ACADIA Pharmaceuticals Inc.
Q1 2018 Earnings Call Transcript

Published: 4 May 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals’ First Quarter 2018 Financial Results Conference Call. My name is Shelly, and I will be your coordinator 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 Elena Ridloff, Senior Vice President of Investor Relations at ACADIA. Please proceed.

[Elena Ridloff:]

Thank you, Shelly. Good morning, and welcome to ACADIA's first quarter 2018 financial results conference call. This conference call is being recorded, and an archived copy will be available on our website through May 18, 2018. Joining me on the call today from ACADIA are Steve Davis, our President and Chief Executive Officer; Todd Young, our Chief Financial Officer; Michael Yang, our Chief Commercial Officer; and Dr. Serge Stankovic, our Head of Research and Development. Before we proceed, I would like to remind you that during our call today, we will be making a number of forward-looking statements. These forward-looking statements including goals, expectations, plans, prospects, gross potentials, timing of events or future results 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. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date. I'll now turn the call over to Steve Davis, our President and Chief Executive Officer.

[Steve Davis:]

Good morning and thank you everyone for joining us today. I would like to take this opportunity to welcome Elena Ridloff, SVP of Investor Relations to the team. As you are aware, Elena joined ACADIA earlier this week, and we're truly delighted to have her onboard. Elena looks forward to meeting many of you over the coming weeks. On today's call, I'm going to provide an overview of our performance in the first quarter, updates on the continued growth of NUPLAZID and some perspective on the tremendous opportunities we see ahead. Following my remarks, Serge will discuss NUPLAZID both in its approved indication, our Parkinson’s disease psychosis, including discussion of the safety and efficacy of NUPLAZID as well as provide a brief update on our ongoing clinical studies in additional indications. Michael will provide some updates on our commercial initiatives, and Todd will review our first quarter financial results and provide our Q2 and full year 2018 guidance. We will then open up the call for questions. For the first quarter of 2018, we saw continued volume growth for NUPLAZID, which generated revenue of approximately $49 million, sequential volume growth of the 13.5%, gross revenue growth of 12%. Looking to the full year, we are reiterating our revenue guidance, which Todd will cover in greater detail. We continue to see a strong response from physicians and patients, resulting in a steady increase in the uptake of NUPLAZID since it received FDA approval, and commercialization began in 2016. As physicians become increasingly familiar with NUPLAZID, they, along with patients and caregivers, witness first hand both a reduction in hallucinations and delusions and an improved quality of life. NUPLAZID is the first and only medicine that treats hallucinations and delusions associated with Parkinson's disease psychosis, or PD Psychosis. Importantly, it does not interfere with the patient's treatment of motor symptoms for Parkinson's disease. To put this disease and treatment in perspective, of the approximately 1 million individuals in the United States living with Parkinson's disease, over 50% will experience hallucinations and delusions associated with PD Psychosis over the course of their disease. Looking ahead, there is still more work to be done. Given its unique profile, NUPLAZID is positioned to be the standard of care for PD Psychosis patients. We will therefore continue our efforts to raise awareness around PD Psychosis, and we expect it to continue driving strong financial results for the second quarter and beyond. Additionally, pimavanserin, as NUPLAZID is known generically, has unique qualities that we believe has substantial potential beyond PD Psychosis to treat neurobehavioral conditions and other CNS disorders, such as dementia-related psychosis, schizophrenia and major depressive disorder, or MDD. We plan to announce top line results from our study of pimavanserin in MDD in the second half of this year. And from our clinical studies in schizophrenia next year. If successful across these additional indications, we have the potential to make a significant impact in the lives of millions of patients suffering from these debilitating diseases. Before I turn the call over to Serge, I'd like to bring into focus the reason why we are working so hard to raise awareness of PD Psychosis and NUPLAZID. Simply put, it is the difference we can make in the daily lives of patients, caregivers and families. On that note, I'd like to share one of the recent unsolicited letters we’ve received on the impact of NUPLAZID. This particular letter came from a caregiver in Arizona. To whom it may concern. I am a pharmacist and my husband has Parkinson's with the hallucinations and delusions that unfortunately accompany that disease. I was reluctant to have my husband take an antipsychotic medication as I've seen firsthand how frequently they are misused. I was wrong. This medication is the best thing that has happened to us since his diagnosis. He suffered from terrible delusions and problem hallucinations. He was terrified in his own home. I truly did not know how much longer I would be able to care for him. Six weeks of NUPLAZID and everything changed. Yes, he still has dementia, but he is no longer physically or verbally abusive because he's no longer under siege from the debilitating hallucinations he was enduring. If there's any way I can help bring awareness to the positive impact this medication can have, I'm more than happy to do so. Sincerely, JV. This letter is the kind of feedback that reminds us at ACADIA why we do what we do. And on that note, I will turn it over to Serge.

