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ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)

Q2 2012 Earnings Call

August 8, 2012 5:00 pm ET

Executives

Thomas H. Aasen – Treasurer, Chief Financial & Business Officer

Uli Hacksell – President, Chief Executive Officer & Director

Roger M. Mills – Executive Vice President-Development

Analysts

Charles C. Duncan – JMP Securities LLC

Bert C. Hazlett – ROTH Capital Partners LLC

Jason Napodano – Zacks Investment Research, Inc.

Juan Sanchez – Ladenburg Thalmann Securities

Brian William Lian – SunTrust Robinson Humphrey

George B. Zavoico – McNicoll, Lewis & Vlak LLC

Operator Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals’ Second Quarter 2012 Financial Results Conference Call. My name is Dianna, and I will be the 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 Tom Aasen, Executive Vice President and Chief Financial Officer at ACADIA. Please proceed.

Thomas Aasen

Thank you. Good afternoon and welcome to ACADIA Pharmaceuticals second quarter 2012 conference call. This call is being recorded and an archived copy will be available on our website at www.acadia-pharm through August 22nd of this year.

Joining me on the call today from ACADIA are Dr. Uli Hacksell, our Chief Executive Officer; and Dr. Roger Mills, our Executive Vice President of Development. We will begin our call today with some introductory remarks by Uli, and then I’ll briefly comment on our financial results for the second quarter. After this Roger and Uli will provide you with an update on our development programs and we’ll then open the floor to your questions.

Before we proceed, I would first like to remind you that during our call today we’ll 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. 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 partnering strategy, and our future expenses and collaboration and grant payments, cash position and stock 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 Uli, our Chief Executive Officer.

Uli Hacksell

Thank you, Tom, and good afternoon. Let me first take this opportunity to thank all of you for joining us on today’s conference call. The first half of 2012 was a very important period in our Phase III program with pimavanserin for Parkinson’s Disease Psychosis or PDP, and sets the stage for what we believe will be an exciting and value-driving second half of the year.

As you will hear later from Roger, we remain convinced that the optimized study design we have been using in the ongoing pivotal Phase III PDP trial has set enrollment of patients with the desired clinical profile, which should help position this study for success. We look forward to reporting top line results from the Phase III trial this fall and believe that a successful study should significantly increase the value of pimavanserin.

Currently, there is no FDA-approved therapy for PDP. We believe that pimavanserin has the potential to be the first safe and effective drug that will treat PDP without compromising motor control, thereby significantly improving the quality of life for patients with Parkinson’s disease. PDP is a large unmet medical 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. Meanwhile, we also believe pimavanserin has a broad potential to address a range of other neurological and psychiatric disorders that are poorly served by existing antipsychotic drugs. While pimavanserin provides the foundation of our product pipeline, we have several additional programs in our R&D portfolio. Our pipeline also includes two clinical stage programs in the areas of chronic pain and Glaucoma in collaboration with Allergan, and two preclinical stage programs directed at Parkinson’s disease and other neurological disorders.

All of our programs have been generated from internal discoveries at ACADIA, and offer what we believe are innovative approaches that address large potential commercial market opportunities. 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.

Before we review our programs in a bit more detail, let me ask Tom to briefly comment on our second-quarter results.

Thomas Aasen

Thank you, Uli. Our financial results reflect a focus on our Phase III pimavanserin program, and once again demonstrate our financial discipline and expense control. Revenues totaled $599,000 for the second quarter, up from $460,000 for the comparable quarter of 2011, and were generated primarily from our collaborations with Allergan and our R&D grants. We expect to continue to realize revenues from these sources throughout the year.

In addition, during the third quarter of 2012, in connection with the termination of our collaboration with Meiji Seika Pharma, we will record as revenue all of the remaining deferred revenue under this collaboration, which totaled $2.8 million as of June 30, 2012. Our research and development expenses totaled $4.5 million for the second quarter, compared to $4.3 million for the comparable quarter of 2011, reflecting increased clinical expenses in our Phase III pimavanserin program.

Our R&D expenses may fluctuate from period-to-period due to several factors including the timing of expenditures in our various studies. Our general and administrative expenses totaled $1.6 million for the second quarter, down from $2.7 million in the comparable quarter of 2011.

Turning to our cash position and guidance, we closed the second quarter of 2012 with $21.3 million in cash and investment securities and used a total of $4.6 million in cash to fund our activities during the second quarter. 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.

I will now turn the call over to Roger, who will provide you with an update on our Phase III PDP program with pimavanserin.

