ACADIA Pharmaceuticals Inc (ACAD) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Acadia's Pharmaceuticals fourth quarter and full year 2007 financial results conference call. My name is Fab, 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.

Thank you. Good afternoon, and welcome to the Acadia Pharmaceuticals fourth quarter 2007 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 March 19. Before we proceed, I would like to 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 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 31, 2007, filed today. 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 now my pleasure to turn the call over to Dr. Uli Hacksell, our Chief Executive Officer.

Thank you, Lisa, and let me take this opportunity to thank all of you for joining us on today's conference call. Also joining from Acadia today are Dr. Roger Mills, our Executive Vice President of Development, and Tom Aasen, our Chief Financial Officer. I will begin today by covering some of our key highlights from this past year. I will then ask Tom to briefly review our financial results for the fourth quarter and following these remarks we will review our clinical programs. We will then open the floor to your questions. 2007 was a year of impressive progress for Acadia. We continued our strong track record of delivering on our milestones and we made significant advancements in our chemical pipeline.

First, we transitioned to a late stage development company with the initiation of our first Phase III pivitol trial with pimavanserin for the treatment of Parkinson's disease psychosis. Second, we reported positive results from our Phase II clinical trial with pimavanserin co-therapy for schizophrenia. Based on these positive results, we are focused on executing our strategy to develop and commercialize pimavanserin together with a strategic partner. Third, we made remarkable progress in our second schizophrenia program where we are developing ACP-104 as a stand-alone treatment. We announced in December that we had completed enrollment in our Phase IIb trial, significantly ahead of schedule. The treatment phase of this time has now been completed and we remain on track to report top line results in the second quarter of 2008. We also continue to advance our collaborative clinical programs with Allergan, including our neuropathic pain program in Phase II developments and our glaucoma program which progressed into Phase I studies last year.

Finally, in addition to these important advancements in our clinical programs we significantly strengthened our balance sheet to a follow-on product offering. This provides us with a solid foundation to further advance our development pipeline and execute on our business strategy. While we are very proud of our accomplishments in 2007, we remain focused on the road ahead. We expect to build on the solid foundation we established last year by delivering on a number of potential value driving milestones in 2008. Above all we remain dedicated to providing meaningful therapeutic improvement for patients who suffer from neuropsychiatric and other CNS disorders. Before we review our clinical programs and upcoming milestones in more detail, let me turn the call over to Tom to discuss our recent financial results.

Thank you, Uli, and good afternoon. I'll provide you with a brief overview of our fourth quarter 2007 financial results which were reported in our press release and Form 10-K issued earlier today. I'm pleased to report that our financial results for the quarter were in line with our expectations and were consistent with the increased investment and advancement we made in our proprietary clinical pipeline. We continue to maintain a strong cash position closing the year with a total of 126.9 million in cash and investment securities. This was well in line with our earlier guidance indicating that cash and securities would be greater than 120 million. We reported a net loss of 17.0 million, or $0.46 per common share, for the fourth quarter of 2007 compared to a net loss of 12.5 million, or $0.42 per common share, for the fourth quarter of 2006.

Let's briefly look at some of the components of our fourth quarter results. Our revenues totaled 1.6 million for the fourth quarter of 2007 compared to 1.8 million for the fourth quarter of 2006 and were comprised of revenues from our collaborations with Allergan and Sepracor as well as our agreements with other parties. Research and development expenses totaled 17.3 million for the fourth quarter 2007 compared to 12.8 million for the fourth quarter 2006. This increase was primarily attributable to increased clinical development activity associated with our advanced proprietary clinical programs including our Phase IIb trial with ACP-104 for schizophrenia and our Phase III trial with pimavanserin for Parkinson's disease psychosis. Most notably, we saw an increase in external service cost which was consistent with the acceleration and timing and patient enrollment in our Phase IIb trial with ACP-104. External service costs totaled 10.4 million for the quarter compared to 6.3 million in the fourth quarter of 2006, largely reflecting the increased costs associated with the acceleration of this trial as well as ongoing costs associated with our Phase III program with pimavanserin.

