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ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)

Q4 2007 Earnings Call

March 5, 2008 5:00 pm ET

Executives

Lisa Barthelemy - Director of Investor Relations

Uli Hacksell - Chief Executive Officer

Roger Mills - Executive Vice President of Developments

Tom Aasen - Chief Financial Officer

Analysts

Jim Birchenough - Lehman Brothers

Ted Tenthoff - Piper Jaffray

Alan Carr - Needham &Co.

Charles Duncan - JMP Securities

David Amsellem - Friedman, Billings, Ramsey

Lucy Lu - Citi

Operator

Good day, ladies and gentlemen, and welcome to the ACADIA’s Pharmaceuticals Fourth Quarter and Full Year 2007 Financial Results Conference Call. My name is Staz, and I I'll 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 today's call. (Operator Instructions).

I would now like to turn the presentation over to Ms. Lisa Barthelemy, Director of Investor Relations at ACADIA Pharmaceutical, who will review the Company's forward-looking statements. Please proceed.

Lisa Barthelemy – Director of Investor Relations

Thank you. Good afternoon, and welcome to ACADIA Pharmaceuticals fourth quarter 2007 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 March 19.

Before we proceed, I would like to remind you that during our call today we will be making a number of forward-looking statements, including statements regarding our anticipated financial results and our research and development programs. 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 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 31st 2007 filed today. 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.

And it is now my pleasure to turn the call over to Dr. Uli Hacksell, our Chief Executive Officer.

Uli Hacksell – Chief Executive Officer

Thank you, Lisa, and let me take this opportunity to thank all of you for joining us on today's conference call. Also joining from ACADIA today are Dr. Roger Mills, our Executive Vice President of Developments and Tom Aasen, our Chief Financial Officer.

I will begin today by covering some of our key highlights from this past year. I will then ask Tom to briefly review our financial results for the fourth quarter, and following these remarks we will review our clinical programs. We will then open the floor to your questions.

2007 was a year for impressive progress for ACADIA. We continued our strong track record of delivering on our milestones and we made significant advancements in our clinical pipeline.

First, we transitioned to a late stage development company with the initiation of our first Phase III Pivotal trial with Pimavanserin for the treatment of Parkinson's disease psychosis.

Second, we reported positive results from our Phase II clinical trial with Pimavanserin as a co-therapy for Schizophrenia. Based on these positive results, we are focussed on executing our strategy to developing commercialized Pimavanserin together with a strategic partner.

Third, we made a remarkable progress in our second schizophrenia program where we are developing ACP-104 as a standalone treatment. We announced in December that we had completed enrollment in our Phase IIb trial, significantly ahead of the schedule. The treatment phase of this trial has now been completed and we remain on track to report top line results in the second quarter of 2008. We significantly strengthen our balance sheet through a follow on public offering. This provides us with a solid foundation to further advance our development pipeline and execute on our business strategy.

While we are very proud of our accomplishments in 2007, we remained focused on the road ahead. We expect to build on the solid foundation we established last year by delivering on a number of potential value driving milestones in 2008. Above all, we remained dedicated to providing meaningful therapeutic improvements to patients who suffered from neuropsychiatric and other CNS disorders.

Before we review our clinical programs and our upcoming milestones in more detail, let me turn the call over to Tom to discuss our recent financial results.

Tom Aasen – Chief Financial Officer

Thank you, Uli and good afternoon. I will provide you with a brief overview of our fourth quarter 2007 financial results, which we reported in our press release and Form 10-K issued earlier today.

I am pleased to report that our financial results for the quarter were in line with our expectations and were consistent with the increased investment advanced we have made in our proprietary clinical pipeline. We continue to maintain a strong cash position closing the year with a total 126.9 million in cash and investment securities. This was well inline with our earlier guidance indicating that cash and securities would be greater than a 120 million.

We reported a net loss of $17.0 million or $0.46 per common share for the fourth quarter of 2007, compared to a net loss of $12.5 million or $0.42 per common share for the fourth quarter of 2006.

Let's briefly look at some of the components of our fourth quarter results. Our revenues totaled 1.6 million for the fourth quarter of 2007 compared to 1.8 million for the fourth quarter of 2006 and were comprised of revenues from our collaborations with Allergan, and Sepracor, as well as our agreements with other parties.