Roger Mills

Thank you, Tom, and good afternoon. Our primary focus in the Phase III PDP program is on the ongoing pivotal Phase III trial referred to as the -020 Study. This is an exciting time for our team as we approach the final stages of the study. -020 is a randomized, multicenter, double-blind, placebo-controlled study designed to evaluate the efficacy, tolerability and safety of pimavanserin in patients with PDP. The study incorporates several design enhancements that were guided by previous data in our PDP program.

Let me take a moment to provide an overview of the -020 protocol and highlight the study enhancements that are designed to mitigate placebo response and reduce data variability. The study is being conducted exclusively in North America, and is expected to enroll about 200 patients over approximately 50 clinical sites.

Importantly, its geographic focus has enabled us to use a small, centralized group of highly trained independent raters to conduct blinded assessments of the primary endpoint at all study sites.

Our previous experience indicated that this approach helped to mitigate placebo response, enhance precision and reduce state of variability. Patients initially participate in a screening phase, which includes a brief psychosocial therapy program. This is designed to help patients adapt to participating in a clinical trial setting and pull initial placebo responses ahead of the baseline assessment.

This also may allow more severe patients to be enrolled by offering nonpharmacologic support. To participate in the study, patients are required to have moderate to severe psychosis as measured by the Neuropsychiatric Inventory Scale, or NPI, at screening, and the Scale for the Assessment of Positive Symptoms, or SAPS, at the time of the baseline assessment. Criteria for study entry were tightened based on our observation in previous studies of a larger placebo response in patients with milder psychotic symptoms.

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 enabling sites to enroll patients with the desired clinical profile, and to filter out patients with milder psychotic symptoms, who are more likely to respond to placebo.

Patients are randomized on a one-to-one basis to receive either 40 milligrams of pimavanserin or placebo once-daily for six 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 endpoints of the study is antipsychotic efficacy as measured using the nine items from the hallucinations and delusions domain for SAPS, which best reflect the expression of the psychosis in patients with Parkinson’s disease.

The nine-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, in -020 Study, we have observed that the blinded baseline data from patients enrolled to-date support our earlier analysis, which indicates that the 9-item SAPS best captures the expression of PDP symptoms.

The FDA was supportive of the -020 design, and accepted a 9-item SAPS as a primary endpoint in the study. The study is designed to be pivotal and 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 II and III 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 outcomes. And we’re pleased to see that the design enhancements appear to operate as planned. We continue to make solid progress with the trial and are in the process of finalizing study enrollment with approximately 95% of planned patient enrollment now completed.

Importantly, as we execute this final stage of enrollment, we have maintained a firm emphasis on recruiting patients with more marked psychosis at study entry, and filtering out patients with mild symptoms who have may have larger placebo responses. While this takes additional time due to a corresponding increase in the number of subjects who do not qualify for randomization after screening due to inadequate severity of symptoms, we believe this rigorous approach will serve us well in the end.

We are pleased to see the patients enrolled 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 had hoped to achieve with the design enhancements and we believe provides patients with the right profile to help position the study for success. We will make an announcement after we have completed enrolling the remaining patients in the study, which is anticipated to occur over the next few weeks.

We expect to report top line results from the -020 Study about three months after enrollment is completed. Well, let me now turn to another important ongoing trial in our PDP program, our Phase III open-label safety extension study, referred to as the -015 Study. This trial involves patients who complete the -020 Study, as well as patients through 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 completed the treatment phase in the -020 Study have elected to rollover into -015. This study, along with a similar extension study from our earlier Phase II trial, is allowing us to generate a large amount of valuable long-term safety data regarding the use of pimavanserin in patients with PDP. Importantly, we have far exceeded ICH guidelines for required one-year exposures, with over 200 patients having been treated for one year or longer.

We also have well over a 100 patients that have been treated with pimavanserin for at least two years, and our longest single patient exposure is over seven years. We are encouraged to see that many patients have remained on treatment with pimavanserin for long periods of time, and we have continued to receive encouraging feedback from investigators, regarding patients’ experiences with pimavanserin.

Our experience to-date suggest that 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 offers significant advantages relative to current antipsychotics used off-label for the treatment of PDP.

I will now turn the call over to Uli.

Uli Hacksell

Thank you, Roger. We are excited about -020 Study and look forward to reporting top line results this fall. We believe that a successful trial should provide the opportunity to drive significant value for our stockholders. PDP is a serious disorder that develops in up to 60% of patients with Parkinson’s disease and deeply affects their quality of life. It contributes substantially to the burden of Parkinson’s disease, and it is the major cause of nursing home placements among Parkinson’s patients.

