ACADIA Pharmaceuticals Inc (ACAD) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals third quarter 2008 financial results conference call. My name is Noellea 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, who will review the Company's forward-looking statements. Please proceed.

Good morning and welcome to ACADIA Pharmaceuticals' third quarter 2008 financial results conference call. This call is being recorded. An archive copy will be available on our website at www.acadia-pharm.com through November 19.

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 research and development programs and our future financial results. 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 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.

I will now turn the call over to Dr. Uli Hacksell, our Chief Executive Officer.

Thank you, and let me take you 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 reviewing our strategy and recent highlights. I will then ask Tom to briefly review our financial results for the third quarter. And following these remarks we will review our clinical programs in more detail. We will then open up the floor to your questions.

Our third quarter was highlighted by continued advancement of our four key product candidates. As you'll recall, we implemented a strategic restructuring in early August to focus our resources on our most advanced product candidates, reduce our expenses, and provide us with added financial flexibility.

Our strategy and our priorities remain very clear. We're focused on developing a portfolio of our four most advanced product candidates, consisting of two internal compounds, as well as two partnered compounds that are fully funded by Allergan.

Our top priority continues to be advancing our Phase III program with pimavanserin for Parkinson's Disease Psychosis, or PDP, toward registration. Our near-term focus in this program is the successful and timely execution of the first Phase III pivotal trial.

Once again, I'm pleased to report today that we remain on track with this study, and expect to report topline results in the third quarter of 2009, consistent with our previous guidance.

We also continue to advance other components of this Phase III program, including our second Phase III pivotal trial and supporting NDA-enabling studies.

In addition to pimavanserin we are pursuing two exciting clinical programs through our collaborations with Allergan. This includes a product candidate in Phase II for chronic pain, and a product candidate in Phase I for glaucoma. In particular, we look forward to Allergan completing the ongoing Phase II chronic pain trials in the mid 2009 timeframe.

Finally, we are also progressing with the IND-enabling studies for our fourth product candidate, ACP-106, and plan to advance it to the clinic in 2009.

With this portfolio of product candidates we believe that ACADIA is well positioned with multiple product and commercial opportunities, and with the opportunity to achieve key clinical milestones over the next year.

Let me now turn over the call to Tom to discuss our recent financial results.

Good afternoon. Let me start by providing a brief overview of our third quarter financial results, which were reported in our press release and Form 10-Q issued earlier today.

We reported a net loss of $15.6 million or $0.42 per common share for the third quarter of 2008 compared to a net loss of $16.0 million or $0.43 per common share for the third quarter of 2007.

As expected, the results for the third quarter of 2008 included charges of $2.1 million in connection with workforce reductions from ACADIA's restructuring announced in August. Despite these charges our net loss decreased during the quarter, primarily due to lower operating expenses.

Looking briefly at some of the components of our third quarter operating results. Revenues totaled $282,000 for the third quarter, and as expected decreased relative to the comparable quarter of 2007, primarily due to completion of our agreement with Sepracor, as well as lower revenues from our ongoing collaborations with Allergan and agreements with other parties.

Research and development expenses decreased to $13.4 million for the third quarter of 2008 compared to $16.9 million for the comparable quarter of 2007. R&D expenses for the third quarter of 2008 included a charge of $1.7 million in connection with our restructuring. Despite this charge, R&D expenses decreased during the quarter, primarily due to $3.1 million in lower external service costs and lower internal costs resulting from our restructuring.

External service R&D costs decreased to $6.6 million for the third quarter of 2008 from $9.7 million for the comparable quarter of 2007, primarily due to reduced clinical costs following completion of our trial with ACP-104.

Costs associated with our internal R&D organization were comparable quarter to quarter, as the $1.7 million restructuring charge incurred during the third quarter of 2008 was offset by cost reductions.

General and administrative expenses totaled $3.0 million for the third quarter of 2008, and were comparable to expenses for the third quarter of 2007, as a restructuring charge of $454,000 incurred in G&A expenses during the third quarter was offset by cost reductions.