Research and development expenses totaled 17.3 million for the fourth quarter of 2007, compared to 12.8 million for the fourth quarter of 2006. This increase was primarily attributable to increased clinical development activity associated with our advanced proprietary clinical programs, including our Phase IIb trail with ACP-104 for schizophrenia and our Phase III trail with Pimavanserin for Parkinson’s disease psychosis.

Most notably, we saw an increase in external service costs, which was consistent with the acceleration in timing and patient enrollment in our Phase IIb trail with ACP-104. External service cost totaled 10.4 million for the quarter compared to 6.3 million in the fourth quarter of 2006, virtually reflecting the increased cost associated with the acceleration of this trail, as well as ongoing cost associated with our Phase III program with Pimavanserin.

General and administrative expenses totaled 3.0 million for the fourth quarter of 2007, compared to 2.5 million for the fourth quarter of 2006.

Finally, regarding our cash position and outlook. As previously mentioned, we closed 2007 with the total 126.9 million in cash and investment securities which represented a net increase of approximately 44 million in our cash position as compared to 83.3 million at December 31, 2006.

Importantly, consistent with our conservative investment policy we do not have any direct investment in auction rate securities or securities that are collateralized by assets that include mortgages or sub-prime debt, and our investment portfolio has not been adversely impacted by the recent disruptions in the credit market.

We used an aggregate of 54.9 million of cash during the year ended December 31st, 2007 to fund our operating activities. We believe that with our current balance sheet we remained well positioned to continue to advance our clinical pipeline and execute on our business strategy.

Consistent with our pervious guidance, we expect that our existing cash resources will be sufficient to fund our operations through 2009.

I will now turn the call back to Uli.

Uli Hacksell - Chief Executive Officer

Thank you Tom. Let me now review our programs in more detail. ACADIA'S pipeline includes five mid-to-late-stage clinical programs. In our most advanced program, we are in Phase III development with Pimavanserin for the treatment of Parkinson's disease psychosis.

We have delivered positive results from our Phase II trail in our program with Pimavanserin as a co-therapy for Schizophrenia. And we have two additional proprietary commercialization rights for all four of these proprietary programs.

In addition, we have a neuropathic pain program in Phase II developments in collaboration with Allergan. My remarks today is mostly focused on our most advanced programs including our Phase III Parkinson disease psychosis program and our two schizophrenia programs.

Let me start by discussing our Phase III clinical program with Pimavanserin as a treatment for Parkinson Disease Psychosis or PDP. PDP is a debilitating neuropsychiatric disease that occurs in up to 40% of patients with Parkinson's disease.

There currently is no drug approved in the US for the treatment of PDP despite the fact that this is a very serious condition characterized by disturbing hallucinations and delusions. The progression of this disease is unrelenting and lacks remissions.

Importantly, PDP often represents an inflection point in the treatment of patients with Parkinson's disease. The condition often disrupts the patient's ability to perform many of the activities of daily sleeping that keeps them independent and active. As a result, PDP associated with increased care givers burden, nursing home placements and increased mortality.

We believe Pimavanserin is well positioned to be an important first and class treatment for PDP. The therapy that can effectively treat the psychosis in patient with Parkinson's disease while allowing for optimal motor control thereby significantly improving the quality of life for these patients and for their care givers.

We continue to enroll patients in our first pivotal Phase III trail with Pimavanserin as a treatment for PDP, which was initiated in June last year. This double-blind, placebo-controlled Phase III trail is designed to evaluate the safety and efficacy of Pimavanserin in approximately 240 patients with PDP.

Patients in the study are randomized to three different study arms including two different doses of Pimavanserin and one placebo arm.

Patients receive oral doses of Pimavanserin or placebo once daily for six weeks, in additional to stable doses of their existing dopamine replacement therapy. The primary endpoint of the trial is antipsychotic efficacy as measured using the scale for the assessment of positive symptoms or SAPS. Psychosis in Parkinson's disease is manifested mainly by hallucinations and delusions. And the SAPS is considered by experts as the most appropriate scale to measure the psychosis in Parkinson's disease.

Motoric tolerability is an important secondary endpoint in the trial and is measured using the Unified Parkinson's Disease Rating Scale, or UPDRS. The trail is being conducted at over 50 clinical centers. About 30 of these sites are located in the US and the remainder are located throughout Europe. We continue to be pleased with the progress of this trail. US clinical sites are initiated and opened and we also began recruiting patients in our European sites during the first quarter of this year.

