ACADIA Pharmaceuticals Inc (ACAD) 2009 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the ACADIA Pharmaceuticals second quarter 2009 financial results conference call. (Operator Instructions). I would now like to turn the presentation over to Mr. Tom Aasen, Chief Financial Officer at ACADIA who will review the company's forward-looking statements. Please proceed.

Good afternoon and welcome to ACADIA Pharmaceuticals second 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 August 19, 2009.

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 research and development programs, including pimavanserin, potential future payments under our collaboration agreements, and our future expenses, cash position 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 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, 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, Tom, and let me take this opportunity to thank all of you for joining us on today's conference call. Also joining us from ACADIA today is Dr. Roger Mills, our Executive Vice President of Development.

I will begin today by covering some recent highlights. I will then ask Tom to briefly review our financial results for the second quarter, and following these remarks, Roger and I will provide you with an update on our most advanced programs. We will then open the floor to your questions.

Let me start by saying that this is an especially busy and exciting time for all of us at ACADIA. During the second quarter, we initiated our new collaborations with Biovail and Meiji Seika. We extended our longstanding collaboration with Allergen and we continued to make important progress in our lead Phase III program with pimavanserin. Our near-term priority in the pimavanserin program continues to be our first pivotal Phase III trial with pimavanserin in patients with Parkinson's disease psychosis, or PDP.

You may recall that we announced the completion of enrollment in this Phase III trial in May. I am pleased to report today that this trial has continued to proceed well and we remain on track to report top line results this quarter consistent with our earlier guidance.

In addition to the progress in our Phase III program, we took an important step in positioning pimavanserin for commercial success by establishing our strategic alliance with Biovail to co-develop and commercialize pimavanserin in North America. We're off to a strong start in this collaboration and we look forward to building on this progress.

At the same time, we also initiated the development of AM-831, a pro-cognitive antipsychotic drug candidate, through our new collaboration with Meiji Seika. We are pleased with the initial progress in this IND-track program as well.

We believe these and other achievements during first half of this year provided us with a strong foundation to continue to advance our platform of product candidates, which is designed to provide meaningful therapeutic improvements to patients with CNS disorders.

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

Thank you, Uli. Let me start by commenting briefly on our second quarter results, which are reported in our press release and Form 10-Q issued earlier today.

We reported a net loss of $12.7 million or $0.34 per common share for the second quarter of 2009 compared to a net loss of $18.3 million or $0.49 per common share for the second quarter of 2008. The net losses for the second quarters of 2009 and 2008 included $616,000 and $811,000 respectively in non-cash stock-based compensation.

As expected, the financial results continue to reflect the affects of the disciplined actions we implemented last August to streamline our cost structure. Looking briefly at some of the components of our second quarter results, our revenues increased to $1.8 million for the second quarter of 2009 from $177,000 in the comparable quarter of 2008.

This increase was primarily driven by $1.4 million in initial revenues recognized under our collaboration with Biovail. This represents the initial amortization of our upfront payment for the portion of the quarter from inception of the collaboration in May through June. The remainder of the $30 million upfront payment was reported as deferred revenue on the Company's balance sheet.

Research and development expenses decreased to $12 million for the second quarter of 2009 from $16 million for the second quarter of 2008. This decrease was driven largely by cost savings of approximately $3.5 million resulting from our restructuring last year and by lower external service costs.

External R&D costs totaled $8.4 million for the second quarter of 2009 and were comprised nearly entirely of expenses related to our Phase III program with pimavanserin.

Let me take a moment to expand on the potential impact of our collaboration with Biovail as it relates to our expenses. If recalled that in an addition to the upfront payment and potential milestones we were eligible to receive, the collaboration also is expected to have a favorable impact on our pimavanserin related expenses going forward. Biovail is responsible for 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 Phase III program for the territory with ACADIA responsible for ongoing clinical studies and Biovail covering the cost of additional development studies, including CMC and manufacturing activities in the program. Biovail's responsible for all the development costs for Alzheimer's disease psychosis, or ADP, and other potential indications.

As a result, we anticipate that ACADIA's pimavanserin related expenses will begin to decrease in the second half of 2009 relative to the first half of the year, reflecting both the development activities covered by Biovail and the fact that the first pivotal trial will be completed. We anticipate that our development expenses for pimavanserin will continue to decline as we look beyond this year through the remainder of the registration program.

