ACADIA Pharmaceuticals Inc (ACAD) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals' third quarter 2010 financial results conference call. My name is Noelia, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this call. (Operator Instructions). I would now like to turn the presentation over to Tom Aasen, Executive Vice President and Chief Financial Officer at ACADIA. Please proceed.

Good afternoon, and welcome to ACADIA Pharmaceuticals' third quarter 2010 financial results conference call. This call is being recorded, and an archive copy will be available on our website, at www.acadia-pharm.com, through November 23, 2010.

Joining me on the call today from ACADIA are Dr. Uli Hacksell, our Chief Executive Officer, and Dr. Roger Mills, our Executive Vice President of Development. Uli will begin our call today with some introductory remarks. I will then briefly comment on our financial results for the third quarter. Following these remarks, Roger and Uli will provide you with an update on our development programs, and we will then open the floor to your questions.

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 development programs and plans, including the timing, design and results of clinical trials and partnering activity; the benefits to be derived from our product candidates, in each case including pimavanserin; benefits to be derived from changes to clinical trial designs; plans to continue the development of pimavanserin; and our future revenues, expenses, cash runway, 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 material 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, 2009, and other 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 Uli Hacksell, our Chief Executive Officer.

Thank you, and good afternoon. Let me first take this opportunity to thank all of you for joining us on today's conference call.

The third quarter of 2010 was marked by a very important event for ACADIA, the initiation of a new Phase III trial with pimavanserin in Parkinson's Disease Psychosis, or PDP. This Phase III trial, which we refer to as the -020 Study, builds on the wealth of clinical experience we have gained with pimavanserin and incorporates several important design enhancements that we expect will lead to successful outcome in this study. Roger will provide you with an update on the -020 Study, and we will review each of these key study enhancements later on in the call.

Our primary focus is on advancing our Phase III PDP program. We believe this positions ACADIA to substantially increase the value of our most advanced product candidate. As most of you know, we recently regained all rights to pimavanserin. This opportunity presented itself following Biovail's recent merger with Valeant, and the related change in their strategic focus. Following discussions between our two companies, we agreed to end our collaboration, with ACADIA regaining US and Canadian rights to pimavanserin and receiving the one time cash payment of $8.75 million.

We saw this as an attractive opportunity to position ACADIA with unencumbered global rights to this Phase III asset while at the same time strengthening our cash position. Since we were already managing all clinical development in the PDP program, this event did not adversely impact execution of our ongoing Phase III products. And, importantly, ACADIA now has the opportunity to realize all of the potential upside from pimavanserin.

While pimavanserin is our most advanced product candidate and our primary focus, I want to remind that it is one of four product candidates in our pipeline. We also have two clinical programs in the area of chronic pain and glaucoma in collaboration with Allergan, and we are in IND-track product development with a product candidate for schizophrenia through our collaboration with Meiji Seika Kaisha. We believe that this portfolio of four product candidates, lead by our Phase III PDP program with pimavanserin, firmly positions ACADIA with multiple product and commercial opportunities and with significant growth potential.

Let me now turn the call over to Tom to comment on our third quarter financial results.

Thank you, Uli.

I'm pleased to note that our financial results continue to demonstrate our financial discipline and expense control, and when coupled with the recent cash infusion from Biovail, we have extended our cash run. We reported a net loss of $4.2 million or $0.11 per common share for the third quarter of 2010, compared to a net loss of $8.7 million or $0.23 per common share for the third quarter of 2009.

Our research and development expenses decreased to $5 million for the third quarter of 2010 from $9.2 million for the comparable quarter of 2009, reflecting lower external service costs associated with our Phase III PDP trial as well as cost savings in our internal organization. Our general and administrative expenses decrease to $1.6 million for the third quarter from $2.0 million in the comparable quarter of 2009, reflecting cost savings in both internal and external expenses. We closed the third quarter with $32.2 million in cash and investment securities.

Following the end of the third quarter, we received the one-time cash payment of $8.75 million from Biovail in connection with our agreement to end our collaboration and regain all rights to pimavanserin. Importantly, the $8.75 million payment is expected to cover the estimated remaining external clinical costs of our ongoing Phase III PDP -020 Study.

