ACADIA Pharmaceuticals Inc. (ACAD) Q1 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals First Quarter 2012 Financial Results Conference Call. My name is Amicia, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to Ms. Lisa Barthelemy, the company's Investor Relations Advisor, who will read ACADIA's forward-looking statements. Please proceed.

Thank you. Good afternoon, and welcome to ACADIA Pharmaceuticals' First Quarter 2012 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 22, 2012. 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, including the timing, design and results of clinical trials and partnering activity; the benefits to be derived from and the commercial potential for our product candidates in each case including pimavanserin; benefits to be derived from changes to clinical trial designs; plans regarding the development of pimavanserin; and our future expenses, collaboration payments, cash position, stock performance and financial performance. These forward-looking statements are based on current information, assumptions 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, 2011, 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 Tom Aasen, ACADIA's Executive Vice President, Chief Financial and Chief Business Officer.

Thank you, Lisa, and good afternoon. Let me first take this opportunity to thank all of you for joining us on today's conference call. Also joining me on the call today from ACADIA is Dr. Roger Mills, our Executive Vice President of Development. Uli Hacksell is under the weather and won't be joining us today. We will begin our call today with some introductory remarks and comments on our financial results for the first quarter. Following these remarks, Roger will provide you with an update on our development programs, and we will then open the floor to your questions. The first quarter was a productive period for ACADIA, helping to set the stage for what we expect will be an exciting and value-driving 2012. Most importantly, as you will hear later from Roger, we continue to make solid progress in the ongoing pivotal Phase III trial with pimavanserin for Parkinson's disease psychosis or PDP and remained positioned to complete this study later this year. We are convinced that the optimized study design we are using in this trial is leading to enrollment of patients with the desired clinical profile and should significantly improve the likelihood of achieving a successful outcome. We look forward to completing this Phase III trial and believe that a successful study will allow ACADIA to significantly increase the value of pimavanserin. PDP is a large, unmet need and represents what we believe is an ideal lead indication for pimavanserin. We are focused on advancing our Phase III program toward registration for this indication. We also believe pimavanserin has the potential to address a range of other neurological and psychiatric disorders that are poorly served by existing antipsychotics. While pimavanserin is clearly our primary focus, I would also like to mention 2 first quarter highlights in our earlier-stage programs. First, we extended our long-standing discovery collaboration with Allergan, which is focused on glaucoma and related ophthalmic conditions. Allergan has been an outstanding partner to ACADIA and we are pleased to continue what has been a very productive scientific alliance. Additionally, late in the first quarter, we were awarded a new grant from the Michael J. Fox Foundation to expand on a promising initial research in our Nurr1 program. This program may offer a new disease-modifying approach to treating Parkinson's disease. Overall, our pipeline of product candidates, led by our Phase III PDP program with pimavanserin, positions ACADIA with multiple product and commercial opportunities and significant growth potential. Let me now briefly comment on our first quarter results, which continued to reflect the focus on our Phase III pimavanserin program. Revenues totaled $450,000 for the first quarter, similar to the comparable quarter of 2011 and were comprised of revenue from our collaborations with Allergan and Meiji Seika Pharma as well as our research grants. Our research and development expenses increased to $5.0 million for the first quarter from $4.4 million in the comparable quarter of 2011, largely reflecting an increase in external clinical expenses for pimavanserin, offset in part by lower internal costs. Our general and administrative expenses totaled $1.7 million for the first quarter, down from $1.9 million in the comparable quarter of 2011. Turning to our cash position and guidance, we closed the first quarter with $25.9 million of cash and investment securities, a net decrease of approximately $5.1 million from our balance at the end of 2011. Going forward, we continue to expect that our existing cash resources and anticipated payments from our collaborations will be sufficient to fund our operations at least into the second quarter of 2013. Let me also add that as part of our planning for our future success, we put an at-the-market or ATM equity facility in place at the end of the first quarter to provide us with added financial flexibility. With the ATM, ACADIA may elect to sell shares of stock over a 3-year period at times and prices to be determined in the future, but is not obligated to do so. No shares have been sold under the ATM and we have no current plans to issue shares. I'll now turn the call over to Roger to review our development programs in a bit more detail.