Finally, let me turn to our cash position and expected outlook. We closed the third quarter with cash and investment securities of $72.7 million. Through our strategic restructuring we have focused our resources on our most advanced product candidates and reduced our workforce by about 50%, providing us with added financial flexibility to advance our clinical pipeline.

Following the streamlining of our organization, costs associated with our internal R&D and support organization have been reduced significantly. We expect this to contribute to lower cash usage in the fourth quarter of 2008 relative to the first nine months of this year.

We expect to see the full effect of the expense reductions from our restructuring as we begin the 2009 year. As a result we anticipate that cash used in our operating activities during 2009 will be below our 2008 level. And we continue to anticipate that our existing cash resources and payments from our collaborations will be sufficient to fund our operations into the first half of 2010.

Finally, the committed equity financing facility that we put in place during the third quarter may provide us with added financial flexibility and leverage.

I will now turn the call back over to Uli.

As I mentioned earlier, we are firmly focused on our most advanced product candidates. My remarks today will largely focus on our lead Phase III program with pimavanserin.

We believe that pimavanserin provides a major pharmaceutical opportunity. We have conducted a number of clinical trials to date, both in patients with PDP and in patients with schizophrenia, and throughout these studies pimavanserin has exhibited an attractive clinical profile, including antipsychotic efficacy, outstanding tolerability, and a long duration of action.

We believe these attributes make pimavanserin ideally suited to address a broad range of CNS indications with large unmet medical needs. This includes PDP, schizophrenia, and other neurological and psychiatric indications that are underserved by currently marketed antipsychotics.

The recent focus on problems resulting from the use of existing antipsychotic drugs in the elderly highlight the unmet medical need in these rapidly growing market segments. Current antipsychotic drugs have a black box warning for use in elderly patients with dementia-related psychosis due to increased mortality and morbidity. They also lead to side effects that can be especially problematic in these elderly patients and can worsen cognitive problems.

We believe that pimavanserin's potentially favorable safety and tolerability profile will allow it to differentiate itself from current antipsychotic drugs used off label and compete effectively in these market segments.

Our program with pimavanserin for PDP provides ACADIA with an attractive development path and considerable commercial opportunity, as well as the potential entry into these broader segments of the market for the elderly.

PDP is a debilitating neuropsychiatric disease in patients with Parkinson's disease, and is characterized by disturbing hallucinations and delusions. It occurs in up to 40% of patients with Parkinson's disease. The typical patient that is diagnosed with PDP may have suffered from Parkinson's disease for several years, maybe in his or her early 70s, in frail health, and is normally taken care of by a spouse or other family member.

The development of psychosis often severely disrupts the patient's ability to perform many of the activities of daily living that keep him or her active and independent.

There currently is no drug approved in the US for the treatment of PDP. The modern antipsychotic drugs block dopamine receptors, which may counteract the dopamine therapy normally used to treat Parkinson's disease itself. Therefore, these antipsychotics are generally not well-tolerated by patients with Parkinson's disease at doses that are required to achieve antipsychotic effects.

The paucity of effective and safe therapeutic options, and the increasing difficulty for the caregiver to care for a patient after the onset of PDP, are key reasons for these patients to enter a nursing home. In fact, PDP is the leading cause for patients with Parkinson's disease to enter nursing homes. And it is associated with greater caregiver burden and increased mortality.

We believe that pimavanserin is well-positioned to be an important first in class treatment for PDP, and may enable neurologists and other physicians to effectively treat the psychosis in patients with Parkinson's disease without impairing motor function.

We continued to make important progress in our Phase III PDP program. This program involves a number of ongoing studies, including two Phase III pivotal trials, an open label safety extension study, and supporting NDA-enabling studies.

Each of the Phase III pivotal studies is a double-blind placebo-controlled study designed to evaluate the safety and efficacy of pimavanserin in approximately 240 patients with PDP. Patients in each study are randomized to three different arms, including two different doses of pimavanserin and one placebo group.