In addition to this cash infusion, this agreement will have other effects on our future financial results. First, you may recall that under our Biovail collaboration, ACADIA had received a nonrefundable $30 million upfront cash payment and significant additional payments to cover specified development costs. For financial reporting purposes under GAAP, these payments were deferred and were being recognized as revenue over an estimated performance period. In connection with concluding the collaboration, during the fourth quarter of this year, we will record as revenue all of the remaining unrecognized deferred revenue from the Biovail collaboration, which totaled $25.9 million and was recorded as a liability at September 30, 2010. During the fourth quarter, we also will record as revenue the $8.75 million one-time payment from Biovail. In total we will recognize $34.7 million in revenue related to our collaboration during the fourth quarter of this year. Thereafter, we'll no longer recognize revenues from this collaboration.

Going forward, we are now positioned to realize all potential upside from pimavanserin and will have no further financial obligations to Biovail. With the additional financial resources and our focus on advancing our ongoing Phase III PDP program, we have extended our cash runway. We now expect our existing cash resources and anticipated payments from our ongoing collaborations will be sufficient to fund our operations to mid-2012.

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

Thank you, Tom.

We remain focused on our four most advanced product candidates, which are pimavanserin in Phase III development, as well as two partnered clinical stage product candidates that are fully funded by Allergan and a program in R&D [product] development in collaboration with Meiji Seika. Our remarks today will focus mainly on our Phase III PDP program with pimavanserin. Let me start by asking Roger to provide you with an update on this program.

Thank you, and good afternoon.

As Uli mentioned earlier, the third quarter was highlighted by the initiation of the -020 Study, a new Phase III PDP study with pimavanserin. The study builds on the extensive data set we've generated in this program and the signals of antipsychotic efficacy in our earlier PDP studies. Importantly, we've use this clinical experience to guide several design enhancements that are incorporated in this study. Let me first review the design objectives of the study, and I will then focus on each of the key design elements in more detail.

The -020 Study is a multicenter double-blind placebo-controlled study designed to evaluate the efficacy, tolerability and safety of pimavanserin in patients with PDP. The study is expected to enroll about 200 patients at approximately 50 clinical sites located in the United States. Patients randomized to two study arms and receive oral doses of either 40 milligrams of pimavanserin or placebo once daily for six weeks. Patients also continue to receive stable doses of their existing dopamine replacement therapy, used to manage the motoric symptoms of Parkinson's disease.

The primary endpoint of the -020 Study is antipsychotic efficacy as measured using nine items from the hallucinations and dilutions domains of the scale for the assessment of positive systems, or SAPS. We employ centralized ratings to assess the endpoint in the study. The -020 Study is [powered] to the standard level for a pivotal study of 90% to provide statistically significant antipsychotic efficacy as measured using the nine items SAPS. Motoric tolerability is a key secondary endpoint in the trial, and is measured using Parts II and III of the unified Parkinson's disease rating scale, the UPDRS.

Importantly, we have made several design enhancements based on the previous data and extensive experience we have gained in this program. Let me now review the design enhancements and why we are confident that they will be able to mitigate placebo response, reduce variability and enhance sensitivity in measuring efficacy in the study.

First, we're testing only 40 milligram dose of pimavanserin versus placebo in a one-to-one randomization. We expect the use of two rather than three study arms will in itself help to mitigate placebo response, because patients will now have an equal or 50/50 chance to receive active drug or placebo. Second, based on our observations of a larger placebo response in patients with less severe psychosis in previous studies, we have increased the MPI minimum score requirement at screening and the SAPS score at baseline. Third, we are also employing a structured social therapy leading period in order to help pull initial placebo responses ahead of the assessments in the study.

Other important design enhancements have been incorporated to further reduce variability and enhance sensitivity measuring efficacy in the -020 Study. In this regard we are conducting the study exclusively in North America, where we are employing centralized ratings using a focus group of highly trained independent raters to assess the primary endpoints. Our previous experience has shown that this structured approach leads to less variability in the data.

We have also refined the primary endpoint of antipsychotic efficacy to a group of nine items from the SAPS which best reflect the expression of psychosis in patients with Parkinson's disease. These nine items are identified using a factor analysis of baseline data from our earlier PDP studies. and from an external clozapine study. In total, this involved over 500 patient, and comprised by far the largest data set using SAPS to assess PDP. Based on our previous experience, by using this nine-item scale derived from the hallucinations and delusions domains of the SAPS, we expect to reduce data variability and enhance the sensitivity in measuring the treatment the response.

