ACADIA Pharmaceuticals Inc (ACAD) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals' first quarter 2009 financial results conference call. I'll be your coordinator for today. (Operator Instructions) We will be facilitating a question-and-answer session towards the end of today's call. 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.

Thank you. Good afternoon and welcome to ACADIA Pharmaceuticals' first quarter 2009 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 25, 2009.

Before we proceed, I would first like to remind you, that during our call today, we will be making a number of forward-looking statements, including statements regarding our research and development programs, including pimavanserin, potential future payments under our collaboration agreements and our future expenses and financial performance. 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 could 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 end ended December 31, 2008, 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'll now 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 me from ACADIA today are Dr. Roger Mills, our Executive Vice President of Development; and Tom Aasen, our Chief Financial Officer. I will begin with highlights today by covering some recent highlights. I will then ask Tom to briefly comment on our financial results for the first quarter. And following these remarks, Roger and I will provide you with an update on our clinical programs. We will then open the floor to your questions.

We're off to a very strong start to the 2009 year and we look forward to building on this progress throughout the remainder of the year. First, we have established two new collaborations that help us to aggressively move our pipeline of product candidates forward. Most recently, last week, we announced a major strategic alliance with Biovail to co-develop and commercialize our lead product candidate, pimavanserin, in North America. This collaboration is a significant step in the execution of our strategy to position pimavanserin for commercial success and to maximize the value of this product candidate. Earlier this year, we also formed a new collaboration with Meiji Seika to develop and commercialize a novel class of true cognitive drugs for schizophrenia. And we also extended our third discovery collaboration with Allergan in the area of ophthalmology.

In addition to these important business development initiatives, the beginning of 2009 was highlighted by impressive progress in our discovery program with pimavanserin. Most notably, as announced last week, we completed enrollment in our first pivotal Phase III trial for Parkinson€™s disease psychosis or PDP. And we remain on track to announce top line data from this study by the end of the third quarter this year. While we have already achieved a number of important corporate objectives this year, we have an exciting and important year ahead of us, that provides the potential for a number of value driving catalysts, including clinical data in our two most advanced programs. Let me now turn the call over to Tom to discuss our recent financial results.

Thank you, Uli, and good afternoon. Let me start briefly by commenting on our first quarter financial results, which were reported in our press release and Form 10-Q, issued earlier today. We reported a net loss of $15 million or $0.40 per common share for the first quarter of 2009, compared to a loss of $16.4 million or $0.44 per common share for the first quarter of 2008. As expected, the financial results reflect the effects of the disciplined actions we implemented last August to streamline our cost structure and focus our resources on our most advanced product candidates.

Looking briefly at our cost structure, our research and development expenses decreased to $12.6 million for the first quarter of 2009, from $15.2 million for the first quarter of 2008. This decrease was largely driven by cost savings of approximately $3.9 million, resulting from our restructuring last year. This was partially offset by $1.3 million in increased external service costs. External service R&D costs totaled $9.1 million for the first quarter of 2009 and were comprised nearly entirely of development expenses for pimavanserin.

General and administrative expenses decreased to $3.0 million for the first quarter of 2009, from $3.3 million in the comparable quarter of 2008. Primarily due to cost savings of approximately $500,000 from our restructuring efforts, offset in part by increased professional fees related to pimavanserin, incurred during the period. Overall, we are now seeing the full effect of the measures we implemented last year to reduce our operating costs. Between both R&D and G&A expenses, we realized cost savings of approximately $4.4 million in our internal organization during the first quarter of 2009, relative to the comparable quarter of 2008.

Let me now look forward and comment briefly on the impact of our new collaboration with Biovail. Importantly, as I mentioned during our call last week, this collaboration strengthens our balance sheet in a meaningful way in the near term, while at the same time, allows ACADIA to participate in a significant way in the downstream economic success of pimavanserin. To recap briefly, under the agreement, ACADIA is entitled to receive aggregate payments, excluding royalties, of up to $395 million for the North American territory. This includes a nonrefundable, up-front cash payment of $30 million and up to $205 million in potential milestone payments associated with the development and regulatory submission and approval of pimavanserin for multiple indications. Downstream, we are entitled to receive up to $160 million in sales milestones, based on a successful commercialization of pimavanserin and significant royalties on sales of pimavanserin in the United States and Canada. In addition, we have the option to co-promote pimavanserin in the United States.