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 endpoint of the Phase III clinical trials is antipsychotic 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. The SAPS is supported by experts as an appropriate scale to measure the psychosis in Parkinson's disease.

Motoric tolerability is an important secondary endpoint in the Phase III trials, and is measured using the Unified Parkinson's Disease Rating Scale, or UPDRS.

The pimavanserin Phase III program continues to be the highest priority for our development organization, with a key focus based on the successful and timely execution of the first Phase III pivotal trial.

We're continuing to enroll patients in this trial, which is being conducted at over 50 clinical sites located in the US and international. The trial is progressing in line with our plan. And we anticipate reporting topline results during the third quarter of 2009.

While our emphasis is clearly on the first pivotal trial, we also continue to advance our second Phase III pivotal trial, which began enrolling patients in the spring. The second trial is also being conducted in the US and internationally. We continue to bring trial sites online and recruit patients in this study.

Along with these two Phase III pivotal trials, we are conducting an open label safety extension study. Patients who have completed either of the Phase III pivotal trials have the opportunity to enroll in the extension study, if in the opinion of their physician they may benefit from continued treatment with pimavanserin. This study will provide us with important long-term safety information.

We are pleased to note that to date we have experienced a high rate of rollover of patients into this long-term safety extension study from the Phase III pivotal trials.

You may also recall that we have an ongoing open label safety extension study in connection with our earlier Phase II PDP trial. In this extension study the exposure to pimavanserin to date equates to about 50 patient years, and the longest durational treatment is now approaching four years for several patients.

We have continued to present data from our earlier Phase II PDP trial and the related safety extension study at the international medical meetings.

In addition to the ongoing Phase III studies, we are conducting a range of supporting NDA-enabling studies, as well as formulation and production work, as part of our goal to advance these program toward registration.

In all, we remain very excited at the progress in our Phase III program, and believe that pimavanserin may offer the opportunity to improve the quality of life for patients with PDP and their caregivers.

As we advance pimavanserin toward registration for PDP, we continue to evaluate and position pimavanserin for broader market opportunities, including neurological and psychiatric indications that are underserved by currently marketed antipsychotic drugs.

In this context we presented pre-clinical data suggesting that pimavanserin has antipsychotic activity in animal models of Alzheimer's disease psychosis at the AAN meeting held in Chicago in July.

Our strategy is to leverage our Phase III program to develop and commercialize pimavanserin for multiple indications. As part of this strategy we plan to establish a partnership to enable us to broaden the market opportunities, to facilitate commercialization, and to maximize the commercial potential of pimavanserin.

As we advance our Phase III program over the next year, and complete the first Phase III pivotal trial, we believe that we have the opportunity to increase the value of pimavanserin significantly.

As we have indicated, we're continuing to entertain partnering discussions for pimavanserin as we advance in Phase III. But importantly we are well-positioned, both with sufficient financial resources and with a strong development team, to advance pimavanserin through completion of the first Phase III trial to ensure that we realize the appropriate value of these assets.

Now let me turn briefly to our two collaborative clinical programs with Allergan, staring with our product candidate in Phase II for chronic pain. We continue to be excited with the progress in this program, which was highlighted by Allergan at their R&D Day last quarter.

We believe that our collaborative alpha agonists provide considerable commercial potential, and address large unmet medical needs within the chronic pain market that is over $3 billion to date and growing rapidly.

Following encouraging results in the areas of fibromyalgia and irritable bowel syndrome, Allergan is currently completing the Phase II chronic pain trials with higher dose cohorts. Data is expected in mid 2009 to enable Allergan to select doses and indications for late stage developments.

In addition to this Phase II program, we continue to advance muscarinic product candidate from our second Allergan collaboration in Phase I for the treatment of glaucoma.

Finally, we also continued the progress with IND-enabling studies for our fourth product candidate, ACP-106, which originated from our internal serotonin discovery efforts.

In summary, we believe that ACADIA is well-positioned to achieve major milestones in our advanced clinical programs over the next year, and build significant shareholder value in both the near and long term.