We remain in track to report top line results from this Phase III trail during 2009 consistent with our previous guidance.

I'm also delighted to report that Roger and his team have completed final preparations for our second Pivotal Phase III trail with Pimavanserin as a treatment for PDP and we expect to initiate this trail during March. This trail is of similar design, duration and nature as our first pivotal trail and will also be conducted at clinical sites located in both the US and Europe. We expect to leverage the investment from our first trail to compress the development time frame for the second pivotal trail.

In addition to the two pivotal Phase III trails, we are currently conducting an open-label safety extension study in our PDP program. Patients who had completed either of the Phase III pivotal trails will have the opportunity to enroll into this extension study if in the opinion of the physician they may benefit from continued treatment with Pimavanserin.

You may recall that we are also continuing to conduct an open-label safety extension study in connection with our earlier Phase II PDP trail. In this extension study 24 patients have been treated with Pimavanserin for at least one year, 12 of whom have been treated for two years including some patients who have now been treated for three years.

In all, we believe that our Phase III program will demonstrate the potential for Pimavanserin to be the first effective treatment for PDP. We believe Pimavanserin will enable its decisions to treat the psychosis without having to compromise on the basic management of Parkinson's disease.

Let me now turn to our two schizophrenia clinical programs beginning with our program with Pimavanserin as a co-therapy for Schizophrenia. Current drugs used to treat schizophrenia related disorders have substantial limitations including, inadequate efficacy and severe side effects. Despite their limitations these drugs currently generate over $16 billion in annual sales.

We believe that co-therapy with Pimavanserin combined with a submaximal dose of atypical antipsychotics can significantly improve the treatment for patients with Schizophrenia and related disorders.

In December, Dr. Herbert Meltzer presents data from our Phase II schizophrenia co-therapy trial at the 46th Annual Meeting of the ACNP. These data confirmed the top-line results reported in March 2007 and demonstrated several advantages of co-therapy with Pimavanserin and a submaximal dose of risperidone, which include an enhanced efficacy, a faster onset of antipsychotic action, and an improved side effect profile, including less weight gain.

As a followup to the ACNP presentation Dr. Murray Rosenthal, presented data from our co-therapy trial at the 14th Biennial Winter Workshop on Schizophrenia and Bipolar Disorders in early February this year. The presentation included new data from this co-therapy trial showing that patients in the co-therapy arm combining Pimavanserin and a sub-maximal dose of risperidone have significantly less increase from baseline in serum glucose levels after treatment compared to patients in the high dose risperidone plus placebo arm.

Taken together, the reductions in weight gain and glucose increase seen after effective antipsychotic treatment with Pimavanserin and a submaximal dose of risperidone suggest that this co-therapy approach has the potential to reduce the metabolic problems commonly associated with atypical and psychotic brands.

Importantly, we are continuing to aggressively pursue our process to establish a potential strategic alliance for Pimavanserin. As we have indicated previously, this involves thoroughly evaluating our commercial opportunities for Pimavanserin with potential partners and pursuing an alliance that can help us to complete the registration program for multiple indications, and optimize the value of these commercial opportunities on the market.

In general terms, our vision is also to retain rights to participate in the commercialization of Pimavanserin in the area of Neurology in the United States. Our focus is to ensure that any lines captures the proper value for Arcadia, as well as strongly involvement and incentives for both parties.

Once again you can appreciate that as we pursue our process we are not providing specific details regarding our partner in this captions or potential timing. What we can say, is that we have been very pleased with the positive and enthusiastic reaction from both the medical and pharmaceutical communities. The strong level of interest from potential partners to evaluate this opportunity and the appreciation of the commercial opportunities for Pimavanserin. We remained confident that we have the right strategy in place to enable Arcadia and its stockholders to realize the commercial potential of Pimavanserin.

It is also important to note that while we are exploring our opportunities to optimize the commercial value of Pimavanserin to a potential partnership. We are continuing to advance our Phase III development program with Pimavanserin as a treatment for Parkinson disease psychosis. Many of the studies and activities that we are conducting in this Phase III program may be leveraged to support the development of Pimavanserin in other indications. In other words, we continue to advance the development of Pimavanserin across indications.