Thank you, Tom. My remarks today will focus mainly on our lead Phase III PDP program with pimavanserin. Our primary focus in this program is on the ongoing pivotal Phase III trial, referred to as the -020 Study. This study incorporates several design enhancements that were guided by previous data in our PDP program. -020 is a randomized multicenter, double-blind placebo-controlled study designed to evaluate the efficacy, tolerability and safety of pimavanserin in patients with PDP. Let me take a moment to highlight key elements of the -020 protocol and the study enhancements that are designed to mitigate placebo response and reduce data variability. This study is being conducted exclusively in North America and is expected to enroll about 200 patients over approximately 50 clinical sites. Importantly, the geographic focus enables us to use a small centralized group of highly-trained independent raters to conduct blinded assessments at the primary endpoint at all study sites. Our previous experience indicated that this centralized rating approach help to mitigate placebo response, enhance precision and reduce data variability. Patients initially participate in the screening phase, which includes a brief psychosocial therapy program. This is designed to help patients adapt to participating in a clinical trial setting, help manage symptoms during the screening phase and poll initial placebo responses ahead of the baseline assessment. This also may allow more severe patients to be enrolled by offering non-pharmacologic support. To participate in the study, patients are required to have moderate to severe psychosis as measured by the Neuropsychiatric Inventory Scale or NPI screening and the Scale for the Assessment of Positive Symptoms or SAPS at the time of the baseline assessment. Criteria for study entry was heightened based on our observation of a larger placebo response in patients with mild psychotic symptoms in previous studies. Patients must have both adequate severity and frequency of symptoms to be included. The baseline SAPS score is assessed independently from the NPI, which provides an important check and balance. We believe the strengthened criteria for enrollment, together with the brief psychosocial therapy, have been effective in enabling sites to enroll patients with the desired clinical profile and to filter outpatients with milder psychotic symptoms who are more likely to respond to placebo. We've continued to observe the patients enrolling in the -020 Study, to date, have, on average, exhibited a greater severity of psychosis at study entry relative to patients in our earlier trials. This is exactly what we'd hope to achieve with the design enhancement and we believe provides patients with the right profile to help position the study for success. We've also seen an increase in subjects that do not qualify for randomization at the conclusion of screening due to inadequate severity of symptoms. Upon qualifying, patients are randomized on a one-to-one basis to receive either 40 milligrams of pimavanserin or placebo once daily for 6 weeks. They also continue to receive stable doses of their existing dopamine replacement therapy used to manage the motor symptoms of Parkinson's disease. The primary endpoint of the study is antipsychotic efficacy as measured using 9 items from the hallucinations and delusions domains of SAPS, which best reflect the expression of the psychosis in patients with Parkinson's disease. The 9-item SAPS is supported by our observation that when we applied this scale for the data in our previous PDP studies, we saw a clear reduction in variability, enhanced sensitivity and an improved effect size relative to the use of the larger 20-item SAPS. Importantly, as expected, we have observed that the blinded baseline data from patients enrolled in the -020 Study, to date, supports our early analysis, which indicated that the 9-item SAPS best captures the expression of PDP symptoms. You may recall that the FDA was supportive of the -020 Study design and accepted the 9-item SAPS as a primary endpoint in the study. This pivotal study is powered at a standard 90% to provide statistically significant antipsychotic efficacy as measured using the 9-item SAPS. Motoric tolerability is a key secondary endpoint in the trial and is measured using parts 2 and 3 of the Unified Parkinson's Disease Rating Scale or UPDRS. Overall, we remain convinced that the optimized -020 Study design should significantly improve the likelihood of achieving a successful outcome, and we are pleased to see that the design enhancements appear to be operating as planned. We continue to make solid progress with the study enrollment while maintaining our focus on ensuring that we enroll patients with the desired clinical profile. Based on our progress and past experience, we anticipate reporting top line results from the -020 Study near the end of the third quarter this year. Let me now turn to another important ongoing study in our PDP program: our Phase III open-label safety extension study referred to as the -015 Study. This large study involves patients who complete the -020 study as well as patients from previous Phase III PDP trials and who, in the opinion of the treating physician, may benefit from continued treatment with pimavanserin. Once again, I'm pleased to report that the overwhelming majority of patients who complete the treatment phase in the -020 Study have elected to roll over into the -015 Study. This study is allowing us to generate a large amount of valuable long-term safety data regarding the use of pimavanserin in patients with PDP. Overall in our Phase III and Phase II extension studies, we have now accumulated over 670 patient years of exposure in this patient population. Importantly, we far exceeded ICH guidelines required for 1-year exposures with over 200 patients having been treated for one year or longer. We also have well over 100 patients that have been treated with pimavanserin for at least 2 years and our longest single patient exposure is 7 years. We're encouraged to see that many patients have remained on treatment with pimavanserin for long periods of time, and we've continued to receive encouraging feedback from investigators regarding patients' experiences with pimavanserin. Our experience to date suggests that a long-term administration of pimavanserin appears to be generally safe and well-tolerated in this often fragile and elderly population. We believe that the favorable safety profile observed to date provides support for the potential of pimavanserin to offer significant advantages relative to current antipsychotics used off-label for the treatment of PDP. PDP is a serious disorder that develops in up to 60% of patients with Parkinson's disease and deeply affects their quality of life, contributes substantially to the burden of Parkinson's disease and is the major cause of nursing home placements among Parkinson's patients. The FDA has not approved any drug to treat PDP. The neurologists currently face very difficult challenges in managing patients with this debilitating disease. We believe pimavanserin, with its innovative and well-tolerated non-dopaminergic profile, have the opportunity to be a first-in-class therapy that will effectively treat psychosis in Parkinson's patients without compromising motor control. Let me now touch briefly on our other product candidates. As Tom mentioned earlier, during the first quarter, we extended our ongoing discovery collaboration with Allergan, which is focused on glaucoma and related ophthalmic conditions. You may recall that our long-standing alliance with Allergan has already resulted in 2 clinical stage product candidates that provide the potential for new treatments in the areas of chronic pain and glaucoma. Our fourth clinical program, AM-831, advanced into Phase I development late last year in collaboration with Meiji Seika Pharma. AM-831 addresses schizophrenia, and is designed to provide a unique combination of antipsychotic and pro-cognitive activities through antagonism of D2, of 5-HT2A receptors, coupled with stimulation of muscarinic M1 receptors. Behind these 4 clinical programs, we have continued to advance 2 preclinical programs that may pave the way for new breakthroughs in the treatment of Parkinson's and other neurological disorders. First, we're excited to expand on promising initial research findings in our Nurr1 program through the new grant mentioned earlier from the Michael J. Fox Foundation. Secondly, our ER-beta compounds have exhibited neuroprotective and anti-inflammatory properties in preclinical models and may have the ability to slow down the progression of Parkinson's disease. These compounds may also address symptoms of chronic, inflammatory and neuropathic pain. Ongoing studies in this area are being funded by a grant from the National Institute of Neurological Disorders and Stroke. Let me now turn the call back over to Tom.