General and administrative expenses totaled 3.0 million for the fourth quarter of 2007 compared to 2.5 million for the fourth quarter 2006. Finally, regarding our cash position and outlook, as previously mentioned we closed 2007 with a total of 126.9 million in cash and investment securities which represented a net increase of approximately 44 million in our cash position as compared to 83.3 million at December 31, 2006. Importantly, consistent with our conservative investment policy, we do not have any direct investments in auction rate securities or securities that are collateralized by assets that include mortgages our sub-prime debt, and our investment portfolio has not been adversely impacted by the recent disruptions in the credit market.

We used an aggregate of 54.9 million of cash during the year ended December 31, 2007, to fund our operating activities. We believe that with our current balance sheet we remain well-positioned to continue to advance our clinical pipeline and execute on our business strategy. Consistent with our previous guidance, we expect that our existing cash resources will be sufficient to fund our operations through 2009. I'll now turn the call back over to Uli.

Thank you, Tom. Let me now review our programs in more detail. Acadia's pipeline includes high to mid to late is that stage clinical programs. Our most advanced program we are in Phase III development with pimavanserin for the treatment of Parkinson's disease psychosis. We have delivered positive results from a Phase II trial in our program with pimavanserin as a co-therapy for schizophrenia and we have two additional proprietary Phase II stage clinical programs. These are ACP-104 as a stand-alone treatment for schizophrenia and pimavanserin for the treatment of sleep maintenance insomnia. We have retained worldwide commercialization rights for all four of these proprietary programs. In addition, we have a neuropathic pain program in Phase II development in collaboration with Allergan.

My remarks today will mostly focus on our most advanced programs including our Phase III Parkinson's disease psychosis programs and our two schizophrenia programs. Let me start by discussing our Phase III clinical program with pimavanserin as treatment for Parkinson's disease psychosis, or PDP. PDP is a debilitating neuropsychiatric disease that occurs in up to 40% of patients with Parkinson's disease. There currently i s no drug approved in the U.S. for treatment of PDP despite the fact that this is a very serious condition characterized by disturbing hallucinations and delusions. The progression of this disease is unrelenting and lacks remissions. Importantly, PDP often represents an inflection point in the treatment of patients with Parkinson's disease. The condition often disrupts a patient ability to perform many of the activities of daily living that keeps them independent and active. As a result, PDP is associated with increased caregiver burden, nursing home placements and increased mortality.

We believe pimavanserin is well-positioned to be an important first-in-class treatment for PDP. The therapy that can affectively treat the psychosis in patients with Parkinson's disease while allowing for optimal motor control, there by significantly improving the quality of life for these patients and for their caregivers. We continue to enroll patients in our first pivitol Phase III trial with pimavanserin as a treatment for PDP, which was initiated in June last year. This double-blind placebo-controlled Phase III trial is designed to evaluate the safety and efficacy of pimavanserin in approximately 240 patients with PDP. Patients in the study are randomized to three different study arms including two different doses of pimavanserin and one placebo. Patients receive oral doses of pimavanserin or placebo once daily for six weeks in addition to stable doses of their existing dopamine replacement therapy. The primary end point of the trial is psychotic efficacy as measured using the scale for the assessment of positive symptoms, or SAPS.

Psychosis in Parkinson's disease is manifested mainly by hallucinations and delusions and the SAPS is considered by experts as the most appropriate scale to measure the psychosis in Parkinson's disease. Metoric tolerability is an important secondary end point in the trial and is measured using the unit high Parkinson's disease rating scale or UPDRS. The trial is being conducted at over 50 clinical centers. About 30 of these sites are located in the U.S. and the remainder are located throughout Europe. We continue to be pleased with the progress of this trial. U.S. clinical sites are initiated and opened, and we also began recruiting patients in our European sites during the first quarter of this year. We remain on track to report top line results from this Phase III trial during 2009 consistent with our previous guidance.