Let me now turn to our second scale second schizophrenia program which is ACP-104, as a stand-alone treatment for schizophrenia. ACP-104's unique pharmacological profile combining m11 muscarinic agonist, 5-HT2A inverse agonist, and dopamine D2 and D3 partial agonist provides the potential for a superior efficacy profile which may include enhanced cognition. We are excited with the progress of our Phase IIb trial with ACP-104 which we initiated last June.

As I mentioned earlier today, we announced in December that we have completed enrollment in the trail significantly ahead of schedule. We believe that the rapid enrollment is the reflection of the needs for new and improved therapies for patients with schizophrenia and the potential for ACP-104 to provide a superior efficacy profile with enhanced cognition.

I am pleased to report that we have now completed the treatment phase of this trail and remain on track to report top line results from the study in the second quarter of 2008.

Let me now take a moment to review the design and objectives of this trail. Our Phase IIb trial is a multi-center, double-blind, placebo-controlled study designed to evaluate the safety and efficacy of ACP-104 in patients with schizophrenia who are experiencing an acute psychotic episodes. The total of 248 patients were enrolled in this trial and randomized to one of three study arms, which includes two different doses of ACP-104 and one placebo arm. Patients underwent a six week treatment schedule followed by a four week followup periods.

The primary endpoint of the trial is antipsychotic efficacy as measured by baseline to base focusing using the PANSS scale. The PANSS, which stands for Positive and Negative Syndrome Scale is industry standard rating scale commonly used in registration schizophrenia products. The scale includes 30 items which measures the severity of positive and negative symptoms and general psychopathology in patients with schizophrenia.

We also will be evaluating secondary endpoints in the trail as well as safety and pharmacokinetics measures including VT lab monitoring. Condition will be in exploratory endpoints.

Our primary objectives for the trial are as follows. First, we would like to show that ACP-104 demonstrates robust and psychotic efficacy as measured using the PANSS scale.

Second, we would like to demonstrate that ACP-104 is generally safe and well tolerated and displace a favorable side effect profile, relative to that commonly seen with close a bit.

In particular we believe that this trail may provide an important signal as to whether the effects of ACP-104 on white blood cells are similar to what one would typically see with placebo treated patient as compared to what is typically seen with close up.

In addition to these primary objectives, we hope to see a signal indicating cognitive primitives of ACP-104 therapy. In this regard, it’s important to note that why we will and exploratory cognition endpoint in the study. The trail is not specifically decide to start with cognition.

We remained very excited about the potential of ACP-104 to be a break through treatment for schizophrenia that can address one of the largest unmet medical needs associated with the disease. We look forward to reporting top line results from this trail as indicated during the second quarter of this year.

Finally, in addition to our proprietary programs we have continued to advance our clinical programs that we are developing in collaboration with Allergan, including our Phase II neuropathic pain program. We remained excited with the potential for this drug candidate and we anticipate that Allergan will provide an update on this program at its R&D date in June of this year.

We are also pleased that Allergan has advanced our small molecule drug candidate for glaucoma into the clinic last fall and then in Phase I clinical studies. Beyond these two collaborations with Allergan that have lead to clinical progress, we announced today that we have further extended our third drug discovery collaboration with Allergan through March 2009. This collaboration involves joint research efforts in the area of pain and maybe expanded to include additional discovery efforts in the area of ophthalmology. We continue to be pleased with the progress of these collaborations and we remain grateful for the opportunity to work closely with Allergan's high quality R&D organization.

In closing, our achievements in 2007 set the stage for a period that we believe has the potential to be transforming for ACADIA. As the CNS focussed company with major growth potential, we are focussed on advancing our late stage drug candidates and positioning them for commercial success.

Our priorities and key objectives are clear. This includes, executing on our strategy to develop and commercialize Pimavanserin together with a strategic partner. Continuing to progress our Phase III PDP program with Pimavanserin towards registration. Completing and reporting top line results from our Phase IIb schizophrenia trial with ACP-104 in the second quarter of this year. Continuing to advance our collaborative clinical programs with Allergan. And finally, continuing to expand our development pipeline with novel drug candidates directed at CNS disorders, and other unmet medical needs.

That completes our update and we will now be happy to entertain any questions that you may have.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Jim Birchenough from Lehman Brothers.