Thank you, Roger. We're excited about the -020 Study and look forward to reporting top line results later this year. We believe that a successful trial should provide opportunity to drive significant value for our stockholders. And while our strategy currently focuses on advancing our Phase III PDP program toward registration, we also intend to use this program as a foundation to develop and commercialize pimavanserin for other major neurological and psychiatric disorders that are underserved by currently available antipsychotics. With ACADIA holding worldwide rights to pimavanserin, as we continue to advance our Phase III PDP program, we will consider potential opportunities that may allow us to accelerate and broaden the developing program of pimavanserin and drive increased value for our stockholders. Finally, before we close today, I would like to mention that we will be hosting an educational program on PDP for analysts and investors on May 22 in New York City. This program will feature presentations by leading clinicians in the field of PDP and provide a physician's perspective on this disease as well as an overview of the treatment landscape. A live webcast of the event will be available on our website. In closing, our pipeline of product candidates, led by our Phase III pimavanserin program, positions ACADIA with multiple product and commercial opportunities and significant growth potential. With a well-designed Phase III program for pimavanserin and Phase III data anticipated later this year, we are confident that we have the foundation in place to drive significant growth for ACADIA and our stockholders. We will now be happy to answer questions that you may have.

[Operator Instructions] Your first question comes from the line of Charles Duncan with JMP Securities.

Roger, you mentioned data near the end of the third quarter of '12 that seems to be consistent with what you've been saying. Have you seen any changes in the enrollment patterns and/or changes in -- have you made any changes in the psychs over the course of the last quarter or so?

No, we have -- we continue to make steady progress with these studies and we've been pleased to see, I think, importantly, that psychs really have taken on board the patient population that we're looking for. They continue to enroll patients who got moderate to severe disease and not just by the simply by scores at entry, but importantly, by really working to ensure that a patient is suitable for the study. I would not -- here within the documents, we've not had any sort of significant turnover of psychs. These are the psychs that have been working with us through the study. And in fact, some of these psychs have been working with us now for quite a few studies, so they're all friends in a way.

And then I know it's probably very tough to quantify, but you talked about the greater level of psychosis that you're seeing with regard to your current enrollment versus in the past. Is there any way to maybe qualify that, if not quantify it? Like it's a 10% increase than the average scores or anything that you can help us with there on a blinded basis?