I'm also delighted to report that Roger and his team have completed final preparations for our second pivitol Phase III trial with pimavanserin as a treatment for PDP and we expect to initiate this trial during March. This trial is of similar design, duration and nature as our first pivitol trial and will also be conducted at clinical sites located in both the U.S. and Europe. We expect to leverage the investment from our first trial to compress the development time frame for the second pivitol. In addition to the two pivitol Phase III trials, we are currently conducting an open label safety extension study in our PDP program. The patients who have completed either of the Phase III pivitol trials will have the opportunity to enroll into this extension study if, in the opinion of the physician, they may benefit from continued treatment with pimavanserin.

You may recall that we are also continuing to conduct an open label safety extension study in connection with our earlier Phase II PDP trial. In this extension study, 24 patients have been treated with Pimavanserin for at least one year, 12 of whom have been treated for two years including some patients who have now been treated for three years. In all, we believe that our Phase III program will demonstrate the potential for pimavanserin to be the first effective treatment for PDP. We believe pimavanserin will enable physicians to treat the psychosis without having to compromise on the basic management of Parkinson's disease.

Let me now turn to our two schizophrenia programs, beginning with our program with pimavanserin as a co-therapy for schizophrenia. Current drugs used to treat schizophrenia-related disorders have substantial limitations included inadequate efficacy and severe side effects. Despite their limitations, these drugs currently generate over $16 billion in annual sales. We believe that co-therapy with pimavanserin combined with a submaximal dose of atypical antipsychotics can significantly improve the treatment for patients with schizophrenia and related disorders. In December, Dr. Herbert Meltzer presented data from our Phase II schizophrenia co-therapy trial at the 46th annual meeting of the ACMP. This data confirmed the top-line results reported in March 2007 and demonstrated several advantages of co-therapy with pimavanserin and a submaximal dose of risperidone which includes enhanced efficacy, a faster onset of antipsychotic action, and an improved side effect profile, including less weight gain.

As a followup to the ACMP presentation, Dr. Murray Rosenthal presented data from our co-therapy trial at the 14th Biennial Winter Workshop on schizophrenia and bipolar disorders in early February of this year. The presentation included new data from the co-therapy trial showing that patients in co-therapy are combining pimavanserin and a submaximal dose of risperidone have significantly less increase from baseline in serum glucose levels after treatment compared to patients in the high dose risperidone plus placebo. Taken together, the reductions in weight gain and glucose increase seen effective and psychotic treatment with pimavanserin and a submaximal dose of risperidone suggests that this co-therapy approach has the potential to reduce the metabolic problems commonly associated with atypical and psychotic drugs.

Importantly, we are continuing to aggressively pursue our process to establish potential strategic alliance for pimavanserin. As we have indicated previously this involves thoroughly evaluating our with potential partners and pursuing lines that can help us complete the registration program for multiple indications and maximize value of these opportunities on the market. In general terms, our vision is also to retain rights to participate in the commercialization of pimavanserin in the area of neurology in the United States. Our focus is to ensure that any lines captures the proper value for Acadia as well as strong involvement and incentives for both parties. Once again, you can appreciate that as we pursue our process we are not providing specific details regarding our partnering discussions or potential timing. What we can say is that we have been very pleased with the positive and enthusiastic reaction from both the medical and pharmaceutical communities, the strong level of interest from potential partners to evaluate this opportunity and the appreciation of the commercial opportunities for pimavanserin.

We remain confident that we have the right strategy in place to enable Acadia and its stockholder to say relies the commercial potential of pimavanserin. It's also important to note that while we are exploring our opportunities to optimize the commercial value of pimavanserin through a potential partnership, we are continuing to advance our Phase III development program with pimavanserin as a treatment for Parkinson's disease psychosis. Many of the studies and activities that we are conducting in this Phase III program may be leveraged to support the development of pimavanserin in other indications. In other words, we continue to advance the development of pimavanserin cross indications.