Neurologists currently face very difficult challenges in managing patients with this debilitating disease. We believe that pimavanserin with this innovative and well-tolerated non-dopaminergic profile has the opportunity to be a first-in-class therapy that will effectively treat psychosis in Parkinson patients without compromising motor control. And our strategy is 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 neurologic and psychiatric disorders that are underserved by currently available antipsychotics.

One such neurological disorder is Alzheimer’s Disease Psychosis, or ADP, which affects an estimated 25% to 50% of Alzheimer’s patients. ADP patients commonly suffer disturbing visual hallucinations and delusions, and like PDP, there is currently no therapy approved to treat ADP in the United States. In July, we published results of studies with pimavanserin in the preclinical model of Alzheimer’s disease, which suggests that pimavanserin may be effective in the treatment of ADP.

We believe that these findings, coupled with the favorable safety profile observed to-date in elderly patients with Parkinson’s disease, suggest that pimavanserin may be ideally suited to address the need for a novel ADP treatment that is safe, effective, and well-tolerated. We believe that pimavanserin also has considerable commercial potential in schizophrenia. You may recall an earlier Phase II trial in which we demonstrated that co-therapy with pimavanserin and a sub-therapeutic dose of risperidone was equally effective as the standard dose of risperidone.

Importantly, the combination of pimavanserin and low-dose risperidone exhibited a much improved side effect profile, including significantly less weight gain, and a faster onset of action. The manuscript providing a complete account of this study has been accepted for publication in the scientific journal, Schizophrenia Research. 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 development in ex-US regions and broaden the program to drive increased value for our stockholders.

Let me now touch briefly on the other programs in our pipeline. Through our long-standing alliance with Allergan, we have two clinical stage product candidates that provide the potential for new treatment options in the areas of chronic pain and glaucoma. We are also continuing joint discovery efforts focused on ophthalmology in a third collaboration with Allergan, which was extended earlier this year.

In addition, we have continued to make impressive progress in two preclinical programs that may pave the way for new breakthroughs in the treatment of Parkinson’s and other neurological disorders. The first of these programs are Nurr1 program, may offer a new disease modifying approach to treating Parkinson’s disease.

In this program, ACADIA scientists discovered compounds that selectively activate Nurr1-RXR complexes. And these complexes are effective in restoring motor control and neuronal health in preclinical models of Parkinson’s disease.

They are currently expanding on these promising initial research findings to a new grant awarded earlier this year by the Michael J. Fox Foundation The second program, our ER-beta program may offer new treatment options for a range of neurological disorders. These compounds have exhibited neuroprotective and anti-inflammatory properties in preclinical models. And they have the ability to slowdown the progression of Parkinson’s disease.

In addition, our ER-beta compounds may address symptoms of chronic inflammatory and neurological pain. Ongoing studies in this area are being funded by a grant from the National Institute of Neurological Disorders and Stroke. Given the progress in both of our preclinical programs, we expect to advance a compound from at least one of these programs into development over the next year in preparation for 2Q clinical trials.

In closing, our pipeline of product candidates led by our Phase III pimavanserin program positions ACADIA with multiple product and commercial opportunities and with significant growth potential. With a well-designed Phase III program for pimavanserin and a Phase III data anticipated this fall. We are confident that we have the foundation in place to drive significant growth for ACADIA and our shareholders. We will now be happy to answer questions that you may have.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question will come from the line of Charles Duncan JMP Securities.

Charles C. Duncan – JMP Securities LLC

Hi, guys, thanks for taking the question, and congratulations on nearly completing the enrollment of the -020 Study?

Uli Hacksell

Thanks, Charles.

Charles C. Duncan – JMP Securities LLC

My first question, Uli, Roger did a good job talking about the changes in the protocol and suggested that you were satisfied that they achieved their goal. I guess my question is, what is the basis of being satisfied, can you be a little quantitative in terms of the psychosis scores that you are seeing, or perhaps dropout rates, something like that?

Uli Hacksell

I’ll let Roger answer that Charles.

Roger Mills

Yeah, Charles, thanks. And just in terms of that, we’re not actually as usual giving specific numeric aspects of an ongoing trial, and I think you well understand why.

Charles C. Duncan – JMP Securities LLC

Yeah.