We're not giving specific figures. We haven't been and we're not doing it today. But I can confidently say that we are seeing that the baseline score -- these are blinded, so just across the study of patients at entry, are higher than we saw in the previous studies and are in line with what we anticipated and we're looking for when we started the study.

And then if I could ask you about the long-term safety study that's ongoing, you made some statements about some pretty profoundly long duration of dosing for certain patients and that dose appear to be a key issue for the patient population, particularly relative to the antipsychotic challenges that they have. But in terms of beyond safety, are there any other benefits to a patient remaining on this drug over that time, or is this a pretty decent efficacy read-through?

Continued participation in the study is based on 2 things, most importantly is the opinion. It's an open-label study, so there is no comparative group. But these are experienced clinicians in the area and have obviously great experience of using the atypical agents, off-label. So I think the continued involvement of the patients with these investigators on pimavanserin really it is a surrogate for the fact that the investigators are feeling that the patients are deriving benefit. But there's another side, which is interesting because, as I say, many of these are very experienced, not just investigators but Parkinson treaters. And we do again a number of reports, obviously anecdotal, but with consistency where they really do feel that the whole mood, the aura around the patient is so different than that seen with the atypical agents and different on the benefit side. So they -- it's perhaps not a tangible thing from that study, but I think there's a consistent feedback that patients do well. And in a broader sense, they're not able -- not just in terms of the psychosis but because the psychosis is being controlled, they can actually get out and do things that they've not been able to do for a period of time. They're more engaged with their families and more engaged with the environment around them. And we've heard that from a number of investigators. And obviously, that's very encouraging. On the safety side, we continue to see that the safety is benign. In this population, we do continually review it, but there are no signals of safety concerns and that, in itself, is hugely beneficial to patients.

That all seems positive. My last question is regarding strategy, and I'm not sure if it's best targeted to you or Tom or Uli, regarding the completion of this study, you'll have a top line. Would it be your plan then to talk to potential partners about the second study? And would that second study be again in PDP or would you possibly take on this AD psych indication?

Thanks, Charles. This is Tom, I'll take it. Clearly, we're excited about our positioning with pimavanserin. We look forward to completing the -020 Study and we see this as the opportunity for a major value inflection point in the asset. I can tell you following -020, we're planning to capitalize on the successful outcome. And I think first and foremost, we plan to continue to advance the PDP Phase III program toward registration to build additional value in the program. And this clearly includes plans to leverage the -020 infrastructure to enable us to start up and run at the second pivotal study, -021, in a very efficient way. And second, clearly, we look to drive additional value from the asset. We're interested in accelerating development in other geographic regions and certainly broadening the program to the other neurological and psychiatric indications we've mentioned, including ADP and schizophrenia. And I think the good thing is with worldwide rights, all options are open to us. And clearly, as we continue to advance and progress the program, we'd have the opportunity to consider partnering in the future to accomplish some of these objectives.

[Operator Instructions] And the next question comes from the line of Juan Sanchez with Ladenburg.

Can you give us some info related to the dropout rates you have found so far relative to your expectations and by your trials?

Yes, just to summarize, a little difficult hearing on the phone line. You just wanted some additional color on dropout rates we're seeing?

Yes, dropout rates so far. What have you seen relative to what you were expecting?

Great.

We actually see the dropout rate, without giving specifics, but the dropout rate is certainly -- is actually improved over what we saw in the previous study. So we are very encouraged with that. We also have, in terms of the analysis, the analysis based on last observation carried forward, so even if patients don't make the full 6 weeks, their data is still captured.

And Juan, I think as we've pointed out a number of times in the past, this is, we think, an ideal kind of patient population. We've seen a great compliance level in the previous studies and clearly seen that again. So the level of dropouts in relation to many other types of indications is quite low.

Yes, it's very, very different from a lot of the psychiatric conditions in younger patients. This is an older population. They're generally compliant with their meds. I think it's just part of the way that generation approaches things in life. So we are pleased with the low dropout that we see in the study.

One additional question related to the psychosocial program. What percentage of patients who entered this program are not randomizing to the trial because of finding in the program?