This completes our presentation, and we will now be happy to answer questions that you may have.

(Operator Instructions). William Ho, Banc of America Securities.

First of all, I was just wondering, can you by any chance discuss the approximate cost of completing the Phase III trials for pimavanserin in PDP?

Then also I just had a question -- Uli, you mentioned a partnership, and at this point what would drive such a partnership?

I will ask Tom to answer the first piece of your question, and I will take the second.

Regarding costs, we have not provided a specificity related to the program, but certainly what I can tell you that is useful is following the restructuring the majority -- the vast majority of our efforts focuses on pimavanserin. And clearly the financial resources are being devoted to pimavanserin.

As we have said, we anticipate that the current runway provide us -- cash runway into the first half of 2010. And obviously that is well beyond completion of the first pivotal study. The remaining portion of the NDA package continues to move along. We have not provided specificity on timing of some of the other studies, but it gives you a sense of the dollars that we have today to carry us into the first have of '10, and it is currently principally pimavanserin.

Do you see those -- can those expenses continue to decline or as you progress you see those expanding again?

Clearly when you look at our costs, following that restructuring we do, as we have said, anticipate significantly lower internal operating costs. Those will continue into the fourth quarter and beyond.

In fact, as we indicated, we had a restructuring charge of about $2.1 million in the quarter. And all of that was offset in itself just by cost reductions from the restructuring. So obviously going forward we will expect to see those continue, and lower cash usage in the fourth quarter, and lower usage in 2009 relative to 2008.

Coming to the second piece of your question, about how we increase the value of pimavanserin, I think it is important for you to remember that we are conducting a full Phase III program for pimavanserin in PDP. And that means that everything we do enhance the value.

In particular, of course, we believe that efficacy data from our first pivotal Phase III study will be a particularly enhancing event for the program. But everything we do currently increases the value of pimavanserin.

I should also say that we believe that the strategy that we have moving towards registration with pimavanserin for PDP is an ideal one, because from that kind of starting point, having pimavanserin registered for PDP, we will have the ability to move into many different directions, both into the neurology area and into the psychiatry area, and thereby really maximizing the full potential of pimavanserin.

Charles Duncan, JMP Securities.

Thanks for taking the question. And sorry if it has been already addressed on the call. I have been hopping back and forth between three earnings calls.

My question was regarding the other work that needs to be done to prepare pimavanserin for an NDA. Can you give me some sense as to where the CMC portion of the work is, and what additional studies beyond the ongoing Phase III primary efficacy studies are needed before the NDA is submittable?

I will start out to try to answer your question, and then I'd ask Roger to complement what I say. [Clearly] what we're doing is a very traditional Phase III program. We believe strongly that the two efficacy studies that we are conducting will provide us with a sufficient material to obtain a registration. But we're doing everything that you normally do in a clinical program to achieve a strong NDA package.

I don't know if you want to add on that, Roger?

I think the bottom line is on the CMC side we've got the full program planned and are running down that path, and obviously all the supporting nonclinical work that needs to go into any standard NDA. And that will be complemented by clinical data that we need to generate, such as drug interactions, etc., as we run through. And we will do those studies in a planned manner leading into the NDA.

I think it is a really good point that, as Uli made before, that as we progress the program, and as we complete these studies, it really provides a base for leveraging that, and then springing forth from that into different indications downstream. So we actually put together a really pretty standard, solid NDA package.

Just to get some clarification. The timelines of the NDA filing, I'm not sure, is it that you have sufficient cash to get the primary efficacy data or to get do a filing of the NDA, and when do you think at best that could occur?

This is Tom. Thanks for the question. What we have said regarding cash guidance is again that our runway with our existing cash is into the first have of '10. That does not include any additional financing or use of the credit facility, for example, or other.

All we have indicated in terms of guidance is the timing of the first pivotal. So clearly we have well sufficient runway to go through that pivotal. And we are marching the rest of the program forward. We have not yet provided guidance on the overall program. And expect as we move forward we will continue to give more color. And probably have a time when we give a lot more information in terms of the scope of the overall program.