Let me now turn to our second schizophrenia program which is ACP-104 as a stand-alone treatment for schizophrenia. Current treatments have generally not effective in addressing negative symptoms and are also not effective or may in fact worsen cognitive disturbances associated with schizophrenia. ACP-104 unique pharmacological profile combining [muscarinic agonist], 5-HT2A [inverse agonist] and dopamine D2 and D3 partial agonist provides the potential for a superior efficacy profile which may enhance cognition.

We are excited with the progress of our Phase IIb trial with ACP-104 which we initiated last June. As I mentioned earlier today, we announced in December that we had completed enrollment in the trial significantly ahead of schedule. We believe that the rapid enrollment is a reflection of the need for new and improved therapies for patients with schizophrenia and the potential for ACP-104 to provide as a superior efficacy profile with enhanced cognition. I'm pleased to report that we have now completed the treatment phase of this trial and remain on track to report top line results from the study in the second quarter of 2008.

Let me now take a moment to read to you the design and objectives of this trial. Our Phase IIb trial is (inaudible) double blind and placebo controlled study designed to evaluate the safety and efficacy of ACP-104 in patients with schizophrenia who are experiencing acute psychotic episodes. A total of 248 patients who are enrolled in this trial and randomized to one of three study arms which includes two different doses of ACP-104 and one placebo arm. Patients underwent a six-week treatment schedule followed by a four-week followup period. The primary end point of the trial is antipsychotic efficacy as measured by the mean change from baseline to date 43 using the PANSS scale. The PANSS, which stands for positive and negative syndrome scale, is an industry standard rating scale commonly used in registration schizophrenia drugs. The scale includes 30 items which measure the severity of positive and negative symptoms and general psychopathology in patients with schizophrenia.

We also will be evaluating secondary end points in the trial as well as safety and pharmacokinetic measures, including weekly lab monitoring. Cognition will be an exploratory end point. Our primary objectives for the trial are as follows: First we would like to show that ACP-104 demonstrates robust and psychotic efficacy as measured using the PANSS scale. Second, we would like to demonstrate that ACP-104 is generally safe and well tolerated and displays a favorable side effect profile relative to that currently seen with clozapine. In particular, we believe that this trial may provide an important signal as to whether the effects of ACP-104 on white blood cells are similar to what one would typically see with placebo treated patients as compared to what is typically seen with clozapine.

In addition to these primary objectives we hope to see a signal indicating cognitive benefits of ACP-104 therapy. In this regard, it's important to note that while we will evaluate an exploratory cognition end point in the study, the trial is not specifically designed to study cognition. We remain very excited about the potential of ACP-104 to be a breakthrough treatment for schizophrenia that can address one of the largest unmet medical needs associated with the disease. We look forward to reporting top line results from this trial as indicated during the second quarter this year.

Finally, in addition to our proprietary programs we have continued to advanced our clinical programs that we are developing in collaboration with Allergan including our Phase II neuropathic pain program. We remain excited with the potential of these drug candidates and we anticipate that Allergan will provide an update on this program at its R&D day in June of this year. We are also pleased that Allergan has advanced our small molecule drug candidate for glaucoma into the clinic last fall and is conducting Phase I clinical studies. Beyond these two collaborations with Allergan that have left the clinical programs we announced today that we have further expanded our third collaboration with Allergan through March 2009. This collaboration involves joint research efforts in the area of pain and may be between additional discovery efforts in the area of ophthalmology. We continue to be pleased with the progress of these collaborations and we remain grateful for the opportunity to work closely with Allergan's high quality R&D organization.

