ACADIA Pharmaceuticals Inc (ACAD) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals third quarter 2009 financial results conference call. I will be your coordinator for today. (Operator Instructions). I would now like to turn the presentation over to Tom Aasen, Chief Financial Officer of ACADIA, who will review the Company's forward-looking statements.

Thank you. Good afternoon, and welcome to ACADIA Pharmaceuticals' third 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 November 23rd. 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 and our partners' Research and Development programs and plans, potential payments pursuant to 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 31st, 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 those 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 reviewing our strategy and recent events. I will then ask Tom to briefly review our financial results for the third quarter; and following these remarks, Roger and I will provide you with an update on our development programs. We will then open the floor to your questions. Clearly, we experienced a major disappointment during the third quarter with the announcement of the topline results from our first Phase III trial which we refer to as the -012 study with pimavanserin in Parkinson's disease psychosis, or PDP.

Following analysis of the data from the -012 study, we were very encouraged to see that the 40 mg pimavanserin arm consistently demonstrated signals of efficacy across a number of measures. We also observed a favorable safety and tolerability profile for pimavanserin, as well as several findings from the -012 study which we believe can be applied to help mitigate the placebo response in new Phase III trials. Together with our partner Biovail, we established a development strategy that we believe will strengthen the PDP program, while at the same time providing the opportunity to explore the clinical and commercial potential of pimavanserin in two other indications with large unmet medical needs. These indications are; first, adjunctive therapy for schizophrenia, and second, stand-alone therapy for Alzheimer's disease psychosis, or ADP.

Importantly, both ACADIA and Biovail remain enthusiastic about pimavanserin's propects and are committed to advancing pimavanserin to the market as quickly as possible. As we pursue this collaborative development program for pimavanserin, we took decisive action to further streamline our operations and reduce our operating expenses. As a result of these actions, we anticipate that we have extended our cash run rate through the end of 2011, and positioned ACADIA to pursue multiple clinical programs. Our strategy and priorities are very clear. We are focused on developing a portfolio of our four most advanced product candidates, all of which are supported by our collaborative partners. In addition to pimavanserin, we have two clinical programs in the areas of chronic pain and glaucoma in collaborations with (Inaudible).

And we are in IND track development with AM-831, a proved cognitive and psychotic drug candidate, through our collaboration with Meiji Seika, which we have established earlier on this year. We believe that our focus on this portfolio of four product candidates, led by a broad-based development program with pimavanserin, firmly positions ACADIA with multiple products and commercial opportunities and significant growth potential. 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 third quarter results, which were reported in our press release and Form 10-Q issued earlier today. We reported a net loss of $8.7 million or $0.23 per common share for the third quarter of 2009, compared to a net loss of $15.6 million or $0.42 per common share for the third quarter of 2008. The financial results reflect the effects of the cost saving measures we implemented in August 2008 to streamline our cost structure. Let's look at some of the components of our third quarter results. Our revenues increased to $2.4 million for the third quarter of 2009 from $282,000 in the comparable quarter of 2008. The increase was primarily driven by $1.9 million in revenues, recognized under our collaboration with Biovail. Research and Development expenses decreased to $9.2 million for the third quarter of 2009, from $13.4 million for the third quarter of 2008.

This decrease was largely driven by cost savings of approximately $3.6 million, resulting from our August 2008 restructuring and by lower external service costs. External R&D costs totaled $6.1 million for the third quarter of 2009, and were comprised nearly entirely of expenses related to pimavanserin. General and administrative expenses decreased to $2 million for the third quarter of 2009 from $3 million in the comparable quarter of 2008. This decrease also was primarily due to cost savings resulting from our August 2008 restructuring. Let me take a moment to review the terms of our collaboration with Biovail as it relates to the future funding of the various development programs with pimavanserin. Under the agreement, Biovail is responsible for future costs associated with the development, manufacturing and commercialization of pimavanserin for all indications, with the exception of specified PDP study costs and the planned initial ADP study which will be funded by ACADIA.