Back to a follow up kind of from a previous question regarding partnering and the strategy for optimizing the shareholder value around pimavanserin, would you consider certain geographic deals in advance of data, or perhaps in advance of the second tranche of data? Is that a possibility on the table, or is only a worldwide deal being considered?

We have not really changed our strategy from what we have talked on earlier. We have always considered a partnership, both with global partners and with regional partners. And as you heard, we are continuing to entertain partnership discussions.

What I have always said is that when we are thinking about partnerships, we see a partnership with a global partner as simpler than multiple regional partnerships. But clearly that doesn't exclude the possibility that we conduct a -- or several regional partnerships.

Is there a demand? Are there discussions that have been initiated, or do you anticipate really data is a key gating factor on that?

As I have said, we are continuing to entertain partnership discussions. But as we also said, meanwhile it is very important from a strategic point of view that we continue to move forward full speed with the PDP program.

And as I also mentioned previously today, we believe that the Phase III efficacy data that come from the first Phase III study will be really a value inflection point and will provide added value for pimavanserin.

My final question is what about publications that could come out and use -- maybe pharmacological type studies use of pimavanserin with other drugs beyond risperidone?

We will continue to present data coming from our internal research on pimavanserin, both for -- for all kinds of different indications. That is, in fact, part of the strategy that we have to start to provide a foundation for line extension opportunities with pimavanserin. And at the same time, Roger and his people will continue to provide presentations on the clinical side as well.

Thanks for the added color folks. And congrats on some progress.

(Operator Instructions). Jason Napodano, Zacks.

In the past you guys have done some discovery deals with Sepracor or Stanley or even what you've got with Allergan. I'm wondering if you got an opportunity to do some early-stage research deals maybe in the next few quarters to help raise cash and keep the R&D discovery wheel going, or do you think that you will remain pretty squarely focused on pimavanserin in '09?

I will ask Tom to take that question.

It is a real good point. I think a couple of things that you may have noted in the restructuring strategy we have. Clearly while we are focusing our resources and financial resources to boot on pimavanserin, we do retain the core discovery capability. And we have a number of assets we have created that are in earlier stages that may be ready for moving into development.

Part of our strategy is clearly to look at monetizing some of those areas. And that can help provide just added flexibility for ACADIA while we focus resources we have today on pimavanserin. So it is clearly part of our strategy.

We continue to have our Allergan relationship. That consists of three different collaborations. But clearly part of our strategy is to look to monetize some of the earlier assets we have. We would not provide specific timing on such, but we are active in that effort.

One of the things that always intrigued me is the open label program that followed the Phase II trial in pimavanserin with PDP. You've got patients in that trial that you said are approaching four years. I know in the past you talked about how survival rates for patients with -- being diagnosed with PDP is rather low. And entering hospitalization I believe it can drop as low as even two years.

I'm wondering if you could comment on the survival rate in that open label Phase II program, and whether or not those patients are demonstrating either quality of life benefits or a survival trend that would suggest pimavanserin is having a positive effect?

Roger?

It is a good point. I think, just to put that study in context, obviously you raise really good points there, but a lot of the -- there is no comparator agent in here. It is all open label. So it is difficult to actually draw conclusions, unless one has strong historical data in which to try and relate the data to.

That is not easily accessible in this area, but we are very encouraged by the longevity of the time that some of these patients are actually spending on the study. And also what we see in terms of the safety profile of the drug when used chronically in this condition. And that is what we will be expecting the marketplace is obviously not acute use but actually chronic ease.

So in some respects, although it is not designed to have longitudinal efficacy data within this, it is encouraging that patients remain on the study. And one of the key factors is that both the patients and the physicians feel that the patient is benefiting from continued therapy.

We don't have clear data as to that, but clearly it is almost -- it is a good sign that patients are still there. We can see the safety data. And that looks excellent -- we have presented that safety data at a number of meetings this year. We will continue to present updated data from that study in meetings through beginning of next year.

Sir, you have no 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 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.