracor collaboration.

No no,.

I'm kidding you. Thanks for the color.

[OPERATOR INSTRUCTIONS]. Your next question comes from the line of Jason Napodano with Zacks Investment Research.

Thank you very much for taking my question. If could I get back to ACP-104 for a second, the multidose trial the 14-day steady state, you mentioned preliminary indicators of antipsychotic efficacy. What exactly are you looking for with those preliminary indicators, and will those be standard industry scale, and how well is that trial powered to even show efficacy?

That's an excellent question. So this is a two-week study. Normally when you do pivotal trials in schizophrenia therapy, you have treatment for 42 days, and you have relatively large groups of patients, so clearly we don't expect to see highly significant psychotic efficacy with this trial. So what we expect to be able to see is some initial signals of antipsychotic effects, and we do, in fact, measure the effect on the patients on the Panz scale, which is the commonly used scale to measure effects or -- measured psychotic effects both on the positive symptoms, that is the hallucinations and the delusions, and the negative symptoms, the social withdrawal and the cognitive impairment.

What we may be expecting here is to see some signals, perhaps on the negative symptoms, but we will see -- we have -- leading experts to our help, both internally and externally we have a lot of experts that can help us to analyze these data in great detail and we believe that we have the opportunity to draw conclusions from this study in combination with the other two studies that we are conducting at the same state and time, but it will help us to pick the rights to doses on ACP-104 that we want to use in the subsequent Phase II b study, where we can really design it so we get strong efficacy data.

How large of a Phase II b study are you thinking about?

We're expecting to have three different arms, 80 to 90s patients per arm, two doses of ACP-104, and one dose of placebo.

Thank you very much.

Thank you.

At This time, there are no further questions in queue, so, Dr. Hacksell, please proceed to closing remarks.

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

Thank you for your participation in today's conference this concludes the presentation. You may now disconnect. Good day.