Clinical and Regulatory Update
At its fourth quarter earnings conference call, Acadia Pharmaceuticals (ACAD) provided an update on its clinical and regulatory programs. These include the ongoing stability testing of the three registration batches of pimavanserin produced in the third quarter of 2013, the ongoing drug-drug interaction studies, the ongoing accumulation of data from the -015 extension study, and the Phase 2 Alzheimer's Disease Psychosis (ADP) trial.
The registration stability testing is designed to comply with ICH guidelines and to meet the regulatory filing requirements for major markets worldwide. As expected, the company now has the initial three months of stability on the registration lots of pimavanserin, and the data appears to be consistent with what was seen earlier with the stability of the clinical trial formulation. Long-term stability of pimavanserin in the clinical trial formulation was previously established covering a three-year period. The initial stability data from the registration batches, which is from the same manufacturing suppliers and general processes as our clinical trial formulation, is encouraging. The stability testing began in October 2013, with the anticipation that one year of stability testing will be required for the NDA submission. We believe this is the rate-limiting step to filing the NDA.
There was also an update on the ongoing custom and short duration drug-drug interaction (DDI) studies. Management reported that they are in the process of completing the planned DDI program, and that the profile of pimavanserin appears consistent with what has been observed in the long-term Parkinson's Disease Psychosis (PDP) safety extension studies. Since PDP patients are usually on a number of medications simultaneously, there has been ample opportunity to accumulate real-life clinical experience from an active patient population through these extension studies. Most importantly, pimavanserin continues to be generally safe and well tolerated in PDP patients and management does not anticipate any major surprises from the DDI program.
The Phase 3 PDP open label safety extension study, referred to as the -015 Study, remains ongoing and will continue until pimavanserin becomes commercially available. A large amount of data has been and continues to be generated from this study in terms of long-term safety. Thus far, there are over 250 patients who have been treated for one year or longer, which far exceeds the ICH guidelines. In addition, there are well over 100 patients that have been treated for over two years with the longest single patient exposure exceeding eight years. This long-term safety data will provide strong support for the potential of pimavanserin to offer significant advantages in relation to current off-label PDP treatments.
Most importantly of all, management indicated that they remain on track for a planned NDA submission near the end of 2014. In support of this, pre-NDA meetings with the FDA will commence in the spring, which will allow Acadia to outline the NDA submission and its organization. In regards to registration in the EU, there has been an initial series of interactions with the regulatory agencies from several EU member states. These meetings will continue so as to clarify the pathway for registration in the EU. Management anticipates being able to delineate a path forward by the end of the year. Ultimately, we believe Acadia will seek to partner pimavanserin for commercial launch in Europe, but at this time a partnership seems unlikely prior to finalizing plans for the MAA.
The Phase 2 clinical trial of pimavanserin in ADP, Study-019, is currently underway and will follow a similar design of the successful Phase 3 trial in PDP in incorporating a screening period with brief psychosocial therapy and a limited number of trained raters. Study-019 is a randomized double-blind, placebo-controlled study seeking to enroll about 200 patients. The study will be conducted through a network of research care facilities established as part of the Biomedical Research Centre for Mental Health at King's College, London. This institution incorporates a geographically focused network of nursing care homes that will facilitate the use of a limited number of raters. As in the PDP trial, this is expected to limit statistical "noise" in the efficacy analysis. Patients will be randomized 1:1 between pimavanserin and placebo, treated for 12 weeks, with the primary efficacy endpoint being the change from baseline to Week 6. Endpoints will include the neuropsychiatric inventory and the nursing home (NPINH) scale with measurements of psychosis, aggression, agitation, sleep, nighttime behavior, and other exploratory endpoints.
The full 12 weeks of treatment will allow the exploration of other endpoints, including determining whether there are any negative impacts on cognition, since currently marketed antipsychotics are linked to cognitive decline in elderly patients with dementia related psychosis. The company continues to offer guidance that it will take up to two years from initiation of enrollment to top-line results. That means data from the Phase 2 ADP program should be available in late 2015.
The company continues to anticipate being able to market and promote pimavanserin itself to high prescribing neurologists in the U.S. with 75 sales representatives. In support of this, management indicated that they have assembled a core commercial organization to help prepare for the planned launch of pimavanserin, including experienced professionals in marketing, reimbursement and managed markets, marketing research and commercial operations, along with sales force planning and management. Through its market research analysis, the company has confirmed the high unmet medical need for PDP patients, with prescribers in need of a safe and effective alternative to the off-label use of antipsychotics.
Recent Financial Results
On February 27, 2014 financial results for the fourth quarter and full year 2013 were released. Revenues in the fourth quarter totaled $37,000 compared to $380,000 for the fourth quarter of 2012, with the decrease primarily due to the conclusion of Acadia's 2003 research collaboration with Allergen in March 2013. For the full year 2013, total revenues were $1.1 million.
Net loss for the quarter totaled $12.0 million, or $0.13 per share, compared to a net loss of $6.8 million, or $0.11 per share, in the fourth quarter of 2012. The net loss included $2.2 million in non-cash, stock-based compensation expense. R&D expenses increased to $7.9 million compared to $4.9 million in the fourth quarter of 2012, with the increase being driving by the pimavanserin Phase 3 program expenses as well as by increased personnel and stock-based compensation expenses. SG&A expenses increased to $4.3 million in the fourth quarter of 2013, compared to $2.3 million in the fourth quarter of 2012. The increase was mainly driven by increased stock-based compensation costs, personnel costs, and professional fees, including costs related to pre-commercial activities.
For the year, Acadia reported a net loss of $37.9 million, or $0.44 per share, compared to a net loss of $20.8 million, or $0.38 per share, for 2012. The net losses for 2013 and 2012 included $5.7 million and $1.9 million, respectively, in non-cash, stock-based compensation expense.
Acadia ended 2013 with approximately $185.8 million in cash, cash equivalents, and short-term investments. The cash position was strengthened by a $107.9 million equity raise in May 2013. An aggregate of $30 million in cash was used to fund operations in the 2013 financial year, which was in-line with management's previous guidance. For 2014, management has indicated they anticipate having greater than $120 million in cash, cash equivalents and short-term investments at the end of the year. We do not anticipate Acadia raising cash in the near term. However, we suspect that significant cash well beyond $120 million will be required to successfully launch pimavanserin in 2016. The ideal scenario for shareholders would be to see management out-license the Ex-North American rights to the drug for upfront cash - say $100 to $200 million - and use that money to fund the commercial launch. That being said, if a deal cannot be struck by the middle of 2015, we would expect Acadia to seek to raise these funds through a public offering.
Conclusion
Pimavanserin is looking like a blockbuster drug. We encourage investors to read our article from November 2013 outlining our beliefs as to why we believe this will be the case.
However, despite our enthusiasm for the drug, we are lowering our rating on the shares to 'Neutral' because the stock has hit our $30 target. Our 'Buy' recommendation from early 2013 netted investors 161% return. We are still very bullish on the pimavanserin story, but we would not chase the stock at its current valuation of approximately $2.65 billion. Meaningful new "news" over the next six to nine months is limited.
We anticipate the NDA filing late 2014. The expected PDUFA will be 12 months later, or late 2015. We are not anticipating results from the Phase 2 ADP -019 trail until late 2015 as well. Our advice to investors would be to Hold shares if they are already long the stock, or book some profits and perhaps wait for a pull-back (or broad biotech market sell-off) before re-establishing a position. We can justify $30 per share via DCF, and thus investment below $25 per share (+20% upside) may warrant re-entry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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