Roger Mills

But I think what I am comfortable in saying is, we obviously look at the base line scores and our intend in many of the changes that we made to the protocol was to avoid what we saw in the previous, what that we’ve done, where patients with milder psychoses tended to respond from being on the study. So they had a mild placebo response, and when we looked at patients with more severe disease, that wasn’t prominent. So the aim really was to have a population in the -020 study that had a more marked psychosis than those in the previous studies.

And to that end what we have seen is that the, obviously the mean score blinded data, these are just baseline scores at entry into the study, but the scores are higher than we saw in the previous studies, and in the sort of ballpark that we are looking for. So that is pleasing to see that the scores really do fit in line with that.

And then, secondly, based on not just the work from those previous studies, but actually from our own Phase II study and also the clozapine study in the past combining all those data if you remember, we went to FDA to propose that we use nine items of the SAPS, and those nine items are the ones that consistently reflected the symptoms expressed by Parkinson’s patients who have PDP.

And again, looking at blinded, just baseline data, the data fall very much in line with what we saw in the previous studies that really that the vast majority of the symptoms are captured within those nine items. That is reassuring, even this new study that we are able to very closely reproduce what we had anticipated doing from the previous work.

Charles C. Duncan – JMP Securities LLC

And then, with regard to the second Phase III that I assume is going to be very similar, or maybe you can address it, will it be the same as the first Phase III? And would you be able to start that before you read out the data, or what other ways can you do to accelerate moving into that second Phase III?

Uli Hacksell

Yeah, see, Charles, our plans for the next study, which by the way we will call -021, is to try to start that quickly when we have looked at the data from -010 Study, the ongoing study. Our redemption is to try to maximize synergies between the two studies in such a way that we have a fast upstart of the 221 Study that we really can use the good sites that we have from 220 in that study as well. When it comes to design, we expect the design to be identical in the -021 Study to than what we have now in the -020 Study…

Charles C. Duncan – JMP Securities LLC

And then…

Uli Hacksell

A good number of the sites are very encouragingly actually very enthused about working with us on the -021 study, so we have really good base of sites there.

Charles C. Duncan – JMP Securities LLC

And then, Roger, with regard to the long-term extension, the -015 Study, it seems like over two years if, I mean, I don’t know, what is the population you’re looking at, but over two years you ought to see some progression of Parkinson’s and some changes in dopamine replacement therapy. Are you seeing any changes? Is that the same as what you would expect out of that patient population, i.e., is the motoric tolerability holding up for the compound?

Roger Mills

In terms of looking at the measures in that study really is, physicians in the safety study. So we’re not measuring efficacy measures during that period really it has been positioned to look at the safety in this population. And the great thing about it is a real launch study, so real-life population, real-life treatment to these people over that period of time.

So very different from -020, where we rigidly managed people through those six weeks of the blinded period. Once they move into -015 then physicians are free to be able to do a lot more changes in terms of the various medications that these patients are on, and they are a good number of other medications for the things as well.

So we don’t keep, there is no comparator group to be able to measure against. But we have not seen any evidence in our data to-date that there is any negative impact on motoric control. The great thing we had intended, we do intend this drug to be able to be used, so that the physicians don’t have to worry about how they manage motor control. And speaking to them in the -015 Study, they approach it in that way. They are not concerned about how they manage motor control based on the pimavanserin therapy, so it really fit with our intention there.

Charles C. Duncan – JMP Securities LLC

Okay. Thanks for the added color. I’ll hop back in the queue.

Roger Mills

Thank you.

Uli Hacksell

Thanks.

Operator

(Operator Instructions) Your next question comes from the line of Bert Hazlett, ROTH Capital Partners.

Bert C. Hazlett – ROTH Capital Partners LLC

Thanks, congratulations to all on the good progress. I have a couple of questions along the lines of the trial as well. Just maybe you mentioned it, Roger, early, but could you just remind us when the -015 study is due to have results and due to wrap up?

Uli Hacksell

That the -015 Study, that’s the open-label extension study. So in fact, we will continue having patients in that until we are on the market with pimavanserin.

Bert C. Hazlett – ROTH Capital Partners LLC

Okay.

Uli Hacksell

So we expect a tremendous amount of long-term data coming out of that. And as you may recall, we have in fact, shown a slice of this data already in a poster that came out sometime ago and with very impressive safety and tolerability data.

Bert C. Hazlett – ROTH Capital Partners LLC

Thank you. And the next question is with regard to the -020 study and it’s finishing its completion and then a potential initiation [-021] Study as it applies to your R&D spend line, how should we think about the progression, I guess for anybody that wants to take a crack at this. Should we be thinking about R&D spend as dipping a bit in the fourth quarter as you do additional analysis of -020, assuming success and spooling up again in 2013, as you consider the -021 Study, is that the way we should think about R&D spend progression?