Again, we're not giving specific details on this. But we have seen that there is an increase in screen fails of patients looking to come into the study. But that is, obviously, what we went out to achieve by changing the entry criteria to the study. We have purposely focused it that we would have patients with moderate to severe disease because those with the milder disease tended to be the ones who are most responsive to placebo. The brief psychosocial therapy, which is used during the screening period, clearly has a couple of benefits. One of the key intentions is to try and poll the placebo response ahead of the randomized portions of the study. There is a "being in the study" effect and using the brief psychosocial therapy and the focus on that in the first 2 weeks of the screening, we hope will poll the placebo response ahead. But secondly, it also offers people, because they don't have any other psychosis treatment during the screening period, it really offers people with more severe disease an opportunity to receive some form of non-pharmacologic treatment during that screening period, and therefore, makes the study more attractive.

And one final question. Is the central rater a neurologist, a psychiatrist? Or any doctor can be the central rater?

The centralized raters are a mix of backgrounds. Many of them are psychologists, maybe psychiatrists as well. But importantly they've all got a background in assessing the psyche of people in different diseases, both from their previous training and also through studies that they've been involved with, with MedAvante. But really it's a small group, small core group of raters, who, as I say, are well trained with good backgrounds in the area. And they're really very good at being able to elicit the symptoms, the nature and severity of the symptoms from patients and then translate that into the scores on the scale. It also provides -- we also have and by having small number, it provides us with a greater opportunity to oversee the continued quality and consistency of those ratings. So it provides that extra robustness to the study.

And your next question comes from the line of Bert Hazlett with Roth Capital.

Just with regard to the Phase III study, -020 study, is it fair to assume that a positive conclusion to the study would immediately spark a study with the same trial design following it? Or are there elements that you would like to augment and enhance, knowing what you know now?

Bert, thanks very much. Clearly, our thinking has been and continues to be that we would like to leverage the infrastructure we have in place with -020 and essentially replicate the trial with the exact kind of study design and complete it for the second pivotal. So we think the design is working very well. We're convinced that it positions the study very well and that's our thinking regarding the second study.

Really, no changes at all? You just spool it right up again?

Yes, and that's, I think, part of our strategy. We want to be able to use that investment and that infrastructure from the -020 to enable us to initiate it and really be able to initiate and run in an efficient manner and also cost-effective.

Could remind us again the timing and have you disclosed, soup to nuts, what this -020 Study costs?

In terms of the timing, what we have said is this tends to be about a 2-year type of period from start to finish. That's been our experience in these studies. And regarding costs, we haven't disclosed all the specifics. We've said that the external side of the cost tends to be in the neighborhood of about $12 million.

Okay. And then just a quick question regarding the potential international acceptance of the enhanced rating scale, the enhanced SAPS, could you just comment on that in general terms? Is it reasonably well recognized that your 9-question version there is maybe a better way to go?

I think it's important to remember we based the 9-item SAPS not in terms of potential outcomes of the data, but really to focus it down to reflect how the psychosis in Parkinson's disease scores on the SAPS scale. Because obviously SAPS was derived from schizophrenia and through our experience, we realized that a certain amount of that scale were somewhat redundant or not critical in the way that the psychosis expresses itself in Parkinson's disease. Therefore, as we acquired more and more data, baseline data, pretreatment data, in this patient population, we felt very comfortable that these 9 items really appropriately are able to be the primary endpoint of the study. Obviously, we took that to FDA and FDA agreed. We haven't been through any formal interaction with the European authorities, but we have, through a number of informal meetings, been able to share our plans with people in the European arena.

And then I guess just thinking forward about the potential success of -020 and what that might mean for not only pimavanserin, but for other programs internally, are there any other programs that, again, assuming a beneficial effect to the company and for the program, obviously the first step would be to spool up the next study. Are there other programs that you might consider accelerating, assuming what would be a very promising or a higher probability success with this asset?

Yes, thanks. Good question. I think the -- clearly, in addition to moving forward with the second pivotal, we have a lot of interest and believe very strongly in the opportunity that exists in a broader range of these neurological and psychiatric disorders. So we're very interested in the ADP as one indication. Here, we already have a Phase II study protocol that we've designed and we'd be very, very excited to be able to move forward with that. And then secondly, you may probably recall the data we had from Phase II in schizophrenia, which was also quite compelling. So we're interested in the opportunity for a co-therapy together with risperidone and pimavanserin. It would be a separate and distinct product opportunity. So but clearly, we think there's a lot of potential ways to move to increase the value of pimavanserin. Behind that, clearly, we have the other programs in our pipeline that we're excited about as well. And some of those have a nice synergy in terms of the Parkinson area, in particular. So we -- our plan is to continue to build a pipeline of programs that can provide us with a nice portfolio of products [ph] and certainly look for other opportunities in the future that can complement that as well.

Mr. Aasen, please proceed to closing remarks.

Great, thank you. And 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 for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.