General and administrative expenses decreased to $2.7 million for the second quarter of 2009 from $3.2 million in the comparable quarter of 2008. This decrease was primarily due to cost savings from our restructuring offset in part by increased professional fees incurred during the period.

Let me turn to our cash position and expected outlook. We closed the second quarter with $66.2 million in cash and investment securities. With the cost savings we are realizing from our restructuring, coupled with the impact of our Biovail collaboration, we anticipate that our cash and investment securities will be greater than $40 million at December 31, 2009. Looking out further, we continue to expect that our existing cash resources and payments from our collaborations will be sufficient to fund our operations, at least into the first half of 2011.

Finally, let me close by commenting on the shelf registration statement that we filed earlier today. We view this as a routine part of our corporate planning and a prudent action designed to position ACADIA to capitalize on future business opportunities over a three-year period if and when appropriate. We want to be clear that we are presently not offering any securities for sale and do not have any current plans to conduct the financing.

I'll now turn the call back over to Uli.

Thank you, Tom. We remain focused on developing a portfolio of (inaudible) most advanced product candidates, including our product candidate pimavanserin in collaboration with Biovail, as well as two partnered clinical stage product candidates that are fully funded by Allergen, and two programs in IND-track development.

Our remarks today will focus on pimavanserin and then we will briefly summarize our other development programs. Let me start by asking Roger to provide you with an update on our Phase III program with pimavanserin in patients with Parkinson's disease psychosis.

Thank you, Uli, and good afternoon. Our Phase III PDP program that we are pursuing in collaboration with Biovail includes two pivotal Phase III trials under related open-label safety extension study. As Uli mentioned earlier, our near-term priority in this program continues to be our first pivotal Phase III trial. Let me start by briefly reviewing the design and the status of this study.

This is a multi-center, double-blind, placebo-controlled study designed to evaluate the safety and efficacy of pimavanserin in patients with PDP. A total of 298 patients were enrolled and randomized to one of three arms -- pimavanserin 10mgs, pimavanserin 40mgs and placebo. Patients receive oral doses of either pimavanserin or placebo once daily for six weeks. Patients also remained on stable doses of their existing dopamine replacement therapy throughout the study.

The primary endpoint of this Phase III study is antipsychotic efficacy as measured using the Scale for the Assessment of Positive Symptoms, or SAPS, hallucinations and delusions domains.

The powering for this Phase III study was based on the clinical effect observed in our earlier Phase II PDP trial. But the primary endpoint of the study is powered as a standard pivotal level of 90% to demonstrate statistically significant antipsychotic efficacy as measured using the SAP scale. For each treatment arm, this is placebo, a change from baseline to day 42.

Motoric tolerability is key secondary endpoint in the study and is measured using Parts II and III the Unified Parkinson's Disease Rating Scale, also known as UPDRS. We are using a non-inferiority analysis to assess motoric tolerability.

As Uli mentioned, we are pleased with the continued progress of this trial. Following the completion of enrollment in May, we have now completed the treatment phase. We are proceeding with the closing phase of the study in the standard manner, and we remain on track to report top line results this quarter. When top line results in this first pivotal Phase III trial are available, we will issue a press release and hold a conference call to announce the results.

Let me know turn to other clinical studies in the PDP program. In addition to the first pivotal trial, we are continuing to enroll patients in our second pivotal Phase III trial, which was initiated about one year after the first. You may recall that this study is similar in design to the first and is an international study with sites throughout the US and Europe.

In addition to the two pivotal trials, we continue to conduct a large open-label safety extension study. Eligible patients who have completed either of the pivotal trials have the opportunity to enroll in this study if in the opinion of their physician the patient 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 study.

Overall, we are very pleased with the progress in our Phase III PDP program. Together with Biovail, we are strongly committed to realizing our vision to advance pimavanserin as a first in class therapy that improves the quality of life for patients with PDP.

Let me now turn the call back over to Uli.

Thank you, Roger. Let me know take a moment to highlight the commercial opportunity for pimavanserin in PDP. Over 1.5 million people in the U.S. and 4 million worldwide are living with Parkinson's disease. Studies have suggested that up to 40% of patients with Parkinson's disease will develop psychotic symptoms commonly consisting of hallucinations and delusions.

The symptoms of PDP are a significant cause of distress to patients and their caregivers and are associated with greater functional impairment, caregiver burden, nursing home placement, and increased mortality. There currently is no therapy in the United States approved to treat PDP, and the problem with the condition is expected to grow as our population ages.