Importantly, prior to finalizing the design of the -020 Study, we consulted leading experts and obtained feedback from the FDA on the proposed study design, including the design enhancements and study endpoints. The FDA was supportive of the study design and accepted the use of nine-item SAPS scale, agreeing that this group of nine items would appear to have improved clinical relevance and face validity in PDP.

We believe that combination of all of the design enhancements will mitigate placebo response, reduce variability and enhance sensitivity. We're pleased with the progress to date in the -020 Study and encouraged that the study startup phases have progressed more efficiently than we experienced in previous studies. We have already initiated about three-quarters of planned clinical sites and are finalizing logistics to activate the remaining sites. If the -020 Study is conducted in a time frame similar to what we experienced in our previous studies, it would suggest top line data by about mid-2012. We expect to provide specific guidance for the timing of this study at a later date.

In addition to the -020 Study, we're continuing to conduct a large Phase III open-label safety extension study, which we refer to as the -015 Study. This study involves patients who completed previous PDP trials together with patients who complete the -020 Study and in the opinion of the treating physician may benefit from continued treatment with pimavanserin. The -015 study, together with a similar extension study from an earlier Phase II PDP trial could generate a large amount of long-term safety data with pimavanserin.

Overall, in our Phase III and Phase II extension studies, total of nearly 200 patients have now been treated for over one year, and over 30 patients have been treated for over two years, and our longest single patient exposure is greater than five years. We continue to be encouraged to see that many patients remained on pimavanserin for long periods of time. Importantly, our experience to date suggests that the long-term administration of pimavanserin has continued to be safe and well tolerated in this fragile elderly patient population.

Let me now turn the call back over to Uli.

Thank you, Roger.

Our priorities are clear, and our resources are focused on advancing our Phase III PDP program. We believe that this program, including the ongoing -020 Study, will allow ACADIA to significantly increase the value of pimavanserin and drive additional value for our shareholders. Furthermore, by recently capitalizing on the opportunity to position ACADIA with unencumbered worldwide rights to pimavanserin, we now can realize all potential upside.

Let me now take a moment to highlight the commercial opportunity in PDP as well as other potential opportunities to expand the reach of pimavanserin. PDP is a serious condition that afflicts up to 40% of Parkinson's patients and deeply affects their quality of life. PDP is associated with increased mortality, caregiver burden, and is the major driver of institutionalization among Parkinson's patients.

Physicians currently face multiple challenges with PDP. As a result this condition is undertreated and represents a large unmet medical need. With no FDA-approved therapy for PDP currently available, physicians may result to using atypical antipsychotics off label in an attempt to treat PDP. Our market research indicates that physicians are concerned with the use of existing antipsychotics due to safety, and this may lead to use of subtherapeutic doses. Among physicians' key concerns was the potential loss of multi-symptom control in PDP patients.

There remains 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 PDP without impairing motor function. We believe that the favorable safety profile observed today supports the potential of pimavanserin to offer significant advantages relative to current antipsychotics used off label for the treatment of PDP.

We see PDP as an ideal lead indication for pimavanserin. While we are not currently conducting trials in other indications, we also continue to believe in the potential of pimavanserin to address the broader range on neuropsychiatric disorders, including Alzheimer's disease psychosis, or ADP, and schizophrenia, which are also underserved by currently available antipsychotic agents. In both of these indications, we have established well-defined paths forward.

In ADP we have completed planning for a Phase II feasibility study to evaluate the potential of pimavanserin as a treatment for ADP. It appears another indication like PDP, with no FDA-approved therapy, and represents a large unmet medical need. As is the case with PDP, physicians may prescribe off-label use of antipsychotic medications for their parents with ADP. However, current antipsychotics may exacerbate the cognitive disturbances associated with Alzheimer's disease, and they are associated with numerous side effects and have a black box warning for use in elderly patients with dementia-related psychosis. Because of its selective mechanisms of action, and the favorable safety profile observed to date in elderly patients with Parkinson's disease, we believe that pimavanserin may also be ideally suited to address the need for a new treatment for ADP that is safe, effective, and well tolerated.

Now let me turn to schizophrenia. Interactions with the FDA have established a straightforward development path for combination product consisting of pimavanserin and Risperdal. This would build on our earlier successful Phase II co-therapy study, which demonstrated a clinically attractive profile of acute therapy combining pimavanserin and a low dose of Risperdal.