Beginning with the PDP indication, we expect to share the costs of this development program. ACADIA's responsibilities include the second ongoing Phase III trial, the -014 study, which is being concluded at its existing enrollment level, and an open label safety extension study. We are currently planning for a new Phase III PDP trial which is expected to start in the first half of 2010. This new trial will be funded by Biovail, provided, however, that if the study does not meet its primary end point we would reimburse Biovail one half of the study cost. We estimate that the amount of this potential reimbursement would approximate the savings to ACADIA from the early conclusion of the -014 study. When it comes to the schizophrenia indication, Biovail is responsible for fully funding this Phase III clinical program with pimavanserin.

Finally, with regard to the ADP indication, ACADIA would be responsible for funding an initial feasibility study in this program. However, if this study is successful, Biovail will reimburse us 100% of the cost of this study. Biovail would then be responsible for the remaining development costs that may arise following the initial ADP trial. Let me now comment briefly on the restructuring that we implemented in October to further streamline our operations, reduce our internal operating expenses and extend our cash runway. This restructuring involved a reduction in our workforce of about 50% to a total of 28 employees. We estimate that we will record charges of approximately $1.3 million during the fourth quarter for employment termination costs in connection with these workforce reductions. Going forward, we anticipate that the costs associated with our internal R&D and support organization will be reduced significantly, and this will result in a considerable extension of our cash runway.

To put this in perspective, let me close by reviewing our cash position and updated guidance. We ended the third quarter with $54.9 million in cash and investment securities. Following our recent restructuring, we now anticipate that our cash and investment securities will be in the range of 43 to $45 million at December 31st, 2009, and that our existing cash resources and anticipated payments from our collaborations will be sufficient to fund our operations through the end of 2011. I'll now turn the call back over to Uli.

Thank you, Tom. As I mentioned, we remain focused on our most advanced product candidates, which are pimavanserin in collaboration with Biovail, as well as two partnered clinical stage product candidates that are fully funded by Allergen, and a program in IND track development in collaboration with Meiji Seika. 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 PDP, and our plans for ADP.

Thank you, Uli, and good afternoon. Let me begin by reviewing the findings from our analysis of the data from the -012 study. While the -012 study did not meet its primary end point of (inaudible) efficacy and had larger than expected placebo response, the 40-milligram pimavanserin arm consistently demonstrated signals of efficacy across a number of measures, including the scale for the assessment of positive symptoms or SAPS, the CGI scale, the scope and nighttime sleep measure, and the caregiver burden scale. These signals are most prominent in the United States portion of the study, which comprised nearly one half of the patients. Pimavanserin met the key secondary end point of motoric tolerability as measured using the Unified Parkinson's Disease Rating Scale, or UPDRS, and was safe and well tolerated in the study.

We also observed several findings from the -012 study that we and Biovail believe can be applied to refine the design of future PDP trials to help mitigate the placebo response and to increase the chances of success. These findings included dose selection, use of the 40-milligram pimavanserin dose, as well as the method and application of ratings and other study design elements. Based on these findings, we implemented a development strategy that we believe will strengthen the PDP program and provide the best likelihood of success. It involves using the findings from the -012 study, together with those from the second ongoing Phase III trial, the -014 study, to arrive at an enhanced study design for use in a new Phase III trial. We are concluding the -014 study at its current enrollment study of about 120 patients, and we'll mine the data when available in order to apply any additional learnings to further refine our new study design.

Meanwhile, we are planning for a new Phase III PDP trial using the 40-milligram dose of pimavanserin, which is expected to start in the first half of 2010. We expect to provide more information on the design and nature of this trial once the -014 study is concluded and we finalize our study plans. In addition, we continue to conduct an open label safety extension study, which includes a significant number of patients who have completed the -012 and -014 studies. This open label study, coupled with a similar study in connection with our earlier Phase II PDP trial, have generated a considerable amount of long-term safety data on pimavanserin. In fact, our total exposures now equate to over 180 patient years. Let me now turn briefly to a second indication that we and Biovail intend to pursue with pimavanserin, and that is Alzheimer's disease psychosis or ADP.

Similar to Parkinson's disease, Alzheimer's disease is progressive, neurodegenerative disorder. Around 5.3 million people have Alzheimer's disease in the USA alone, and it is estimated that 25 to 50% of these patients may have psychosis consisting of hallucinations and delusion. There is a similar phenomenology in both ADP and PDP. Moreover, as is the case with PDP, as the psychotic symptoms in ADP progress, physicians may resort to off label use of anti-psychotic medicines for these patients. However, current anti-psychotics 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 new treatment for ADP that is safe, effective and well tolerated. Planning is now underway for an initial feasibility study for ADP.