For neurologists, managing PDP is often a major challenge. Without an approved treatment in the US physicians may try to decrease the dose of dopamine replacement therapies that are used to manage the motoric symptoms of Parkinson's disease. However, this approach often worsens motor function in these patients without effectively alleviating psychotic symptoms.

Alternatively, physicians may use current antipsychotic drugs off-label. However, these drugs counteract the Parkinson's disease therapy and, therefore, are generally not well tolerated by patients with PDP at doses that are required to achieve antipsychotic attacks. Current antipsychotic drugs have a black box warning for use in elderly patients with dementia-related psychosis due to increased mortality and morbidity and are associated with numerous side effects.

As a result, there is a pressing need among patients, caregivers and physicians for a new treatment that is safe, effective and well tolerated. We believe that pimavanserin has the opportunity to be the first in class therapy that will effectively treat the psychosis in patients with Parkinson's disease without impairing motor function.

Our strategic alliance with Biovail allows us to continue to move aggressively on the advancement of our Phase III PDP program by broadening the pimavanserin program to include other neurological and psychiatric indications to maximize the commercial value of the product candidate.

We and Biovail have selected Alzheimer's disease psychosis, or ADP, as the second indication to pursue with pimavanserin. Just like for PDP, 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. Both indications represent large unmet medical needs and significant commercial opportunities.

Overall, I'm very pleased with the initial progress in our collaboration with Biovail. Both companies are strongly committed to advancing pimavanserin to registration and to maximizing the commercial opportunity for this product in North America. While this clearly represents the core of our pimavanserin program, I want to remind you that ACADIA retains all rights to pimavanserin in the rest of the world, which provides us with the opportunity to derive additional value for our stockholders.

While pimavanserin is our primary focus, ACADIA also has other important programs in its pipeline. Through our collaborations with Allergen, we have two clinical stage product candidates that provide the potential for new treatment options in the areas of chronic pain and glaucoma.

Through our collaboration with Meiji Seika we have initiated IND-track development with AM-831, a compound that we discovered and that offers a new approach to treating schizophrenia that may address cognition and untreated dementia of this serious disease.

We also have another internal product candidate, ACP-106, that is in IND-track development. And behind our five most advanced product candidates, we have earlier stage programs, including our estrogen receptor (inaudible) for Parkinson's disease that we are exploring through a grant from Michael F. Fox Foundations.

In addition, we are pleased with ACADIA's progress through the first half of 2009 and we look forward to continuing to advance our pipeline of product candidates 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 questions that you may have.

(Operator Instructions). Your first question comes from the line of Alan Carr with Needham & Company. Please proceed.

Hi, good afternoon everyone.

Hi there.

Can you comment on any of the blinded data with respect to efficacy or safety from the Phase III trial?

Do you want to comment on that, Roger?

Yes. First of all, I just want to say the blinded data is blinded. Obviously, we are in the middle of reviewing data for and running the standard checks that we need to do to be able to formally unblind the date at the appropriate moment. I'm not prepared to comment on blinded data. Very soon we'll have the actual data and I think that's the appropriate time to look at it formally.

Okay. And what sort of data should we expect to see? Will it just be the SAPS score and the UPDRS score? Will there be more than that?

I think in the initial report it will be the top line data, obviously, the SAPS and the UPDRS as the primary and the important secondary endpoint. And also top line in terms of the safety data that we see in the study.

Okay. And then one last one regarding the second trial, I recall that when you all entered into the deal with Biovail that that would give you the extra resources to accelerate that trial maybe even boost the enrollment rate. Has that happened and can you give us a sense when you think that one might end?

So what we have said about the second trial is that it's about one year behind the first one. When it comes to -- and we haven't provided any guidance on the delivery of top line data from the second study. What we said when it came to the collaboration with Biovail that this collaboration would allow us to continue to aggressively pursue our Phase III program for PDP, and also to move forward for a second indication very aggressively as soon as we have the data from the first efficacy study on that is in ADP a program that we think would be very exciting and we will provide more information about the ADP program after we have received data from the first efficacy study in PDP.

So after we get the data from this one you think you'll be able to give us some guidance on timing for results from the second one. Is that what you're saying?

That is the intention, yes.

Okay. Thanks very much.

Thank you.

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

Hi, guys, thanks for taking the question and congratulations on a good quarter of progress.

Thank you, Charles.

I had a question regarding the Phase III program in PDP. You said that the powering was a result of the result of what you saw in Phase II, but were there some things that you did to reduce the inherent noise of measuring efficacy in a psychosis trial? And can you share those kind of strategies with us?