As we focus on and continue to advance our Phase III PDP, we will consider potential opportunities that may allow us to further accelerate and broaden the development program for pimavanserin, and of course, drive increased value for our shareholders. With ACADIA now holding worldwide rights to pimavanserin we have the opportunity to consider partnering either on a regional or global basis.

Given the commercial potential for pimavanserin in PDP and broader range of neuropsychiatric indications, we have focused on establishing a strong patent portfolio around pimavanserin. This portfolio includes 69 patents that generically and specifically cover pimavanserin. In addition to claims that cover compositional matter of pimavanserin, patents contain claims for the use of pimavanserin to treat Parkinson's disease, schizophrenia, Alzheimer's disease, and other disorders. Importantly, patents that claim compositional matter will generate patent protection to June 2028 in the US, and December 2025 in numerous countries outside of the US.

While pimavanserin is our most advanced product candidate, ACADIA also had other important programs in its pipeline. Through our long-standing alliance with Allergan we have two clinical stage product candidates that provide the potential for new treatment options in the areas of chronic pain and glaucoma. First, in the [alpha agonist] chronic pain program. Allergan has conducted several Phase II trials in this program and has announced that they are seeking a partner for the further development and for commercialization in areas predominantly served by general practitioners. Second, in our muscular glaucoma program, Allergan is conducting a Phase I development with our candidate.

Through our collaboration with Meiji Seika, we are in IND-track development with AM-831. This compound, which ACADIA discovered, offers a new approach to treating schizophrenia that may address cognition, an untreated third symptom domain in this disease.

Behind our four most advanced product candidates we have additional earlier-stage projects. This includes our ongoing discovery collaboration with Allergan, which is focused on ophthalmology, and additional discovery efforts which are founded by other sources.

Finally, let me mention that we are pleased to have recently been awarded two new grants totaling approximately $550,000. One by the Michael J. Fox Foundation for a neuroprotection discovery project, and one by the federal government's Qualifying Therapeutic Discovery Project Program.

In closing, we believe our portfolio of four product candidates, lead by pimavanserin, our Phase III product candidate for which we hold worldwide rights, firmly positions ACADIA with multiple product and commercial opportunities. With the well-designed Phase III program for pimavanserin and an extended test runway, we believe we have a strong foundation in place to advance our lead product candidate and drive value for our shareholders.

We will now be happy to answer questions that you may have.

(Operator Instructions). Please stand by for your first question. Your first question comes from the line of Charles Duncan from JMP Securities. Mr. Duncan, if your line is muted, please un-mute.

Maybe we can go back to Charles later on.

Thank you. Your next question comes from the line of Jason from Zacks Investment Research.

Hi, guys, can you hear me?

Yes, we can.

Great. Uli, when you look at potentially reopening the partnership discussions for pimavanserin, are there things that you would like to have completed before those discussions really heat up, such as enrolling the -020 trial, or even presenting some interim data there, or even finalizing the plans in schizophrenia before those talks kind of push forward? Or are you pretty much open to a partnership at anytime?

Well, I mean, when I --In order to answer that, I can say that first of all our current focus is very much on executing in our ongoing PDP program. But we are very aware of the fact that now when we have unencumbered worldwide rights, we have expanded the partnering universe greatly, now can partnering both regional and globally. And clearly, we're open to opportunities that may allow us to accelerate the PDP program or to grow the pimavanserin program in general. We are open to anything that can drive the -- increased shareholder value. And that's what I can say currently.

Okay. And just getting back to the potential in schizophrenia, last update we had was that Biovail was having some discussions back and forth with the FDA on the design for a safety study prior to Phase III. Do you essentially just pick up where those discussions left off, or are there kind of things you need to reset with the FDA before you can continue to have those talks?

No, no, I think that we are in pretty good shape here. We understand what is required in terms of the design of the two efficacy studies that need to be conducted in the pimavanserin co-therapy program. It's pretty straightforward. In fact, we think that we need two efficacy studies with four arms each which study the combination, the two individual components and the placebo group. And -- so it's pretty straightforward to move forward here, and we have learned a lot, in fact, from the interactions with the FDA.