In closing, our (inaudible) in 2007 set the stage for a period that we believe has the potential to be transforming for Acadia. As a CNS focused company with major growth potential, we are focused on advancing our late stage drug candidates and positioning them for commercial success. Our priorities and key objectives are clear. This includes executing on our strategy to develop and commercialize pimavanserin together with a strategic partner, continuing to progress our Phase III PDP program with pimavanserin towards registration, completing and reporting top line results from our Phase IIb schizophrenia trial with ACP-104 in the second quarter of this year, continuing to advance our collaborative pimavanserin programs with Allergan and, finally, continuing to respond our development pipeline on novel drug candidate directed at CNS disorders and other unmet medical needs. That completes our update and we will now been happy to entertain any questions that you may have.

(OPERATOR INSTRUCTIONS) Jim [Berkino] from Lehman Brothers.

A couple questions on ACP-104. Just as we look ahead to the data, what would be determined to be a statistically significant improvement in PANSS in this trial and what would you view as a clinically relevant improvement beyond that?

So, thank you, Jim. I will ask Roger to answer that question.

We piled the study look at a 20% drop in the PANSS scores. To put that in context, the entry criteria is patients who come in with 70 or greater in PANSS.

When we look at drugs like olanzapene, what sort of improvements do we expect to see? I just want to get a sense how clinically relevant that would be.

It is clinically relevant. I don't have the comparative drop to that, but we would expect to see a fairly robust drop in the PANSS score and this is a placebo-controlled study so it would be relative to placebo.

Perhaps I can add to what Roger said that we believe that the efficacy of ACP-104 will be quite powerful on the basis of what we have seen so far in clinical studies and also what is we have seen preclinically in terms of its profile. All of that would predict that ACP-104 would have a powerful antipsychotic profile in terms of other kind of improvements.

To follow up on the adverse event profile, particularly looking at white blood cell effects, I'm assuming that if there had been a case of agranulocytosis in the trial we might have heard about it by now, so I want to make sure that assumption is right. And secondarily, in terms of reductions in white blood cell counts, what would you expect to see with clozapine so we have some frame of reference here?

So we currently, although the treatment phase of this study has the patient treatment phase, the study is still ongoing in respect to cleaning and then analyzing the data. So we are not in a position to comment on the white blood cells per se. In terms of reports of any cases and I put the caveats back there that we haven't got fully cleaned and reviewed the data in total yet; however, we are not aware of any report of agranulocytosis in this study.

Just to follow up on what we would expect from clozapine over a six-week period and a similar followup period, what would we expect in terms of white blood cell effects over this period?

Jim, it's a lot of variation in the literature when it comes to specific effects on white blood cells. What you see are, first of all, agranular is an observation that you don't see frequently with clozapine. You will see it in less than 1% of patients, perhaps 0.8%. But you see other effects on white blood cells. You see leucopenia, neutropenia. You will see that again relating to differences between different reports between 4 to 8% of patients have considerable drops in white blood cells which is clearly much more than what you expect to see in placebo treated patients. So we believe that when we have looked at the data in detail we will be been able to see whether it's ACP-104 is having effects on white blood cells that are similar to what would you expect with placebo or whether, which we don't believe that it would be clozapine.

Thanks for taking the questions.

I think that the trial will provide us with a good signal on what to expect from ACP-104.

Perfect, thanks.

Your next question comes from the line of Ted Tenthoff from Piper Jaffray.

Great. Thank you very much for taking the question. I guess just to sort of get this one out early, obviously we are all anxiously awaiting the partnership here. Can you give us a little bit more detail on kind of where things stand? And obviously we'll wait for timing but have things changed in terms of your expectations? Have the types of companies that you're talking to change? Can you give us any more color on where the negotiations stand and maybe what some of the key points are surrounding the development potential of 103?