Thomas Aasen

Yeah, Bert, this is Tom. I think what you are alluding to is probably a fair way to look at it. Overall, things can fluctuate obviously in a quarter-by-quarter basis just with timing. But, yeah, you would anticipate that generally speaking the majority of the expenses are through to when the treatment period is concluded. So you may see it kind of taper off a bit near the tail end of the year. Then we expect obviously, expenses to go back as you move into the next year. So I think that’s a fair way to look at it.

Bert C. Hazlett – ROTH Capital Partners LLC

Okay, thank you. And as you also consider your additional partners and additional clinical work not only with the pimavanserin, but with other programs, should we consider in general terms this rate of revenue in the quarter as something that is sustainable through the remainder of the year?

Thomas Aasen

Bert, we haven’t provided specific guidance on the revenues this year. I think, the key thing I first do is point you to the overall cash usage guidance. But what I can you that it maybe helpful is, the majority of the revenues in the recent quarter and quarter two were generated from the collaborations with Allergan, that’s just under, say, $300,000 on a quarterly basis, and the research grants was in the $200,000 range. So that’s really about $500,000 of the $600,000 in revenue.

And as I mentioned, we do expect to continue to see those revenues throughout the upcoming quarters. With respect to Meiji, that was a pretty trivial amount that was about $100,000 on a quarterly basis that was included in the previous quarter that would not be going forward. However, as I mentioned, there will be pulling in all the remaining Meiji revenue that will be about $2.8 million that would be pulled into quarter three.

Bert C. Hazlett – ROTH Capital Partners LLC

Okay, $2.8 million. And there are no expenses associated with that $2.8 million coming into Q3, correct?

Thomas Aasen

Essentially, no.

Bert C. Hazlett – ROTH Capital Partners LLC

Okay. And then just a more strategic question on pimavanserin in general, I know in some prior discussions there has been consideration for partnering other indications again assuming success in the -020 study. Is that still the operating strategy success in -020, you focusing on -021 the follow-on study fairly rapidly and then maybe spooling up a consideration for schizophrenia, or the Alzheimer’s disease indications with others? Is that the way to think about it?

Uli Hacksell

Yeah. So I think you are very much on it here. We’re clearly very excited about pimavanserin looking forward to the -020 data coming up here in the fall. And then, of course, we plan, as I mentioned earlier to advance the Phase III program towards registration, initially moving on with the -021 Study.

Having that in place, we certainly want to drive additional value from our pimavanserin assets. And we are clearly interested in two things in particular, and one is to accelerate development of pimavanserin in other geographic regions outside on the U.S., and the second thing is to broaden the program as you have noticed, beyond Parkinson’s Psychosis into related neurological indications, initially probably Alzheimer’s Disease Psychosis. And also into psychiatric indications, the first thing there we clearly would look at would be Schizophrenia. The great thing for ACADIA is that we have worldwide rights. So we have all options open to us and we kind of clearly look at this over time here.

Bert C. Hazlett – ROTH Capital Partners LLC

Thank you. And just one more quick one, the Schizophrenia research publication, when is that due tentatively?

Uli Hacksell

Sometime, during the fall.

Bert C. Hazlett – ROTH Capital Partners LLC

Okay. Thank you very much. Thanks, again.

Uli Hacksell

Thanks.

Operator

The next question comes from the line of Jason Napodano, Zacks.

Jason Napodano – Zacks Investment Research, Inc.

Hi, guys, thanks for taking the question. So as you stated one of the goals with the redesign of -020 was to enroll patients with a more severe disease, and it sounds like you clearly did that. But can you give us a sense of what percent of the PDP population is considered severe, or maybe well qualifies for -020, like one out of two that you screened, or one out of three that you screened, some color there?

Thomas Aasen

Yeah, sure. I think in looking at the population, the important thing with PDP is, it is very different from psychosis in schizophrenia. So as you develop the symptoms it is usually hallucinations that begin. Although, there may be day-to-day or week-to-week variations in the symptomatology over time it inevitably progresses to become increasingly severe.

In terms of percentages, there is about a third of the population may be deemed mild and a third sort of moderate to severe, and then a third as severe. But importantly, everybody is progressing through that continuum.

Jason Napodano – Zacks Investment Research, Inc.

