By Michael Kramer
Thursday after the close ACADIA Pharmaceuticals (NASDAQ:ACAD) reported 2Q'16 net products sales of $97,000 and a net loss of $71.1 million. The company reported cash and equivalents of $412 million. At the end of the day, we learned nothing new that we did not already knew.
There was no update or information given on the number of Nuplazid (pimavanserin) scripts written or dispensed during the 30-day free trial period. Additionally, the management once again noted there will be no way to track scripts with weekly data. The immediate reaction to the revenue number would be to imply the company had 49 scripts written ($97,000/$1950 (monthly cost)= 49). However, given the timing and patients that may not have qualified, it is impossible to make that assumption and in my opinion would be wrong to infer.
However, taking a look through the company's 10Q we could see ACAD had deferred revenue of $513k through June 30th, 2016.
The company noted on the conference call it was using a sell-through revenue recognition model. Therefore, ACAD is not booking revenue until after the specialty pharma dispenses the prescription or after the specialty pharma sells Nuplazid.
It could likely mean that ACAD shipped nearly $515k worth of Nuplazid to specialty pharma before the end of the quarter. Implying a monthly price of $1950, ACAD had about 265 patients potentially renewing scripts in July after the 30-day free trial ended. None of this came up on the call, and I only noticed after reviewing the 10Q.
The company talked about the completion of enrollment for the Alzheimer's Disease Psychosis trial on the call. It also verified enrollment of 181 patients, which I had written about the day prior. A top line read out will come most likely in 4Q'16. Alzheimer's Agitation is still on track for 2H'16, which is what the company has previously guided.
Pimavanserin Life Cycle
Additionally, the Pimavanserin life cycle is still being evaluated with updates to come later in the year. It has been my guess that the next indications will likely be in positive and negative symptoms for Schizophrenia and also likely an adjunctive treatment for Treatment Resistance Depression. The company job board currently has open position posting for Senior Director of Clinical Research, as shown in the previous articles.
The company had a loss of over $70 million for the quarter. This likely caught most investors' attention. It was driven by an R&D increase to $20 million due to increased personal (compensation) and life cycle management of Pimavanserin. SG&A also increased to $50 million, driven by support for Nuplazid launch and the hiring of the sales force. This is compared to 1Q'16 loss of $50.3 million, where we had R&D of $22.8 million and SG&A of $27.5 million. The company launched the drug, and it cost it $20 million more to do it. Let's face, we all knew the burn rate had to increase; I'm not surprised.
We did receive and update on the call for Europe as well. The company indicated it is working on the Pediatric Investigation Plan (PIP). If granted this would give ACAD a waiver, which is needed, to submit an application for approval to the European Medicines Agency (EMA). The plan is to resubmit the PIP to the EMA this quarter.
Ultimately, I saw nothing in this quarter that came as a surprise. I would expect the burn rate to remain high until the company begins to generate meaningful revenue from the launch of Nuplazid, which is likely not going to be the case until sometime in 2017.
The big piece to pay attention to is the deferred revenue of $513k found in the 10Q. Again, this could be a little piece of information the market was likely looking for around scripts, that no one seemed to notice yet.
Without guidance or an understanding of the projected path of Nuplazid, it is in my opinion not worth the speculation as to when the company will generate meaningful cash flow.
I am, and the Clients of Mott Capital Management are, long shares of ACAD.
Disclosure: I am/we are long ACAD.
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