Jim Birchenough

Yeah, hi guys. A couple of questions on ACP-104, just as we work ahead to the data, what would be determined to be a statistically significant improvement in PANSS in this trial and what would you view as a clinically relevant improvement beyond that?

Uli Hacksell

So, thank you Jim, I will ask Roger to answer that question.

Roger Mills

Well, probably, we have powered the study to look at a 20% drop in the PANSS scores and with that in context that the entry criteria is patients would come in with 70 or greater on PANSS.

Jim Birchenough

And when we look at drugs like clozapine, what sort of improvements do we expect to see. So, I just wanted to get a sense of how clinically relevant that sort of improvement would be?

Roger Mills

It is clinically relevant, I don’t have the comparative drops of that, but we would expect to see a fairly robust drop in the PANSS score and this is a Placebo controlled study, so it would be relative to Placebo.

Uli Hacksell

Perhaps I can add to what Roger said about, we believe that the efficacy of ACP-104 will be quite powerful on the basis of what we have seen so far in the clinical studies and also what we have seen pre-clinically in terms of its pharmacological profile, all of that would predict that ACP-104 will have a powerful antipsychotic profile. (multiple speakers) account of improvements.

Jim Birchenough

And just a follow-up on the adverse event profile particularly looking at white blood cell effects. I am assuming that if there had been a case of a granulocytosis in the trial, we might have heard about it by now, so I want to make sure that assumption is right? And secondarily, in terms of reductions in white blood cell counts, what would you expect to see with clozapine so we have some frame of reference here?

Uli Hacksell

Roger?

Roger Mills

So, we are currently a little bit treatment phase of this study has now completed, that's sort of the patient treatment says. The study is too long going in respect of cleaning and then analyzing the data. So, we are not in a position to comment on the white blood cells per se. In terms of reports of any cases and I will put those caveat that we haven't got fully cleaned and reviewed the data in total yet. However, we are not aware of any repots of a granulocytosis in this study.

Jim Birchenough

And so, then just a followup, just on what we would clozapine over a six week period and similar followup period, what would we expect in terms of white blood cell effects over this time period?

Uli Hacksell

Jim it is a lot of variation in the literature when it comes to specific effects on white blood cells. But what you see are, first of all agranulocytosis is an observation that you don't see frequently with clozapine. You will see it in less than 1% of patients, perhaps 0.8%. But you see other effects on wide blood cells. You see leukopenia, you see neutropenia, and you would see that they are somewhat again relating to differences between different proportions between 4% to 8% of patients have had considerable drops in white blood cells which is clearly much more than what you expect to see in Placebo treated patients. So we believe that when we have looked at the data in detail, we will be able to see whether it is ACP-104 is having effects on white blood cells that are similar to what you would expect with Placebo or whether which we don't believe that it would be close up in light.

Jim Birchenough

Thanks for taking my questions.

Uli Hacksell

I think that trial will provide us with a good set of what to expect from ACP-104.

Jim Birchenough

Perfect thanks.

Operator

Your next question comes from the line of Ted Tenthoff from Piper Jaffray.

Ted Tenthoff

Great, thank you very much for taking the question. I guess just to sort of get this one out early. Obviously we are all anxiously awaiting the partnership here. Can you give us a little bit more detail on kind of where things stand and obviously we will wait for timing but have things changed in terms of your expectations? Have the types of companies that you are talking to changed? Can you give us any more color on sort of where the negotiations stand and what maybe some of the key points are surrounding the development potential of 103?

Uli Hacksell

Hi Ted, thank you for your question. First of all let me say that we are not providing specific details regarding the ongoing discussions or timing for a deal. What we can say is that more general aspects of our view on these things and so let me try to recapitulate that. First of all, during this process we have really had many reasons to be pleased with, with the reaction from potential partners when it comes to what they see us as the commercial potential for Pimavanserin and the opportunity in terms of the drug and that is something that is that is very pleasing for ACADIA of course.

What I also can say is that we remain confident that we have the right strategy in place and we have the right process in place to ensure that we can find a partnership that really provides us with a commercial potential, the opportunity to really maximize and optimize the commercial potential for Pimavanserin. That confidence is steadfast, if I can use that word.