ACADIA will take a lead on this initial study, after which Biovail will be responsible for any further studies perceived by the parties for this indication. Let me now turn the call back over to Uli.

Thank you, Roger. Let me first take a moment to highlight the third indication that we are pursuing with pimavanserin in our collaboration with Biovail; that is, adjunctive therapy in schizophrenia. Biovail will take the lead in this program. This is an indication that we have been very excited about following the positive results from a large Phase II trial that we reported in 2007, in which we showed that adjunctive therapy with a 20-milligram dose of pimavanserin, together with a low sub-maximal dose of risperidone, was just as effective as a high dose of risperidon but with a better safety profile, including a statistically significant difference with respect to weight gain. Biovail's intention is to build on the foundation of our Phase II schizophrenia trial and demonstrate similar results in a Phase III program. They anticipate discussing development plans for pimavanserin as an adjunctive therapy in schizophrenia with the FDA, hopefully in the first quarter of 2010. Depending on the outcome of those interactions, Biovail believes that the schizophrenia program may represent the quickest route to market for pimavanserin.

Overall, both ACADIA and Biovail remain enthusiastic about pimavanserin's propects and are strongly committed to advancing pimavanserin to market as quickly as possible. We are excited with the broad development strategy we are pursuing, which provides the opportunity to explore the clinical potential of this product candidate over three different indications and to maximize the commercial value of pimavanserin in North America. While this collaborative effort clearly represents the core of our pimavanserin program, I want to remind you that we have retained all rights to pimavanserin in the rest of the world. This provides ACADIA with the opportunity to drive additional value for our stockholders. While pimavanserin is our most advanced product candidate, 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 area of chronic pain and (inaudible) glaucoma.

And, through our collaboration with Meiji Seika, we are progressing with IND track development of AM-831, a compound we discovered that offers new approach to treating schizophrenia that may address cognition, untreated third dimension of this disease. While ACADIA also has earlier stage assets behind these product candidates, in order to reduce our operating expenses and extend our cash runway, we have limited our earlier R&D activities to only selected programs that are directly funded. As a result, we currently are not proceeding with further development of two other clinical product candidates, ACP-105 and ACP-106. Our earlier stage efforts do include our estrogen receptor beta or ER-beta program for Parkinson's disease that we are exploring through a grant from the Michael J. Fox foundation, and an ongoing discovery alliance with Allergen, focused on ophthalmology. Importantly, while we recently have gone through the painful yet essential process of reducing our workforce, we remain positioned with a strong core organization that we are convinced will enable us to deliver on our key objectives. In closing, we believe that our focus on a portfolio of four product candidates, coupled with the steps that we are taking to extend our cash runway, firmly positions ACADIA with multiple product and commercial opportunities and a significant growth potential. We will now be happy to answer questions that you have.

(Operator Instructions). Our first question comes from the line of Charles Duncan from JMP Securities. Please proceed.

Hi, guys. Thanks for taking the question.

Hi, Charles.

Hi. I had a question regarding the schizophrenia disease adjunctive therapy trial. You mentioned, Uli, that that might be the quickest route to market. I'm wondering if you could expound on that and really kind of compare and contrast that to the other programs that you have ongoing, and what gives you confidence that it could be first or quickest?

There are multiple reasons for that hypothesis. One of them is that we have conducted several schizophrenia trials similar to the ones that we believe that Biovail will conduct here, and we know that it's pretty straightforward to recruit patients. There are many patients available in schizophrenia research, and we have our previous timelines that we used in our previous studies to try to get agreed upon how long it takes to conduct a schizophrenia study. We know also by experience that PDP studies are slower than schizophrenia studies. We expect, and I can mention, that ADP also may be faster than PDP studies, simply because of the larger availability of ADP patients.

Okay. And then with regard to the measurement of efficacy in those trials, do you intend to use a central reviewer mechanism, and how might you limit the impact on those trials or the Parkinson's trials of a geography, if any?