Thank you for your question. First of all, let me say that we are not providing specific details regarding the ongoing discussions or timing for a deal. What we can say is that more general aspects of our view on these things so let me try to recalculate that. First of all, I think during this process we have many reasons to be pleased with the reaction from potential partners when it comes to what they see as the commercial potential for pimavanserin and the opportunity in total with the drug and that is something that is very pleasing for Acadia of course. What I also can say is that we remain confident that we have the right strategy in place and we have the right process in place to ensure that we can find a partnership that really provides us with the, a commercial potential for the opportunity to really maximize and optimize the commercial potential for pimavanserin. That confidence is steadfast, if I can use that word.

I also think it's very important to remember that we are moving forward full speed with PDP and that our Phase III program with pimavanserin provides a number of benefits to other indications that we want to develop for the drug. So we are not sitting still in the boat. We are moving forward both when it comes to the partnership discussions and when it comes to the development of pimavanserin. I have previously outlined what kind of partners that we are interested in talking to and basically we have talked about three different kinds of partners that we see as interesting for Acadia in this context. One type of partner is a global pharmaceutical company that has a schizophrenia product on the market. Another potential partner is a global pharmaceutical company that has a strong CNS force. The third kind of group of partners, potential partners that we include in our process, are partners that have a strong CNS sales force but more of a regional presence. So these are the three different buckets of partners, potential partners that we have seen as interesting to explore as part of our process and as part of our strategy.

Great. That's very helpful. Maybe one quick followup if I may. I know you're discussing some of the opportunities in other areas in psychosis and will be getting underway with the Phase III with Parkinson's disease. Can you give us an update on sort of what the thoughts are of maybe additional psychosis indications? Is this something where we would push through with PDP first and then come back and fill or do you think there would be opportunities to begin pivitol trials in other forms of psychosis or would that even be necessary?

It's a very interesting question and clearly with a drug like pimavanserin with the profile that we have of the drug we see multiple opportunities for line extensions beyond PDP and schizophrenia. Clearly there are many, many other psychosis indications that could come into play. These indications include psychosis in the elderly, psychosis in bipolar disease. They include beyond these indications as well. So we see line extension opportunities both into the neurology and into the neuropsychiatric indications which are very exciting to explore with pimavanserin. These are clearly what we have talked about that we are interested in exploring with potential partners is the vision that the partner had for these kind of expansion opportunities. It's very important component of a potential partnership for Acadia.

I can understand stand that. Thank you.

Your next question comes from Alan [Carr] from Needham.

Hi, good afternoon everyone. I was wondering if you could maybe narrow down the time lines for the PDP trial? Is that something maybe towards the first half or the second half of '09? And I'm also wondering how the time lines for this trial, if they fit into or how they fit into your partnership discussions?

So let me start out with the timing, what we have said and what we can say today is that we expect to provide top line data from the first Phase III study in PDP during 2009. We have also said that the second PDP study in Phase III PDP study where we will initiate this month, in March, may have a compressed time line as compared to the first efficacy study, but we haven't provided a specific timing for the delivery of top line data from that study. Now as part of your second question how this impacts discussions with partners, I think that the fact that we are moving forward with pimavanserin in PDP is something that is just positive, no one is sees that as anything negative because it helps all kinds of indications.

One other question. You have a couple years of treatment experience it looks like in your open label trial, the Phase II trial. I was wondering if you are learning anything new positively or negatively coming out of this longer treatment experience?

In fact we have some patients that have been on the drug for three years or more so. Roger, if you want to comment on that?

Yes. I think what we are learning is that the drug is well tolerated in this patient population over what is a fairly extended treatment period. So that's all to the good. And we are not learning that there are any safety concerns there. It seems to be very well tolerated indeed. And patients have done very well on it.

Okay. Thanks very much.

Thank you.

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

Hi, guys, thanks for taking my question. Uli, I had a question about ACP-104 and what you're going to do with the Phase IIb data. Do you anticipate designing and launching a Phase III program yet this year and, if so, would you do that with or without a partner?