I also think it's very important to remember that we are moving forward full speed with PDP and that our phase III program with Pimavanserin provides a number of additives to other indications that we want to develop for the drug. So we are not sitting still in the boat. We are moving forward both when it comes to the partnership discussions and when it comes to the development of Pimavanserin.

I have previously outlined what kind of partners that we are interested in talking to and basically we have talked about three different kinds of partners that we see as interesting for ACADIA in this context. One type of partner is a global pharmaceutical company that has a schizophrenia product on the market. Another potential partner is a global pharmaceutical company that has a strong CNS force. And the third kind of group of potential partner that we include in our process are partners that have a strong CNS sales force but more a regional customs. So these are the three different markets or partners, potential partners that we have seen as interesting to explore as part our process and as part our strategies.

Ted Tenthoff

Great that’s very helpful. You know may be one quick follow up if I may, I know you are discussing some of the opportunities in other areas in psychosis and will be giving underway the words of Phase III trial for Parkinson's disease. Can you give us an update on sort of what your thoughts are of may be additional psychosis indication, is this something where we would push through with PDP first and then comeback and fill, or do you think there would be opportunities to began pivotal trials in other forms of psychosis or would that even be necessary?

Roger Mills

It’s a very interesting person under cleaning, with a drug like Pimavanserin, with the TOEFL that we have of the drug we see multiple opportunities for line extensions beyond PDP and schizophrenia. Clearly, there are many, many other psychosis indications that could come in for play. These indications include psychosis in the elderly, psychosis in older disease that includes options to go beyond these different indications as well. So we see line exemption opportunities both into the neurology and into the neuropsychiatric indications which are very exciting to explore with Pimavanserin and these are clearly what we have talked about that we are interested in exploring bit with potential partners is the vision that the partner had for these kind of expansion opportunities, its very important component of the potential partnership for Acadia.

Ted Tenthoff

I can understand that. Thank you.

Roger Mills

Thanks.

Operator

Your next question comes from Alan Carr from Needham.

Alan Carr

Hi, good afternoon everyone.

Tom Aasen

Hi.

Alan Carr

Tom, I was wondering if you could may be drill down the timelines for the PDP trial – that’s something maybe towards first half or the second half of ’09, and I’m also wondering how the timelines for this trial, if they fit into or how they fit into your partnership discussions?

Uli Hacksell

So let me start out with the timing what we have said and what we can say today is that we expect to provide top line data from the first Phase III study in PDP during 2009. We have also said that the second Phase III PDP study that we will initiate in this month in March may have a compressed timeline as compared for the first efficacy study, but we haven’t provide a specific timing for the delivery of top line data from that study. Now as part of your second question how this impacts discussions with partners being that’s the effect that we are moving forward with Pimavanserin PDP is something that is just positive note in (Inaudible) 70 negative, that’s because it helps four times of the indications.

Alan Carr

One other question, you have a couple of years the treatment experience if I can hear, open-label trial, the Phase II trial, I’m wondering if are learning anything new positively or negatively coming out of this longer treatment experience?

Uli Hacksell

Yeah, in fact we have some patients that being on the drive for three years or more, Roger, do you want a comment on that?

Roger Mills

Yeah, thanks Uli. I think what we are learning is that the drug is well tolerated in this patient population over what is – we extended treatment period so that’s all to the good, and we are not learning that there are any safety concerns, it seems to be very well tolerated in deed, and patients have done very well on it.

Alan Carr

Okay. Thanks very much.

Uli Hacksell

Thank you.

Operator

And your next question comes from the line of Charles Duncan with JMP Securities.

Charles Duncan

Hi guys thanks for taking my question. Uli, I had a question about ACP-104 and what you are going to do with Phase IIb data, do you anticipate designing and launching of Phase III Program yet this year and if so, would you do that with or without a partner?

Uli Hacksell

Thank you, Charles for your question. Clearly our general strategy is to seek a partner that can help us to complete our Phase III program and commercialize this product, but we are keeping our options open regarding timing. We are currently planning for the future development in this program and we will fine tune this plans following results from the Phase IIb trial

Charles Duncan

And then if so specifically you would be prepared to design a trial based on those results and launch that as quickly as possible or do you anticipate wanting to partner the drug?

Uli Hacksell

We are open to doing something additional with 104. It's something that we are currently discussing, it's an obvious kind of thing to talk about, but we want to keep all options open here.

