Acadia Remains On Track With Pimavanserin Program

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 |  About: ACADIA Pharmaceuticals Inc. (ACAD)
by: Jason Napodano, CFA

Summary

NDA for pimavanserin in PDP expected to be filed late 2014. This would put a PDUFA late 2015.

Phase 2 program in ADP, a significant value-driver in our opinion, continues on plan, with data expected late 2015.

Our DCF model pegs fair-value between $25-30 per share, making the stock attractive for long-term investors at today's price of $17.

On May 6, 2014, Acadia Pharmaceuticals (NASDAQ:ACAD) reported financial results for the first quarter 2014. Revenues in the first quarter totaled $30,000 compared to $417,000 for the first quarter of 2013, with the decrease primarily due to the conclusion of Acadia's 2003 research collaboration with Allergan, Inc. (NYSE:AGN) in March 2013.

Net loss for the quarter totaled $17.8 million, or $0.19 per share, compared to a net loss of $6.1 million, or $0.08 per share, in the first quarter of 2013. The net loss included $3.2 million in non-cash, stock-based compensation expense. R&D expenses increased to $11.7 million compared to $4.4 million in the first quarter of 2013, 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 $6.3 million in the first quarter of 2014, compared to $2.2 million in the first quarter of 2013. The increase was mainly driven by increased stock-based compensation costs, personnel costs, and professional fees, including costs related to pre-commercial activities.

Acadia exited the first quarter with approximately $369.3 million in cash, cash equivalents, and short-term investments. The cash position was strengthened by a $198 million equity raise in March 2014. For 2014, management now anticipates having greater than $300 million in cash, cash equivalents and short-term investments at the end of the year. We forecast that this will be enough cash to fund the company into 2017.

Clinical and Regulatory Update

There were a number of updates provided during the first quarter conference call, which we summarize below:

  • Acadia continues to make steady progress in the Parkinson's Disease Psychosis (NYSEARCA:PDP) development program, including stability testing of pimavanserin registration batches and supportive studies, which include standard drug-drug interaction studies. During the first quarter, the company completed an assessment of the initial three months of stability data from the pimavanserin registration lots and confirmed that the data are consistent with historical data observed with the clinical trial formulations. The company continues to accumulate data in the registration stability program and expects to have six month stability data available during the second quarter of 2014. We believe twelve month data will be required during the FDA's review of the NDA.
  • There was substantial progress made with supportive studies that include customary short duration drug-drug interaction (NYSE:DDR) studies. This is important because patients with PDP are frequently on a number of concomitant medications. The company is now in the process of finalizing the planned DDR program, and thus far the safety profile of pimavanserin appears consistent with what has been observed in the long-term PDP safety extension studies.
  • The Phase 3 PDP open label safety extension trial (015 Study) is designed to continue until pimavanserin is commercially available. This study has provided the company with a large amount of valuable, long-term safety data regarding the use of pimavanserin in PDP patients. The company has already far exceeded the ICH guidelines for required one year exposures with well over 250 patients having been treated for one year or longer, over 100 patients having been treated for at least two years, and the longest patient exposure exceeds eight years.
  • Management continues to indicate 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 second quarter of 2014, 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. The company characterized these initial interactions as very informative, with the 020 Study being seen as a strong study with the medial needs of patients with PDP being appreciated in the EU. These meetings will continue so as to clarify the pathway for registration in the EU. 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. We believe this study will report out in late 2015.
  • In addition to ADP, the company is planning a number of new studies to examine additional indications for pimavanserin. One particular area of interest to the company is sleep disturbance, which is a frequent problem to patients with neurological disorders including both PDP and ADP. The company has observed long sedating sleep related benefits of pimavanserin including in the 020 Study, where pimavanserin demonstrated significant improvement in nighttime sleep, with the improvement not accompanied by any sedation effects. In addition, pimavanserin produced a significant improvement in daytime wakefulness in PDP patients, with patients having severe nighttime disturbances benefiting the most from pimavanserin therapy. Interestingly, the positive effects of pimavanserin nighttime sleep and daytime wakefulness did not tolerate the psychosis measures, indicating that sleep and wakefulness may represent independent treatment benefits of pimavanserin use. The company indicated that additional studies in sleep disturbances may allow for further characterization and highlight the potentially important clinical benefits associated with pimavanserin use.
  • Another area of focus for broadening the pimavanserin clinical program is schizophrenia. The company believes that pimavanserin's selective mechanism of action and attractive clinical profile may enable it to be used in multiple ways to improve the therapy for patients with schizophrenia. First, pimavanserin may be used as a co-therapy together with low doses of existing atypical antipsychotic drugs to enhance the clinical profile. Secondly, pimavanserin may be used as a monotherapy in the maintenance phase of schizophrenia treatment, as the selective action of the drug may allow for effective symptom control while avoiding interactions with dopamine and other receptors that are linked to many of the side effects caused by existing antipsychotics. The company's commercial assessment has reinforced the idea that schizophrenia treatment represents a sizable commercial opportunity and study designs in the schizophrenia program are currently on-going with the company set to share further details on this program later in the year. Our enthusiasm for the use of pimavanserin in schizophrenia is low due to the significant number of generic typical and atypical molecules on the market. We do not believe combination therapy will be attractive to treating physicians and we do not believe the efficacy of pimavanserin monotherapy is strong enough to drive meaningful use.
  • The company briefly discussed some of the other programs in the R&D portfolio. Acadia has two clinical stage programs in partnership with Allergan, Inc. in the areas of chronic pain and glaucoma, along with preclinical development of an additional compound as a potential new treatment for glaucoma. The company also has two additional preclinical programs, the ER-beta and Nurr-1 programs, which are being pursued as potential treatments for Parkinson's and other neurological diseases. The ER-beta program is being supported by a grant from the National Institute on Neurological Disorders and Stroke, with preclinical studies in the Nurr-1 program being supported by a grant from the Michael J. Fox Foundation. We assign no value to these programs. Clinical work with Allergan has been stalled for years and we do not include pre-IND candidates in our valuation models.

Conclusion

Pimavanserin is looking like a blockbuster drug for PDP and ADP. 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 continue to see limited meaningful new "news" over the next six to nine months to drive the stock price. Our DCF valuation pegs fair-value between $25 and $30 per share, which might be attractive to investors at today's price of only $17. 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.

Co-Authored by David Bautz, PhD.

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.