So Roger, maybe you could answer that?

Yes, sure. So the schizophrenia would be assessed using the pans. There is a difference with schizophrenia to the Parkinson's studies, in as much as the investigative base of schizophrenia studies are psychiatrists are used to administering the various psychiatric scales, whereas obviously in PDP, the SAPS is a psychiatric scale, which -- where the investigators are essentially neurologists. So the central rating was clearly applicable in PDP due to the fact that many of the investigators weren't as comfortable perhaps as psychiatrists might have been using psychiatric scales. With ADP, we haven't said what the end point of that study will be yet, and we haven't finally defined that. However, it is likely to be a scale which is commonly used in the assessment of Alzheimer's patients, and is likely to be very well validated, and the investigators that we would be using will be comfortable using that scale.

And in future studies in PDP, how will you limit the geography effect, or will you require center readers for all sites?

I think the first thing is, it is -- where possible, it will be preferable to have homogenous patient group, and clearly that cuts across cultural and healthcare provision in a particular geography. In terms of the raters, I think the idea of a centralized and, importantly, independent rater, it is important because it brings some degree of objectivity to what is otherwise potentially subjective end point.

Okay. And maybe a question for Tom, quickly. I'm wondering about your year-end 2011 plan in terms of extending the cash. I know it's full of a lot of assumptions in terms of milestones paid, but could you give us some sense as to the R&D spend goal and the SG&A spend goal for 2010 at least?

Yes, thanks, Charles. When it comes to the expenses, we have not provided the specific guidance, but I would once again refer you to the overall guidance on the cash usage. And as we said, we expect to end this year in the range of 43 to $45 million, and that does at the end of the year, as we've said, represent a two-year runway. So I think that gives you a pretty good sense of the overall kind of amount, if you sort of back into spend, what we would anticipate over those two-year period. And I think that clearly, just looking at a couple of factors, you can consider, first is, as we mentioned, in October we just implemented the restructuring. That will result in a charge in the fourth quarter. We've said the charge related to the employee reduction -- workforce reduction -- will be about $1.3 million. Then going forward, we do expect the internal expenses to reduce considerably. Hence, you'll see the ability to move the earn rate down to that -- sort of fits into that two-year runway for the 43 to $45 million.

And then in terms of other input, does that include cash from any other new deals, or is that just milestones from Biovail and perhaps Allergen?

It does not include any cash from any new sources; and also I can mention that this is based on the existing collaboration agreements we have and the terms of those. That does not include any potential milestones that could be generated, but it would assume the expense reimbursement that is pursuant to those collaborations. So this is actually a runway we're quite comfortable with that does not include a projection of a major milestone that would be dictated by the success in a particular study.

Okay. Thanks for the clarification, guys. Good luck.

Thanks.

Our next question comes from the line of Alan Carr with Needham & Company. Please proceed.

Hi, good afternoon, everyone.

Hi.

Thanks for outlining before the structure around reimbursement for trial costs for the pimavanserin trials with Biovail. I'm wondering about the converse situation around the milestones and royalties. The schizophrenia indication, my recollection is that wasn't specifically outlined in the original agreement which was focused on PDP and Alzheimer's. Is there -- what's the milestone and royalty structure look like for that third indication?

Sure, Alan. Actually, there was -- if you may recall when we announced the deal, it provided for three indications. We just had not specified what a third may be, and that was subsequently -- we came out in October and that was when Biovail announced that they wanted to pursue the adjunctive therapy as the third indication. Just to give you sort of a quick overview again of the specifics, what we did say is that we're eligible for up to $205 million in milestones associated with the development, submission and approval of pimavanserin. In 160,000 of that 200 -- excuse me, $160 million of that $205 million in milestones associated with the development submission and approval of pimavanserin, and 160,000 of that -- or excuse me, 160 million of that 205 million related to PDP and ADP. So the third indication was a $45 million level of milestones that is reachable with respect to the third indication, which is now schizophrenia.

None of these milestones change after the -- after this failure in the first trial, though, right?