Charles Duncan

Okay and then with 103, I know you have always talked about doing a second study and you have always said it was going to be similar design. But, can you provide us any additional color on the design and really what additional clinical questions you are looking the answer with that second trial and just help us understand why, if you’re going to extend perhaps additional international sites or what's different about the second trial than the first trial. How you are going to be able to contract the timelines in that one?

Uli Hacksell

Roger, maybe you can take that.

Roger Mills

Yes Uli, thanks Charles. I mean, as with anything you learn as you go along. These are the largest studies that have everything been conducted in this patient population. So remember there are three studies that we are initiating in this program. There are the two pivotal, first the long term safety study which as Uli indicated earlier is open to patient's t rollover when they have completed the treatment portion of the pivotal studies. So first getting – it wasn’t just getting first study up and running, it was in fact ensuring that the long term safety study was also up and running so patients have the opportunity to rollover in a timely manner.

As we previously indicate, these trials are very similar. So the idea is to do two equal pivotal studies. They are of similar design, similar in treatment duration and generally similar in nature. Both will be internationally driven studies. Naturally there will be differences in some of the countries that one study is in versus the other, but that is not by specific design. It's just to ensure that we get a timely enrollment into the program. You asked the differences between them? We are intending in the second study to incorporate healthy economic measures into that study as one would expect and additionally the doses used in the first trial of Pimavanserin 10 mg and 40 mg and in the second study we will be investigating 10 mg and 20 mg, and we expect this to enable us to fully explore the dose range and synergize this with the other development programs.

Charles Duncan

Okay so slightly different dosing 10 and 20 versus 10 and 40?

Roger Mills

Correct. That’s not in common in the psychotic area.

Charles Duncan

Yeah. That make sense to me, but same end points and duration of treatment et cetera?

Roger Mills

There will be exactly the same end point, so the studies are exactly the same in that respect.

Charles Duncan

Okay. And then, if I could ask just one more follow up from Tom, if he could provide a little color on the R&D spend and whether or not you anticipate any milestone or upfront in your guidance?

Tom Aasen

Yes, I would be happy to Charles. First of all what I did note when you look at the fourth quarter is that clearly as we had said before particular period can fluctuate depending upon the timing of different expenditures and in particular in this case, we had the acceleration of the enrollment that occurred in that Phase IIb enrolled quite dramatically and in fact we announced we completed it in December, so we did see that corresponding impact in the fourth quarter, so you saw very significant increase in the external cost component. As I mentioned that totaled about $10 million in the fourth quarter of our R&D expenses, and that was up quite remarkably since the comparable quarter a year ago.

Again, this can fluctuate in given period, so that’s’ significantly hit on 104. We would expect that the expense is going forward and 104 would clearly be significantly lower as we just wrap up the financial conclusion of that trail, and then there will be other expenses. So, it will fluctuate, and we have not -- in terms of our guidance to be clear what we have said approximately is a two year runway. We have not factored in a partnership into that runway.

Charles Duncan

Okay. Good thanks for the added color. Thanks guys.

Operator

(Operator Instruction). Your next question comes from the line of Mike King with Rodman and Renshaw. He has withdrawn from the queue. Your next question comes from the line of David Amsellem from Friedman, Billings, Ramsey.

David Amsellem

Thanks for taking my question. Can you provide any more color on your plans for Pimavanserin in sleep maintenance insomnia? And given that it's. a totally different indication from the psychosis setting and you have a strong cash position. What if anything has precluded you from moving forward in the setting? Thanks

Uli Hacksell

Thanks it's an area that is quite interesting for those of you who don't remember we conducted a proof of concept study in sleep maintenance insomnia with Pimavanserin a while ago and we saw some powerful robust increases in slow way sleep in the older healthy volunteer now. When we have those results in hand we shortly afterwards got the exciting schizophrenia data, the co-therapy data with schizophrenia, but said that with these exciting schizophrenia data, we want to make sure that we do the right kind of sleep studies to ensure that we sort of optimize the total clinical program around Pimavanserin. So we wanted to take a step back, we wanted to ensure that additional sleep studies would be consistent with a total development program that we want to develop together with a partner, and we think that there are many areas where we can look at the sleep properties of Pimavanserin as a great advantage. Not only the in patient's with specific sleep maintain insomnia and the general population, but also in patient's with neuropsychiatric and neurological disturbances where the sleep properties of Pimavanserin will provide an additional clinical advantage. So we want to make sure that we sort of utilize this clinical finding in the optimal way.