Beyond these financial terms, the collaboration also is expected to have a favorable impact on our operating expenses going forward. Recall that Biovail is responsible for all future costs associated with the development, manufacturing and commercialization of pimavanserin for all indications in the territory, with the exception of specified ongoing PDP studies. Essentially, we expect to share the future development costs related to the PDP face reprogram for the territory. With ACADIA responsible for ongoing clinical studies and Biovail covering the cost of all additional development studies, including the CMC and manufacturing activities in the program.

Biovail is responsible for all of the development costs for Alzheimer's Disease, psychosis or ADP and potential other indications. As a result, we anticipate that ACADIA's pimavanserin-related expenses will decrease in the second half of 2009, relative to the first half of the year. Reflecting both the costs covered by Biovail and the fact that the first pivotal trial will be completed. We anticipate that our expenses for pimavanserin will continue to decline as we look beyond this year, through the remainder of the registration program.

Finally, to help put this into perspective for you, let me turn to our cash position and expected outlook. We closed the first quarter with $46.4 million in cash and investment securities. With the cost savings we are realizing from the restructuring, coupled with the impact of our Biovail collaboration, including the up-front payment and aforementioned program support, we now anticipate only a relatively modest net cash burn for the remaining three quarters of 2009. Specifically, we anticipate that our cash and investment securities will be greater than $40 million at December 31, 2009. Looking out further, we've extended our cash runway considerably and expect that our existing cash resources and payments from our collaborations will now be sufficient to fund our operations, at least into the first half of 2011. I'll now turn the call back over to Uli.

Thank you, Tom. We remain focused on developing our portfolio of our five most advanced product candidate, including our lead product candidate, pimavanserin in collaboration with Biovail. As well as two partnered compounds that are fully funded by Allergan and [schizophrenia] product developments. Our remarks today will focus on our lead product candidate, pimavanserin. Let me first discuss pimavanserin in the context of our new strategic alliance with Biovail. Roger will then provide you with an update on the Phase III clinical program with pimavanserin. As I mentioned earlier, we were extremely pleased to establish our collaboration with Biovail. In addition to the attractive terms if the deal that Tom mentioned and the impact this would have on our financial position in the near and long term, we are able to achieve a number of important objectives through this collaboration.

First, we were able to continue to move aggressively on the advancement of our Phase III program with pimavanserin as a potential first-in-class in therapy for PDP and devote more resources to this program. Second, we are able to begin executing on our strategy to broaden the pimavanserin development program to include other neurologic and psychiatric indications to maximize the commercial value of this product candidate. Specifically, in addition to PDP as our lead indication, the collaboration is designed to develop and commercialize pimavanserin for ADP. Similar to PDP, there are no treatments approved in the US for ADP. The large unmet medical need in both of these indications provide a blockbuster opportunity for pimavanserin.

Third, the collaboration provides with us significant participation in the downstream success of pimavanserin in the North American market. Meanwhile, ACADIA retains all rights to pimavanserin in the rest of the world, which provides us with the opportunity to drive additional value for our stockholders. Finally, the collaboration provides ACADIA with an option to co-promote pimavanserin in the US, which may provide us with the foundation to forward integrate and to establish a special sales force. Importantly, ACADIA and Biovail both strongly believe in the potential of pimavanserin to play an important role in the treatment of several neurological and psychiatric disorders, including PDP and ADP. And we are committed to realizing the full commercial potential of pimavanserin. Let me now turn over the call to Roger, who will provide you with an update on our Phase III program with pimavanserin in PDP. And he will also expand on the opportunity for pimavanserin in ADP.

Thank you, Uli, good afternoon. As part of our collaboration with Biovail, we will ton manage the ongoing PDP clinical studies, including the two pivotal Phase III trials and their related open label safety extension study. Our top priority in this program continues to be the successful and timely completion of our first pivotal Phase III study. Therefore, we're very pleased that we were able to announce last week that we've completed patient enrollment in this trial. This was an important achievement for ACADIA. And I'd like to express my appreciation to the ACADIA team who worked diligently to ensure the timely execution of the trial.

As a reminder, the clinical phase of this trial is still ongoing. This includes a six-week treatment period, followed by the standard safety followup phase. Remember, that patients may either rollover into the long-term safety extension study at the end of the treatment period, or have a standard followup visit four weeks after completion of this treatment period. This will then be followed by the normal closing period of the study. Importantly, we remain on target to report top line data by the end of the third quarter this year.

Let me now take a moment to review the design and key objectives of the trial. The Phase III trial is a multicenter, doubleblind, placebo-controlled study designed to evaluate the safety and efficacy of pimavanserin in patients with PDP. A total of 298 patients were enrolled into the trial. And randomized to one of three study arms, pimavanserin 10 milligrams, pimavanserin 40 milligrams and placebo. Patients receive oral doses of either pimavanserin or placebo once daily for six weeks. In addition to the stable doses of their existing dopamine-replacement therapy.