Okay. And then the percent of patients that are in nursing homes or long-term care facilities?

Uli Hacksell

I don’t think that we have specific numbers. But what we do know, however, is that placement into nursing homes, the patients who are placed into nursing homes frequently have Parkinson’s Psychosis. In fact Parkinson’s Psychosis is the major reason why Parkinson’s patients are placed into nursing homes.

So we think there is a fair amount of PDP patients in the nursing homes. We know also that then Parkinson’s disease progresses, but the psychosis also tends to get worse over time and patients also tend to develop dementia the same time. So we have an increasing severity of the symptoms over time. And clearly, many of these patients will be in nursing homes.

Jason Napodano – Zacks Investment Research, Inc.

Yeah, I think that would be interesting from an economic standpoint to get a sense of patients that are not in nursing homes, if you’re keeping the amount of nursing homes longer with a drug like pimavanserin?

Thomas H. Aasen

Yeah, clearly that’s one thing that we see as a potential opportunity in terms of a big advantage, because as Uli said, it’s a leading driver right now for those Parkinson’s patients going in. Often the caregiver is a spouse or other relative and just – sort of you are seeing a fracturing of that relationship. To the extent you can maintain the independence, the quality of life for the patient and for the family is improved immeasurably. And then obviously, you would be saving a tremendous amount of cost by avoiding the nursing homes.

Roger Mills

Yeah, I think there are a number of attributes of the drug that really fit very well with that, not only the improvement in the psychotic symptoms that we see with the drug, but also importantly the improvement in nighttime sleep.

Unfortunately, the two tend to come together with many of these patients, waking up frequently during the night for long periods. And with the psychotic symptoms wandering around the house at night it is a real nightmare for the caregivers. And it is often this that really precipitates the point at which the caregivers says – I just can’t manage in most of these cases, any longer.

And being able to intervene on both those fronts, I think will be a distinct advantage, and really make life a great deal better for these patients, and keep them in their homes and with their loved ones.

Uli Hacksell

And we know, of course, that as soon as the patient enters the nursing home the life expectancy shortens. So the longer you can keep the patient at home, the better.

Jason Napodano – Zacks Investment Research, Inc.

Yeah, so that kind of leads into my final question, obviously we know the primary end point of the -020 Study, but what are some of the secondary benefits, things like maybe entering nursing homes or sleep or life expectancy or even false. That you can kind of go back after the trial completes and look at I mean, is the trial big enough to kind of give you that data on a retrospective basis?

Roger Mills

In terms of the key endpoints that we look at, obviously it is the primary, which is the psychosis. Let’s not forget the motoric endpoint, which is a key secondary endpoint there. It is one of the challenges for – one of the key challenges for physicians is that they work hard to get the motor symptoms under control. And as the disease progresses they have to adjust that and they try to fine-tune the patients’ care over time.

And then the psychotic symptoms develop, there are all the challenges with the available antipsychotics to date as to date as we have well-described. And then the balancing if they – even if they give those at some stage that it throws the motor control off for the patient.

So they have the issues with the safety with those agents, but also it really frequently throws out the motor control into somewhat of a state of disarray. So I think that is an important point and we’ve seen that consistently that we do not negatively impact motoric control. And I think the investigators we have now, they don’t even think about it, they are so comfortable with the drug in that respect.

Sleep remains an important end point. It’s not a claim that I think we’ll be able to draw from the study in a regulatory sense. But it certainly would be an endpoint that has potential to be described in the label at the end. And will be something that as we develop the drug further and close both on the NDA and then the only NDA, these are attributes of the drug that we really look at teasing out into more specific studies.

So, I think it is not just the improved night’s sleep - nighttime sleep, but also the other critical factor is that patients don’t have sedation during the day. So, improves the nighttime sleep, but without adding to the burden of the daytime issues with the patients.

Jason Napodano – Zacks Investment Research, Inc.

That’s helpful guys, thanks for taking my question.

Roger Mills

Thank you Jason.

Operator

Your next question comes from the line of Juan Sanchez Ladenburg

Juan F. Sanchez – Ladenburg Thalmann Securities

I think most of my questions have been answered. The only one is, how much will the next Phase III clinical trial would cost? And what else do you need to do, other than growing an additional Phase III in order to prepare on NDA

Roger Mills

Sure, Juan I will address the first part. Clearly, what we have indicated is that the cost of the cost of the study, the pivotal trial, is in the neighborhood of about $12 million. In terms of the development going forward, I think, obviously that is one of the key elements. A significant amount of the program will be de-risked with -020, then we essentially plan to replicate with the -021 study and everything else, we feel will be within the timeframe. There are some other supporting studies that are traditionally done in a Phase III program, but the key really is -020 to -021 as part of it.