David Amsellem

Okay. That's helpful and then one other question if I may. Just remind us if you have contemplated running any additional Pimavanserin co-therapy studies with other atypical antipsychotics in parallel with your ongoing discussions with potential partners?

Uli Hacksell

Our strategy with the Pimavanserin as a co-therapy in schizophrenia has been that we really want to make sure that we have optimal input from the potential partner in the design of the development program in that area before we really embark on its full speed. Having said that, we have not exclude that we might do something but our current strategy is stands past and that is to seek that the optimum kind of input from potential partner in the schizophrenia development.

David Amsellem

Okay. Thank you.

Uli Hacksell

Thanks

Operator

Your next question comes from the line of Lucy Lu from Citi.

Lucy Lu

Hi. Thank you. I have a couple of questions on 104. Basically just from reading the published literature it seems like patient are treated with Clozaril, the risks for developing a granulocytosis is highest between 6 and 18 weeks or even 12 and 18 weeks depending on which paper. And I am just wondering from a safety point of view of this Phase II study, exactly what kind of safety information do you really get in terms of comparing to Clozaril?

Uli Hacksell

It’s a good question and we don't expect to be able to say anything specific about the risk for agranulocytosis based on the current study. For the specific reason that you mentioned and also for the fact that the agranulocytosis with clozapine is relatively rare only about 0.8% of patients develop agranulocytosis. But what we do expect to see from the study is a signal based on the general effects on white blood cells that receive Pimavanserin with 104.

And compare that with what you would expect to see in clozapine-treated patients. And that signal we think is powerful because the agranulocytosis is clearly preceded by an effect on white blood cells which is more benign. So all those patients that develop agranulocytosis have some initial minor effect on the white blood cells; and that kind of effect should be observable in the clinical study and that’s why we hope to be able to as a result of this study really say whether ACP-104 has an effect on white blood cells that is more like what we would expect from Placebo-treated patients then what you would expect from clozapine-treated patients. And that will be an important signal with it.

Lucy Lu

Right. And can I just ask on the safety side, what is the average age of patients in this trial?

Uli Hacksell

I really have to refer to Roger.

Roger Mills

We have not looked at, I couldn't comment on what the average age is. All I know across the board it’s a pretty standard psychosis study. So I'm not expecting the age to be different from anything previously.

Lucy Lu

Okay.

Roger Mills

I just don't have that information, couldn't tell you right now.

Lucy Lu

Oh, that’s fine. And then in terms of efficacy endpoints, just wondering if we combine those versus Placebo or is it the higher dose 200 mg b.i.d. versus Placebo as a primary efficacy endpoint?

Roger Mills

Yeah, it's basically larger.

Lucy Lu

Okay. So it's basically 200 versus Placebo. And then just one more follow-up question on the 200 b.i.d. what kind of dose of Clozapine is it equivalent to approximately?

Uli Hacksell

We cannot really say that. What we can say is that patients are treated with clozapine and those patients may receive from 300 to 900 milligrams a day of clozapine.

Lucy Lu

Right.

Uli Hacksell

They clearly develop cognitive concentrations of the metabolized 104, which are in the range of what we are studying here. We don't expect to have any problems here establishing efficacy with those doses.

Lucy Lu

Alright. Thank you.

Uli Hacksell

And I think again its – to make the direct comparison with clozapine is probably not the optimal way of looking at this, because ACP-104 has distinct differences as compared to clozapine. For example, its ability to stimulate muscarinic M1 receptors is something that we believe may not only be important in terms of its cognitive effects on the patients, but may also in fact enhance efficacy and psychotic efficacy in general.

Lucy Lu

Right. Thank you.

Uli Hacksell

Okay.

Operator

There are no further questions at this time. Dr. Hacksell, please proceed the closing remarks.

Uli Hacksell

So thank you again to everyone for joining us on today's call and for your continued support. We look forward to the opportunity to update you again in the further on our on going progress. Thank you so much.

Operator

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

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Source: ACADIA Pharmaceuticals Inc. Q4 2007 Earnings Call Transcript
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