The primary end point of the Phase III trials is antipsychotic efficacy, is measured using the scales the assessment of positive symptoms or SAP's, and the hallucinations and delusions domains of the SAP's. Motoric tolerability is an important secondary end point in the Phase III trials and is measured using the Unified Parkinson's Disease Rating Scale, or UPDRS, parts two and three. For the primary end point, the trial is powered at a standard level for a pivotal study of 90%, in order to provide statistically significant antipsychotic efficacy, measured using the SAP scale for each treatment arm versus placebo, a change from baseline to day 42. We're using a noninferiority analysis to assess motoric tolerability as a key secondary endpoint, using the UPDRS scale.

In addition to this first pivotal trial, we are continuing to enroll patients in the second pivotal Phase III study, which was initiated about one year after the first. With a completion of enrollment in the first pivotal trial and having established our collaboration with Biovail, we will now be able to devote additional resources to this second pivotal trial. Similar to our first study, the second pivotal trial is an international study, which is site active throughout the US and Europe. In addition to the two pivotal trials, we are also conducting an open label safety extension study. Eligible patients, who have completed either of the two pivotal Phase III, trials have the opportunity to enroll in this study if, in the opinion of their physician, they may benefit from continued treatment with pimavanserin. We continue to be encouraged to see that a high percentage of patients that have completed the pivotal studies have elected to rollover into the open label safety extension study.

Overall, we're very pleased with the progress in our Phase III PDP program. ACADIA and Biovail are firmly committed to advancing PDP as the lead indication for pimavanserin. Our market research suggests that this is an ideal indication to spearhead the pimavanserin development program and to serve as an entryway into the market. Remember that this represents a considerable market opportunity. Approximately 1.5 million people in the US have Parkinson's Disease. And up to 40% of these people may suffer from PDP, commonly characterized by disturbing hallucinations and delusions.

Patients with PDP lack an effective treatment option today. Current antipsychotics are not well tolerated because they block dopamine receptors. However, they're frequently still used off label despite the problems associated with their use. Let me remind you that in contrast to the existing antipsychotic agents, pimavanserin is selective to the 5-HT2A receptor and has no antagonistic action on dopamine receptors. Pimavanserin has, in studies completed to date, exhibited an attractive clinical profile, including antipsychotic efficacy, tolerability, safety and a long duration of action. We believe these attributes will allow pimavanserin to differentiate itself from current antipsychotic drugs used off label to treat PDP.

Let me now turn briefly to the opportunity for pimavanserin in the Alzheimer's Disease psychosis, or ADP. Similar to Parkinson's Disease, Alzheimer's Disease is a progressive neurodegenerative disorder. Around 5.3 million people have Alzheimer's Disease in the United States alone. It's estimated that 25% to 50% of patients with Alzheimer's Disease may have psychosis, consisting of hallucinations and delusions. As in the case with PDP, as antipsychotic symptoms in ADP progress, physicians may have to resort to off label use of antipsychotic medications for these patients. However, current antipsychotics are associated with numerous side effects and have a black box warning for use in elderly patients with dementia-related psychosis due to increased mortality and morbidity.

We believe that pimavanserin may be ideally suited to address the need for a new treatment for ADP that is safe, effective and well tolerated. With its major unmet medical need and large market opportunity, ADP is an attractive indication for pimavanserin for both parties to pursue. Biovail will take the lead in developing and commercializing pimavanserin for ADP in North America. We will leverage a foundation that ACADIA has established and will continue to jointly plan for future clinical studies in this indication.

At this time, we are not providing more specifics on the development plans. What I can say is that we will await data from the first pivotal Phase III study in PDP before finalizing the design and initiating trials in the ADP program. Let me now turn the call back over to Uli.

Thanks, Roger. Before we get to your questions, let me touch briefly on some of our other programs. As I noted earlier, we're also excited to be collaborating with Meiji Seika to develop and commercialize a novel class of proved cognitive drugs to treat patients with schizophrenia in Japan and other Asian countries. Importantly, this collaboration allows us to advance a new class of compounds discovered by ACADIA and referred to as pro-cognitive antipsychotics or PCAP's. The PCAP's may offer a new approach to treating schizophrenia and in particular, to addressing the untreated third dimension of this disease, cognition. Our lead product candidate in the PCAP program, Am-831 is now moving forward in IND track development.