Thank you, Charles, for your question. Clearly, our general strategy is to seek a partner that can help to us complete our Phase III program and commercialize this product, but we are keeping our options open regarding timing. We are on the future development of this program and we will fine tune following the results of the Phase IIb trial.

And then if, so specifically you would be prepared to design a trial based on those results and launch that as quickly as possible or do you anticipate wanting to partner the drug?

We certainly are open to doing something additional with 104. It's something that we are currently discussing. It's an obvious kind of thing to talk about but we want to keep all options open here.

Okay. With 103, I know you've always talked about doing a second study and you've always said it was going to be a similar design, but can you provide us any additional color on the design and really what additional clinical questions you're looking to answer with that second trial? And just help us understand why, if you're going to extend perhaps additional international sites or what's different about the second trial than the first trial? How are you going to be able to contract the time lines on that one?

Roger, maybe you could take that.

Sure. Thanks, Charles. I mean as with anything you learn as you go along. These are the largest studies that have ever been conducted in this patient population. So remember there are three studies that we are initiating in this program. There's the two pivitols plus the long-term safety study which Uli indicated earlier is open to patients all over when they completed the treatment portion of the pivitol studies. So as far as us getting the first study up and running it was in fact ensuring that that long-term safety study was also up and running so patients had the opportunity to roll over in a timely manner. As previously indicated, these trials are very similar so the idea is to do equal pivitol studies. They are a similar design, similar in treatment duration and generally similar in nature. Both will be internationally driven studies. Naturally there will be differences in some of the countries that one study is in versus the other but that isn't by specific design. It's just to ensure that we get a timely enrollment into the program. You asked the differences between them? We are intending in the second study to incorporate healthy economic measures into that study as one would expect. And, additionally, the doses used in the first trial of pimavanserin 10 and 40 milligrams and in the second study we will be investigating 10 and 20 milligrams. And we expect this to enable us to fully explore the dose range and strategize this for the other development programs.

So slightly different dosing, 10 and 20 versus 10 and 40? Correct?

Yes, and that's not uncommon in the psychotic area.

That makes sense to me but say end points and duration of treatment.

It will be exactly the same end points. So the studies are exactly the same in that respect.

Okay. And then if I could ask just one more follow up from Tom, if he can provide a little color on the R&D spend and whether or not you anticipate any milestones or upfronts in your guidance?

Yes, I would be happy to, Charles. First of all, what I did note when you look at the fourth quarter is that clearly as we've said before particular periods can fluctuate depending upon the timing of different expenditures and in particular this case we had the acceleration of the enrollment that occurred in that Phase IIb enrolled quite dramatically and in fact announced we completed it in December. So we did see that corresponding impact in the fourth quarter. So you saw very significant increase in the external cost component. As I mentioned, that totaled about $10 million in the fourth quarter of our R&D expenses and that was up quite remarkably since the comparable quarter a year ago. Again these can fluctuate in given periods so that's something you significantly hit on 104 we would expect that the expenses going forward and 104 would clearly be significantly lower as we just wrap up the final conclusion of that trial and there will be other expenses. So it will fluctuate. We have not, in terms of our guidance to be clear what we've said is this approximates a two-year run way, we have not factor add partnership into that run way.

Okay. Good. Thanks for the added color. Thanks, guys.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Mike King with Rodman and Renshaw. He has withdrawn from the queue. Your next question comes from the line of David Amsellem from Friedman, Billings, Ramsey.

Thanks for taking my question. Can you provide any more color on your plans for pimavanserin in sleep maintenance insomnia? And given that it's a totally different indication from the psychosis setting and you have a strong cash position what, if anything, has precluded you from moving forward in the setting? Thanks.