Juan F. Sanchez – Ladenburg Thalmann Securities

Got it. Thank you.

Uli Hacksell

Thank you.

Operator

Your next question comes from the line of Brian Lian SunTrust.

Brian William Lian – SunTrust Robinson Humphrey

Hi, thanks for taking the questions. I know you’re focused on the nine-item SAPS, but are the other 11 items being collected as any sort of secondary endpoint?

Roger Mills

Yes, and it is not a secondary endpoint as such. But as we have moved to the using the nine-item is the primary endpoint, so they are important to run the whole SAPS just to make that confirmatory position that in fact it really is a nine-items that are driving the symptoms or to capture the symptoms of PDP in Parkinson’s patients. As we discussed earlier, that is really what we are seeing in this study to date.

Brian William Lian – SunTrust Robinson Humphrey

Okay, and I may have asked this previously, but I can’t find it in my notes. But when you apply the nine-item SAPS to the -012 Study, you obviously see sort of an enhanced signal. But have you applied this to other trials that have failed with other agents and seen a similar enhancement in signal?

Uli Hacksell

Perhaps, I can answer that. We have only baseline data from one additional external study, we don’t have data-on-data from failed external studies. So we have been unable to do that.

Brian William Lian – SunTrust Robinson Humphrey

Okay, and then with the -015 Study, can you give any color on the sleep-inducing characteristics and how they have evolved over the longer term? Does it look like there is a robust signal that lasts a long time in the open-label extension?

Roger Mills

Within the open-label since we don’t have a comparator group, so it is difficult to draw that completion or we can really relate to is the anecdotal evidence from speaking to a number of the investigators. And one of our really experienced investigators are - they really feel that almost like the aura of the patient is different on pimavanserin than what one has seen in previous - with previous agents.

And part of that is the fact that the people are actually getting much better nighttime sleep, really its important to just remember that this is not a sleep-inducer. It is not an agent, which is putting people sleep it really got some sleep, really keeps them asleep and makes the sleep better, better quality. And we may be seeing some of that in these sort of anecdotes that we hear from the investigators of this general sense of what being of patients on the drug.

Brian William Lian – SunTrust Robinson Humphrey

Okay, thanks very much.

Unidentified Company Representative

Thank you.

.

Unidentified Company Representative

Thank you.

Operator

Your next question comes from the line of George Zavoico MLV & Company.

George B. Zavoico - McNicoll, Lewis & Vlak LLC

Hi, Uli, hi Tom, hi Roger. Congratulations on a good quarter and the progress you are making look forward to the upcoming results in the next few weeks and months. The question about -021, upcoming -021 Study. Typically in the confirmatory Phase III there are - while the design of the study may not differ very much, some differences do create perhaps some geographical differences. Are you going to expand the number of sites perhaps also to enhance the rate of enrollment to get the trial going faster maybe few more Canadian sites?

Roger Mills

It is certainly a possibility for us to include more Canadian sites. What we don’t want to do is to grow outside of North America, because we want to keep the opportunity for us to have centralized rating. We think that and the good standard of care or two things that become yet in both the U.S. and Canada, So it is we will stick to those two geographies.

George B. Zavoico – McNicoll, Lewis & Vlak LLC

Yeah, and then obviously you will leverage some existing sites in the U.S. So you probably will have a few more new sites hopefully none will drop out. That leads me to the next question, regarding – because you wanted to expand internationally, and one of the issues obviously with -020 was that you had a different interpretation of the measurement scale. When you move internationally well the difference could be country-by-country or could you pull EU into one group. And are you thinking about doing this on your own or through progress moving internationally?

Uli Hacksell

First of all, let me say that we believe then that the ideal way of moving beyond the U.S. is to do it together with a partner. And perhaps, Roger, you can say something about the regulatory thinking for Europe and other regions?

Roger Mills

Yeah, hi, George. The – from a regulatory position, we – I think we feel that, that the European regulators feel very similar to the U.S. ones so there is a real need for drug with the types of attributes that pimavanserin really offers. In terms of why we are in North America, really relates to what Uli was saying early, which is just the access to the centralized raters, for a couple of factors in the ex-U.S. data that we have seen previously.