Turning quickly to our collaborations with Allergan. Most of you recall that our long-standing alliance with Allergan has yielded two clinical stage product candidates, the chronic pain program in Phase II and the glaucoma program in Phase I. These programs continue to advance and in particular, we look forward to Allergan completing the Phase II studies in the chronic pain program. We are also delighted to report the recent extension of our third drug discovery collaboration with Allergan, which is focused on ophthalmology.

Before I conclude, let me take the opportunity to mention the Michael J. Fox Foundation grant that we received earlier this year for a discovery program, in which we are exploring the potential of estrogen receptor B selective compounds the potential of estrogen receptor beta selective compounds to treat Parkinson's Disease. These proprietary compounds may have newer protection and helps disease modifying properties. In closing, I'm pleased with the progress we have made to begin this year and believe that we are now well positioned to advance our pipeline of product candidates forward in pursuit of our goal to deliver new therapies that will address major unmet medical needs for CNS disorders. We will now be happy to answer any questions that you may have.

Thank you. (Operator Instructions) And our first question comes from the line of Charles Duncan with JMP Securities. Go ahead.

Hi, guys. Thanks for taking the question. And congratulations on a good couple of months of progress.

Thanks, Charles.

My question is, first of all, for Roger. It's related to the Phase III program. You mentioned the powering for the ongoing trial. If you could give us a little additional color on whether or not there are any patient differences between this trial and the one that the Phase II program, as well as perhaps the dosing? And then the end point analysis that gives you -- it give you confidence that this trial is adequately powered?

Thanks, Charles. So, the Phase III program that both studies, the design is the same, apart from the dosing study to study. The patient population was based off what we saw in the Phase II. It was designed to provide a very similar population in the Phase III program of to that that we saw in Phase II. I don't have the exact details of the population, obviously the study is still ongoing and we haven't analyzed that yet. But the entry criteria are very similar in the Phase III to that seen in phase II.

The other question you had was the end point analysis. So the study was powered to show a very similar difference of about a change of around about five points in the SAP scale, it's very similar to the margin that was seen in the Phase II. And obviously, before embarking on the phase III program, we had the meeting with the FDA and other regulators to agree the study design. The study's powered at 90%, which would be standard for a pivotal study. And we have -- the powering was based on a number of things. It is based on the improvement that one wishes to see in the population and also the variability of data.

In the Phase III study, as opposed to the Phase II study, we have taken steps to reduce the variability by ensuring that, in the United States, we have a centralized ratings or patients are -- that the SAP scale -- the SAP score is generated from about eight to 10 ratings, which is done centrally. And external to the US, where the technology is not available, we have performed extensive training with the investigators and the raters at those sites to ensure that we have sort of a high level of rating of patients. All of that is designed to improve and keep variability to a minimum. The benefits of that were not built into the powering. So the benefits of that should be adequate to the powering of the study as designed.

Should be additive, you mean?

Yes. Yes.

Okay, and then -- go ahead.

I was going to say, obviously, I said earlier, the powering for the Phase III, when we designed the study, was based off what we're seeing in the Phase II. In addition to that now, just to be clear, we have taken fairly extensive steps to reduce any variability that we see in the study. So that should effectively add to the power of the study.

Okay. That makes sense to me. And then how do you think the -- is there going to be an impact of giving the dose over six weeks versus four weeks used in Phase II? And then, how does the second study differ from the first study?

Okay. So the duration should add to benefits seen in the study. So six weeks should, if anything, give a better outcome than in the four weeks. The reason six weeks was chosen, because that is the standard duration of therapy that would be in a pivotal study for psychosis. And as I mentioned earlier, we obviously discussed this with the agency before embarking on the program. The only difference between the two studies is in the dosing. The first study has the -- the 012 study has doses of 10 and 40 milligrams of pimavanserin, with the third being placebo. In the second study, the 014 study, the two doses are 10 milligrams and 20 milligrams, with a placebo.

Okay. Thanks for the added color. I'll hop back in the queue.

Thanks, Charles.

Our next question comes from the line of Alan Carr with Needham and Company. Go ahead.

Hi, good afternoon, everyone. A clarification on the primary end point is -- it's SAP's, is it the one and two of SAP's, or is it all four of the scores on SAP's that are going to be measured?

No, so SAP's has four domains, hallucination, delusions, it also has bizarre behavior and formal thought. We are looking at the first two domains, the hallucinations and delusions, as appropriate for the symptomatology seen in these patients. Bizarre behavior and formal thought are more schizophrenic domains and are not as relative to -- are not important in this population.