Can you shed some light on that, Roger?

Yes, sure. Hi, Charles. We powered around the results from the Phase II. What we did in addition to that was to in the United States is to use a centralized rater to actually measure the SAPS in patients. So all the sites in the US, actually in both studies, have a centralized rate of about 8 to 10 raters at any time across all the sites.

In the rest of the world we use extensive training of the sites and the raters at those sites as to how to measure the SAPS essentially across both regions to drive for consistency. We continue to monitor the performance of raters both centralized and the localized raters in the rest of the world to look for quality.

All raters in the rest of the world have to be qualified so they actually have to, at the end of training, have to take tests and have to be approved. And at periodic intervals we actually ensure -- just refreshment training and any raters that require remedial training do. We have not had that circumstance to date. So we built that in over and above the powering that we built into the Phase IIs.

And the powering assumption you must have used some assumption about dropout rates. What was that, and from you look at the data so far, how was the dropout rate relative to your assumption?

So the dropout rate is well within the assumptions that we made from the Phase IIs, so we assumed a dropout rate of about 10%.

Okay, cool. So it's well within 10% range.

Yes.

Okay, good. And then if I could hop over to -- I apologize to the others on the phone -- a little biology, but can you help me understand why it -- I guess it's my assumption that PDP the psychosis in Parkinson's disease is related to the dopamine therapy. If that's not the case -- well, if that's the case, then why is it going to work in ADP, and if that's not the case, can you share with me some of the common elements that you see in psychosis associated with Parkinson's and Alzheimer's and differentiate them from schizophrenia?

That's a challenging question, Charles, but let me try to answer that. So, first of all, its not completely -- people don't have united idea about what really causes Parkinson's disease psychosis. More and more today it's considered that it's probably due to the underlying disease more than to the therapy. So there is sort of -- you see a maturing of the field a maturing of the understanding of the disease.

Regardless, it's very important to understand that when we treat PDP by blocking the 5-HT2A receptor, we do it because it works and because there are indirect interactions between 5-HT2A receptors and the dopamine receptors. And really if I tried to explain it in a simple way, would be that in a normal system in the brain when you stimulate the 5-HT2Areceptor, there are a number of control functions and some of them are directed by dopamine receptors.

In the Parkinson brain we have lost many of those controlled functions because Parkinson's disease includes neurodegeneration from earlier dopamine neurons. And when those controlled functions are lost, the 5-HT2A receptor is allowed to run amok and that essentially leads to the hallucinations and delusions that we see in the disease. And that's why when we block the 5-HT2A receptor we regain the control of the 5-HT2A receptor. So that is a very simple way of looking at the disease and the way we are addressing the therapy.

ADP has similar kind of problems. In ADP you also have neurons that are dying and that could lose control of the 5-HT2A receptor system and related systems. And, therefore, again by blocking this receptor, you have a way of controlling hallucinations and delusions, which are really coming from stimulation of the 5-HT2A receptor. So it's a complicated -- the brain is a complicated organ, but that's the way I try to explain it in a relatively simple way.

And isn't it the case that in psychosis associated with this Alzheimer's and PDP is primarily visual hallucinations versus auditory in schizophrenia.

Yes, clearly the psychosis is very different in PDP from schizophrenia. In schizophrenia you have the auditory hallucinations, which are very predominant in schizophrenia. And also the therapy in schizophrenia we believe that you need also to block some dopamine receptors in order to be fully effective in schizophrenia. We don't think that you need to do that in order to be fully effective in Parkinson disease psychosis, for example.

May I just add something there. I think just to bring that back. I think that there is a great commonality between the psychosis seen in both PDP and ADP. I think as you indicated, Charles, the picture is one that is very similar between the both being driven off the positive symptomatology the hallucinations and delusions. And as earlier indicated, both are very different from the psychosis that you see associated with schizophrenia. And it really does come back to that commonality of the degenerating brain in both functions.

Similarly, there is dementia, which is increasingly associated or increasingly becoming aware of being associated with Parkinson's disease. And therefore, the original hypothesis that the Parkinson's psychosis is driven from the dopamine therapy is increasingly being challenged or changing more that it may be an interaction between the dopaminergic therapy and the degenerating brain. And therefore, the dopamine therapy if anything is just a trigger, it's not an ongoing pressure in terms of driving the psychosis.

And in both cases the psychosis is usually what results in the institutionalization of the patient, correct?

Exactly.