And I think you really need to - I think you sort of alluded to it with respect to Western Europe versus Eastern Europe, and I think the healthcare system in Eastern Europe is very different from that in the Western Europe or the United States, I think the key factor between the North America and Western Europe really is the availability to be able to do the centralized ratings. And as that both technically and language reasons is only available in North America, hence why we are doing -020 here and hence why we intend to -021 in this region.

But I don’t think there is any other aporia reason that Western Europe wouldn’t be really something, that you would expect anything different in. It is just really the access to be able to use the limited raters, and thereby reduce variability and confounding factors. But importantly I think successful, -020 and -021 studies really will provide the foundation for the - one, the ex-U.S. for the ex-U.S. regulatory filing, but also for broader ex-U.S. program.

George B. Zavoico – McNicoll, Lewis & Vlak LLC

And moving ex-U.S. I would presume you would obviously if -020 works, and you would go for nine items SAPS in the EU, but that would also require the same sort of agreement I would imagine, with the EMA as you did with the FDA. Are you taking any steps at this point at all to prepare for a possible partnership in moving forward in the EU to sort of maybe accelerate a little bit when you actually do establish a partnership?

Roger Mills

I think one of the key things in this, irrespective of a partnership, and Uli can comment on that in a minute, but I don’t think we see and have never seen these as being separate programs U.S. and ex-U.S. all through the program we have taken it along what would be required for a standard NDA, which is also what would be required under ICH guidelines for standard MAA in Europe. And we’ve then had discussion with European regulatory bodies and we’ve moved along with that in mind and remember that the previous two studies that we did both incorporated and the good number of countries in, in the European Union and therefore we don’t expect there to be any, the need to be a separate European based program, the program we’re doing is a comprehensive development program.

George B. Zavoico – McNicoll, Lewis & Vlak LLC

Are you implying that, you might not need to do additional trials in Europe?

Uli Hacksell

Yeah that is nothing that be able to necessarily expect to have to do. We still think it would…

George B. Zavoico – McNicoll, Lewis & Vlak LLC

Terrific.

Uli Hacksell

Be good to have a European partner in that camp to confirm that.

George B. Zavoico – McNicoll, Lewis & Vlak LLC

Sure.

Uli Hacksell

Yes

George B. Zavoico – McNicoll, Lewis & Vlak LLC

So it sounds like, with -020 positive results hopefully they will be positive, you are going to move forward on number of different initiatives all at once. Besides just the -021, you’re going to move into the maybe advanced partnership discussions and also thinking about broadening the indications. That is going to be very interesting and you’re going to be very busy.

Uli Hacksell

Yes.

Roger Mills

Yeah I think we, we obviously see the -020 is really a something that really as a major inflection point for the asset. So we think after that point we obviously the number one priority is to continue to build the value in that asset and head toward the registration here in for PDP. But, sure, strategically where we very much have in mind as Uli mentioned the, we think those other indications provide tremendous commercial potential, and we want to think about that in addition to making sure we can get things moving so we can follow up with registrations in a timely manner in the other geographic region as well.

Uli Hacksell

So, we can take one different question. I think we’re running out of time.

Operator

Yes, the next question is a follow-up from the line of Charles Duncan JMP Securities.

Charles C. Duncan – JMP Securities LLC

Hi guys, thanks for taking the follow-up, I wondering, if you could review the current IP on pimavanserin, and if there has been any updates on that recently?

Uli Hacksell

Things haven’t really changed much more. What I can say is that we have an outstanding IP portfolio around pimavanserin, that provides patent protection in the U.S. to mid 2028. We also have a lot of patents throughout the world. In Europe, we haven’t have validate patents in 23 countries that provide exclusivity into 2024. We expect to have additional patents being issued in Europe, in the U.S. and in the rest of the world including India, Japan, China, et cetera. So, we have the obvious IP portfolio to really correspond to what we see as the commercial opportunity with pimavanserin, so to protect us, or to give exclusivity also when we move into other related indications and beyond PDP including urology, psychosis and psychiatric indications.

Charles C. Duncan – JMP Securities LLC

Uli that makes sense to me, just, to make sure I understand, is that composition of matter based patent through 2028 or 2024?

Uli Hacksell

Yes, composition of matter. So we have a mix of claims that both relate to composition of matter and the uses.

Charles C. Duncan - JMP Securities LLC

Excellent, thanks for the added color.

Uli Hacksell

Sure.

Roger Mills

Thanks

Uli Hacksell

So with that, I want to thank everybody again for joining us on today’s call and for your continued support. So we’ll look forward to updating you again in the future on our ongoing 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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