Thanks. It's an area that is quite the interesting. For those of you who don't remember, we conducted a proof of concept study in sleep maintenance insomnia with pimavanserin a while ago and we saw some powerful, robust increases in slow wave sleep in older healthy volunteers. When we have those results in hand, we shortly afterwards got the exciting schizophrenia data, the co-therapy data with schizophrenia, and with this exciting schizophrenia data we want to make sure that we do the right kind of sleep studies to ensure that we sort of optimize the total clinical program around pimavanserin. So we wanted to take a step back. We wanted to ensure that additional sleep studies would be consistent with a total development program that we want to develop together with a partner. And we think that there are many areas where we can look at the sleep properties of pimavanserin as a great advantage. Not only in patients with specific sleep maintenance insomnia and the general population but also in patients with neuropsychiatric and neurological disturbances where the sleep properties of pimavanserin will provide them additional clinical advantage. So we want to make sure that we sort of utilize this clinical finding in the optimal way.

Okay. That's helpful. One other question if I may. Just remind us if you've contemplated running any additional pimavanserin co-therapy studies with other atypical antipsychotics in parallel with your ongoing discussions with potential partners.

Our strategy with pimavanserin as a co-therapy in schizophrenia has been that we really want to make sure that we have optimal input from a potential partner in the design of the development program in that area before we really embark on it full speed. Having said that, we have not excluded that we might do something but our current strategy stands as and that is to seek the optimum kind of impact from the potential partner in the schizophrenia development.

Okay. Thank you.

Thanks.

Your next question comes from the line of Lucy Lu from Citi.

Hi, thank you. I have a couple of questions on 104. Basically just from reading the published literature it seems like when patients are treated with Clozaril, the risk for developing agranulocytosis is higher, it is between 6 and 18 weeks, or even 12 and 18 weeks depending on which paper. And I'm just wondering from a safety point of view of this Phase II study exactly what kind of safety information can you really get in terms of comparing to Clozaril?

It's a good question and we don't expect the to say anything specific about the risk for agranulocytosis based on the current study. For the specific reason that you mentioned and also for the fact that the agranulocytosis is relatively rare only about 0.8% of patients develop. What we do expect to see from the study is a signal based on the general effects on white blood cells that you see with pimavanserin -- with 104, excuse me. And compare that with what you would expect to see in treated patients. That signal, we think, is powerful because the agranulocytosis is clearly preceded by an effect on white blood cells which is more benign. So all those patients that develop agranulocytosis have additional minor effect from the white blood cells. And that kind of effect should be observable in the clinical study and that's why we hope to be able to, as a result of this study, really say whether ACP-104 has an effect on white blood cells that is more like what you would expect from placebo treated patients than what you would expect from clozapine treated patients and that will be an important signal.

Right. Can I just ask on the safety side, what is the average of patients in this trial?

I have to refer to Roger.

We have not looked at, I couldn't comment on what the average age is. It's, across the board it's a pretty standard psychosis study so I'm not expecting the age to be different from anything previously. I just don't have that information, couldn't tell you right now.

That's fine. In terms of efficacy end points, just wondering is it combined dose versus placebo or is it the higher dose, 200 mg b.i.d. versus placebo as a primary efficacy end point?

It's the latter.

Okay. So it's basically 200 versus placebo? And just one more follow-up question. On the 200 b.i.d., what kind of dose of clozaril is it equal to approximately?

We are not really say that. What we can say is that patients who are treated with clozapine and those patients may receive from 300 to 900 milligrams a day of clozapine, they clearly development concentrations of the metabolized 104 which are in the range of what we are studying here. We don't expect to have any problems establishing efficacy with those doses.

Great. Thank you.

I think that the again it's to make the direct comparison with clozapine is probably not the optimal way of looking at this because ACP-104 has distinct differences as compared to clozapine. For example, it's ability to stimulate muscarinic inbound receptors is something that we believe may not only be important in terms of its cognitive effects on the patients but may also in fact enhance efficacy and psychotic efficacy in general.

All right. Thank you.

There are no further questions at this time. Dr. Hacksell, please proceed to closing remarks.

Thank you 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 so much.

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