Okay. And then, based on your understanding of the biology behind PDP and ADP, how would you -- would you guys care to speculate as to how -- if there's a positive outcome for PDP, would that predict how things might turn out for -- in ADP? I'm trying to figure out how much of a similarity there is in the biology between those two.

So, maybe I can start to answer your question and Roger, please fill out if you have anything to add. First of all, one thing that struck us when we looked at the two indications and the symptoms in ADP and PDP is that we have very similar symptomatology, hallucinations. We have delusions. The psychosis in these conditions in these conditions are quite different from the psychosis that you see in schizophrenia, for example.

One additional and very interesting and important thing, I believe, is that when you have a brain which is disturbed as you do in Alzheimer's Disease and Parkinson's Disease, in these diseases you have a lot of brain neurons that have died. In those kind of brains it appears that the 5-HT2A receptor, quite suddenly, becomes much more important than it is in a normal brain. Probably because certain feedbacks, loops don't work anymore. And that means that when you stimulate the 5-HT2A receptor to get the full effect of that stimulation. And we believe that's a major reason why you get the hallucinations and delusions. And that's why it's so important to completely block that receptor, as we now can do with the pimavanserin.

I don't think I've got much more to add than that, Uli. And I think as Uli described earlier, the patients are treated with antipsychotics, the same as with PDP, which carry a lot of baggage along with any benefits. So not only do we believe that we'll have efficacy in this population but also importantly, will provide a much better, more tolerable and potentially safer therapy than is currently available to these patients. And the safety of the usage of both the atypicals and typicals in this population is an increasing concern to patients, their relatives, their doctors and the regulatory authorities.

Okay. And one last question about the open label extension trials for the two Phase III trials. Can you tell us about enrollment in those and adverse events and that sort of thing that you may be seeing in these longer term trials?

Yes, certainly. The long-term study following off of the Phase III's is our 015 study. This is a very popular study. We're seeing a high rate of rollover of patients who complete the first two studies, who are able to roll over. Who wish to and are able to rollover into the long-term study. And in terms of safety, obviously, we've not done any formal analysis but we're not seeing any safety concerns, which would be indicative of any consistent sort of safety issues. I think you've got to put in context that these are elderly, very frail patients with a lot of co-morbidity. So there is a background that you have to look at any of the -- any safety issues that arise. But really, it is -- the drug seems to be very well tolerated in these populations over a long period of time. And really, confirms what we saw in the first rollover study from the Phase II study, where we have patients at 60 milligrams. Some of whom have been on drug for over four years. So we're seeing a similar picture now in a much larger study following on from the phase III pivotal studies.

Okay. Thanks much.

(Operator Instructions) And our next question comes from the line of Chad Messer with Piper Jaffray. Go ahead.

Thanks for taking my questions. First of all, is there any more details you can provide on the status of the second Phase III study, and enrollment update? What -- can you give me a little bit more on that, is that possible?

Maybe Roger, you can answer that.

Yes, we're not actually giving any guidance as to when we will be reporting that study. However, it's reasonable to say, it started about a year behind the first one and it is progressing very nicely according to plan. We will be -- one of the advantage of our collaboration is it will enable us to obviously focus results -- sorry, focus efforts on ensuring that that study is complete in a similar timely manner. As well as as soon as we complete the 012 study, we'll also be adding additional focus in addition.

And are there any other study required for the NDA or is the two Phase III's and the open label and existing data sufficient?

In terms of the basic pivotal safety and efficacy studies, the two pivotal studies address the needs to determine whether the drug has utility in treating that PDP. For the rest of the program, it's a full program. So, there's a lot of preclinical work that goes on in parallel. Plus there are additional Phase I studies. A lot of the drug interaction studies that usually take place. So, it is actually a full Phase III program that's moving forward. And we continually look at the safety numbers to ensure that we'll be able to address the ICH requirements for safety data.

All right. Thanks. And the last one, is just a quick housekeeping question on the $30 million upfront payment. How are you guys going to recognize that? Is that over a certain period, or --?

Yes, Chad. I can address that. The collaboration was established in the second quarter and we're currently reviewing our proposed counting with our auditors. So while I can't provide all of the specifics, I can clearly say that we anticipate, in connection with our policy, that the upfront would be deferred and amortized over an estimated development term. And we'll, of course, be providing more specifics when we come to our second quarter reporting.

All right. Great. Thanks for the added information.

Thanks.

Thank you.

And ladies and gentlemen, I show no further questions. I'd like to turn the call back over to Dr. Hacksell for closing remarks. Please proceed, sir.

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

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