Yes, it seems to become too difficult and burdensome for the caregiver to take care of them. It's a difficult situation, not only for the patient, but also for the -- frequently the spouse.

In both conditions it represents a major reflection point in the care and management of the patient.

And cost. Okay, good deal. Thanks for the added color. I'll hop back in the queue.

Your next question comes from the line of Lucy Liu with Citigroup. Please proceed.

All right, thank you. A couple questions on this study, the Phase III study. In terms of a powering assumption can you please talk about what would be a success scenario? Do both arms is it combined analysis versus placebo, P has to be less than .05. Do a parallel analysis or do you look at one arm versus placebo first, and then you can transfer all the alpha to the other arm if it's successful. Can you just tell us what that is?

Roger, can you give a little bit back on that?

Yes, the study is powered, obviously, to as we mentioned to show significance of the drug arms versus placebo on the baseline versus day 42 in terms of SAPS. There is, as you rightly pointed out, we're testing two doses here versus placebo, and there is an adjustment which takes that into account. So the two significances are .025 and .05 on the doses, but it isn't specified which dose takes the .025.

Okay. So which means at least of the doses needs to hit .025 for the study to be positive?

Yes.

Okay. And then the other question that I had was are you expecting any kind of inverse dose response relationship because you are testing 10 and 40 in this study, in the next study 10 and 20. It almost seems like you think 10 will definitely work. I just wanted to get your thoughts on the dose response in these two trials.

Maybe I can start that and Roger you can fill in afterwards. So let me say first that when we designed the study we designed it with the assumption that both the 10 mgs and 40mgs would be effective. The 10mg is basically based on the fact that now that we have a full occupancy of 5-HT2A receptor set factors, the 40mg choice of dosing is based on the fact that in Phase II, which was the dose escalation study, most of the patients on drug ended up at 40mgs. We expect that both of these doses will be effective because of those assumptions. That's what we can say now. Do you want to add to that, Roger?

No, I think you described it nicely there, Uli.

Okay. And then in terms of the treatment duration, this is a six-week study. I'm just wondering if you definitely have gotten the okay from FDA for a six-week duration study. Just because we don't see it very often sometimes we see 20-day study, sometimes three-month study. You don't see six-week study very often.

Roger?

Thanks, Uli. Six weeks is the appropriate measure for a psychosis study. I think, as we've mentioned before and I will reiterate today, that we met with FDA prior to embarking on the Phase III program, as well as meeting with regulatory authorities elsewhere. And the Phase III program was started following those discussions and reflects the outcomes of those discussions.

Okay. And then just last question and I'll go back to the queue. On the secondary endpoint on the motor -- on the unified Parkinson's disease rating scale, just want to confirm it's still combined Part II and Part III the score to measure motor tolerability.

Yes.

Same as Phase II, right?

Yes.

Okay, thank you very much.

Sir, you have no questions at this time. (Operator Instructions). And your next question is a follow-up coming from the line of Charles Duncan with JMP Securities. Please proceed.

Hi, guys, thanks for taking the follow up. Regarding the ADP development program, I'm not sure I was clear, but is it the case that you are preparing to launch an ADP study, and if so, when that might be.

Yes, so what we have said, Charles, now this is something that we are very excited about, and that I think we see the same excitement at ACADIA and at Biovail, is that when we get data from the first efficacy study, we intend to finalize the ADP program and that's an area where we think that pimavanserin will have great potential.

This is an even larger indication that PDP. we are talking about an indication where there are 5.3 million patients in the US with Alzheimer's disease and somewhere between 25%, 50% of those patients develop psychosis. It's what I frequently refer to as a blockbuster indication area where there is a tremendous unmet medical need.

So we are very excited about the opportunity to move forward there. But we want to look at the first Phase III data and PDP before we finalize the design of the ADP program, so when we come back and provide much more detail about that at a later stage.

But would you anticipate perhaps being in a position to articulate that design maybe even this fall and perhaps get that underway significantly before the completion of the second Phase III in PDP?

Without saying too much, I can say as you know we expect to have top line data from the first efficacy study this quarter in PDP. And when we have those data, we expect to be able to finalize the design clearly of the ADP program this year. And then whether we move on with it this year or early next year it's not decided, but we will move aggressively with the ADP program as well.

Okay, good. Thanks for the added color.

Sure.

At this time, we have no more questions. Dr. Hacksell, please proceed to closing remarks.

So, 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. This concludes the presentation. You may now disconnect.