Okay. Quick question for Tom, the $34.7 million that you noted to be recognized in the fourth quarter, should we be adding in some additional things like the two grants that you mentioned, or is that $34.7 millionwhat you totally expect to recognize as revenues in the Q4?

Yes, Jason that $34.7 million is only related to Biovail, so we would expect that there is additional revenues, as we have been recording revenues related to other collaborations, including our one with Allergan and also Meiji Seika, and you can kind of see from the third quarter how much those contributed. The $34.7 million is --will be exclusively related to the Biovail arrange.

And those grants -- how do you recognize those grants? Are those all upfront, or do you kind of amortize them out?

I can say that the one grant that is under the federal government's program, that is one that will be recognized essentially immediately, and that's upon receipt. The other grant is for the Michael J. Fox; supports the research for a one-year period.

Okay. Great, guys. Thanks a lot.

Thank you.

(Operator Instructions). Your next question comes from the line of Charles Duncan from JMP Securities.

Hi, guys, sorry for the drop out. I'm in an airport. First of all, thanks a ton for the color on how things are going so far, but I wanted to perhaps get a little bit more information, Roger, you said that things were starting up a little bit quicker than you had anticipated. Could you review with us a number of sites up and running and when you expect the rest of them to be up and running?

So, thanks, Charles, yes, we -- obviously we have got a couple -- in fact, more than the previous including the Phase II to look at for study startup, and we are ahead of what we have seen previously with the studies. We have about 50% of the sites are returning sites from the previous study. So we have worked with these sites in the past, and we have had good relationships with them, and they have been good recruiters into our previous programs. Not giving guidance currently as to exactly how many patients are in the study, but I'm very pleased with the study startup, and the activity that has taken place at the sites.

And the actual number of sites in -- or onboard now so far is approximately?

About 75. Around that, sothree-quarters of the sites are up and running. We have got about 50 sites that we're intending to use in the United States.

Okay. And then I know that you had mentioned if it ran consistent with the previous experience, when you suggested data, but are there any initiatives that you are pursuing that could perhaps accelerate review, and could you review with us what maybe the top two, three initiatives right be?

Again, we're not giving specifics as to interactions during the study. However, as I just said one of the key elements was actually in choosing the sites to ensure that we chose sites that have been able to perform well in previous studies and consistently over the period of those studies. That was a key element in how we approach this particular study. We have got that experience now with the sites, and we can build on those relationships that we have previously established. Obviously, in addition to that we continue to look at site performance and work with the sites to -- and on a detailed site-by-site basis to help them identify patients and bring those patients into the study.

That makes sense to me. And then with regard to the enrollment criteria and the prescreening that you mentioned, which is designed to reduce placebo effect and variability, it makes a lot of sense to me that you are pursuing that, but does that also create a penalty with regard to the time lines to enrollment, at least with regard to getting a patient through that screening? Or do you think that can occur relatively rapidly as well.

I think it's -- that's one element of the redesign of this study compared to the previous ones. It's an important one, because it was a factor that we could clearly see was associated -- the lower the MPI, then the greater the potential for a placebo response. So naturally in this study we have increased it in a structured manner so that we increase the hurdle for patients with less severe disease to go in to the study. But obviously from our previous results, those are exactly the patients we don't want to go in to the studies, those patients whose disease is more amenable to the -- for want of a better way of putting it -- the being in a study effect. The attention -- the extra attention they get from being in a study. So we primarily want to avoid having those patients in the study.

But there are a number of other factors, going back again to the choice of the sites, that we actually expect to enhance enrollment, so although the hurdle on some factors may be higher, there are other factors that we have built in that will make it easier to bring patients in to the study.

That makes sense as well. Now Roger, we had talked about the trial -- the previous trial beforehand with regard to non-US sites, and I guess I'm kind of wondering if you are taking extra precautions. I know that the non-US sites in the previous trial were very different than the ones in the trial today or the current trial, but could you review with us where the non-US sites are and what precautions you are taking to ensure that the enrollment is done consistent with the US sites here?

So in this particular study, we have no non-US sites. It is US based. So all 50 sites are US sites.

Okay. That's -- that's awesome. Good. Well, I think I'll hop back in the queue, and thanks for your patience in taking my questions.

Thank you, Charles.

At this moment there are no more questions in the queue. I would now like to turn the call over to Dr. Hacksell. Please proceed for 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 call. This concludes the presentation. You may now disconnect. Good day.