The milestones do not change. I can point you to one aspect that relates to the agreement with the PDP, and that is that in connection with the PDP indication, subsequent studies, which includes the study that we're planning to start in the PDP area, Biovail would have the opportunity to offset 50% of the costs of that milestone -- excuse me, of that study -- against the specific milestone that is earned on the completion of that clinical trial successfully. That offset only relates to PDP. There are no similar offsets as it relates to the other indications at all. So fundamentally, the economics from a big picture sense essentially stay the same as what we had announced.

And that's only for the third study?

Yes, that's -- with respect to the PDP trials, again, does not relate at all to the other indications.

Okay. And back to schizophrenia, do you guys -- can you guys provide any guidance on what that trial might look like in terms of design? Is it going to be against -- or on top of several different atypicals? What can we expect there? What do you know now?

So what we can say again is that this trial and this area will be the responsibility of Biovail coming forward with. But one thing I've talked about so far is essentially to try to build very much on the positive data in Phase II. That is, establishing firmly in Phase III similar advantages of using adjunctive pimavanserin on the top of a low dose of risperidone.

Okay, one last item. When can we expect results from the second PDP trial?

Roger, you want to comment on that? So you're referring to the study that we call -014?

Yes, yes.

Alan, we anticipate that we will complete the analysis of that study in the first quarter of 2010. We will then -- sort of in parallel, we'll be looking at using the findings in that study, along with those from the first study, the -012, to refine the design of the new Phase III study which we intend to start in the first half of 2010.

Okay. Thanks very much.

Thank you.

Our next question comes from the line of Jason Napodano with Zach's Investment Research. Please proceed.

Hi, guys. Thanks for taking the question.

Hi.

When you start that third study -- or I guess when Biovail starts that third study in the first half of next year, do you think that will just be one program, or do you think they'll do two kind of parallel programs?

What we have said is we intend to start a third study in PDP when we have analyzed the results both from the -012 and the -014 PDP studies. We have not yet provided information on when we intend to start an additional PDP study.

Okay. So it's -- we should consider that you'll need at least two -- I mean, let's assume that -014, the same problems that happened with -012 happen with -014, you'll still need probably two studies that meet an end point before you'll go ahead -- or before Biovail will file an NDA?

Yes, that has been our belief but -- and that's certainly what we expect, that we will need two PDP studies to get the registration for PDP.

Okay, And those -- you're only going to focus on the 40-milligram?

Yes.

Okay. So --

We think that's the appropriate dose. Actually, it will be -- the next study will be a two-armed study of 40-milligrams and placebo.

Okay. So maybe in terms of a number of patients, maybe smaller than that -012 study because you're only enrolling two arms?

Yes, Roger, perhaps you can comment on that.

Yes, that's correct. So it will be two arms instead of three, so there's just the basic proportional difference. Furthermore, you don't take the fiscal hit of having two active arms versus placebo, so you gain a little bit there as well.

So it will be -- 0.05 will be essentially what you're looking for in terms of a --

Exactly.

Okay. On the initial ADP study that you plan to move forward -- and you said it's 100%, I guess, reimbursable by Biovail if it's successful -- can you kind of give us a sense of what success is for an initial study? Is this a -- are you looking -- is there going to be a statistical efficacy end point, or do you think it will be mostly kind of a safety or kind of a PK analysis?

We expect to have an efficacy end point, and clearly the success will be related to if we can reach that end point.

Okay. So like a Phase II-B kind of design?

No, I mean, we are still talking about that we are planning a feasibility study in ADP. I think that's important to remember here.

Okay. But I guess large enough that you'll have it powered to hit a statistical end point?

Yes, or define the parameters around the signals.

Yes, yes.

Okay. Thanks. And then -- well, actually one more question. As far as AM-831 with Meiji Seika, is there a milestone for that entering the clinic?

Let me -- I can take that. First of all, the arrangement there is that our partner, Meiji, covers the initial $15 million of the development expenses there, so they will be covering, from a cost basis, a substantial portion of the development as we progress forward. The milestones that we are eligible for relate to development in the Asian territory, because you recall, in this -- at the end of the day, we retain the rest of world rights, and Meiji would have the rights in Japan and areas of Asia, so we would only receive the milestones related to that development. We would not receive one specifically to entering the clinic in this path.

Okay. Thank you.

Thanks.

We have no further questions. I would like to turn the call back over to Mr. Hacksell.

Right. 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.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.