[Serge Stankovic:]

Thank you, Steve. It is always so gratifying to hear the impact NUPLAZID can have on the lives of patients and their caregivers. As we continue to evaluate the benefits of pimavanserin as a potential treatment in number of new indications, safety remains front and center and has always been a primary focus of our activities. NUPLAZID was approved by the FDA based on the pivotal Phase 3 study that demonstrated clinically robust and highly statistically significant efficacy, along with supportive data from other clinical studies. We are confident in NUPLAZID's efficacy and positive risk profile and stand firmly behind it. Since, approval and launch in 2016, ACADIA has monitored NUPLAZID’s safety throughout this period in robust of pharmacovigilance activities. We're also continuously evaluating the benefits and risks of pimavanserin treatment in our ongoing clinical studies, both in placebo-controlled and the open-label long-term safety trials. Based on this ongoing evaluations and the totality of currently available information, we maintain our assessment that the benefit risk profile for NUPLAZID remains unchanged and it is appropriately described in the product labeling. We base this on the following

[Michael Yang:]

Thank you, Serge. As Steve mentioned, our team continues to be pleased with the commercial progress and feedback we received from physicians, patients and caregivers, who experienced the benefits of NUPLAZID. We see continued opportunity to further raise awareness of PD Psychosis in the community. As we said before, we need to raise awareness as both real and pressing. A survey conducted by the Parkinson’s and Movement Disorder Alliance, a national Parkinson’s advocacy group, showed the serious impact of non-movement symptoms, like hallucinations and delusions, on quality of life of patients and caregivers; 90% of the respondents reported the presence of non-movement symptoms, 84% agreed that non-movement symptoms had a negative impact on quality of life and almost half of them rated as more challenging or much more challenging to live with the movement symptoms. These findings support our focus on caregiver patient awareness and disease education. We continue to have a significant and meaningful presence at major medical meetings, including the Annual Meeting of the American Association of Geriatric Psychiatry and the American Academy of Neurology. During these meetings, we have the opportunity to raise awareness amongst our target physicians as well as interact with physicians, who are prescribing NUPLAZID. What they tell us about their clinical experience aligns with our market research, which further supports NUPLAZID as an effective treatment for PD Psychosis. Our latest chart review, market research study on physician behavior confirms a strong progress towards establishing NUPLAZID as standard of care for PD Psychosis. These results show satisfaction levels with NUPLAZID are significantly higher versus [indiscernible] highest amongst neurologists and movement disorder specialists. We understand that continuing to raise awareness of PD Psychosis is important for patients and caregivers, and we remain committed to these important educational efforts. Our disease awareness campaign is focused on increasing the level of awareness and comfort around PD Psychosis. Early metrics show the success of this campaign. The market has grown and our sales team has been able to convert this growth into new patient starts as physicians, patients and caregivers all become more knowledgeable about PD Psychosis. With that, I’ll turn the call over to Todd to discuss our financial performance.

[Todd Young:]

Today, I’ll discuss our Q1 financial results and provide our Q2 and full-year 2018 guidance. In the first quarter of 2018, we recorded $48.9 million in net sales, an increase of $33.6 million or 220% growth compared to the $25.3 million of revenue recorded in Q1 2017. Our gross to net in Q1 2018 was approximately 24% compared to 26% in Q1 of 2017. Our $48.9 million of net sales in Q1 was a $5.3 million increase or 12% growth compared to the $43.6 million of revenue in Q4 2017, driven by sequential volume growth of 13.5% as health care providers and patients continue to experience the benefits of using NUPLAZID to treat the symptoms of Parkinson’s disease psychosis. Gross to net increased from approximately 13% in Q4 to approximately 24% in Q1. As a reminder, our gross-to-net adjustment is highest in the first quarter because of the annual reset of the obligation under Medicare Part D. At the end of Q1, days in inventory channel were unchanged from the end of Q4 2017. Turning to sales gains. We are reiterating our full year 2018 guidance of a $255 million to $270 million, with our gross-to-net expected to be in the mid-to-high teens. For Q2 2018, we expect net sales to be in the range of $57 million to $61 million, with gross-to-net in the mid-teens. Let’s now turn to the expense side of the P&L. Total operating expenses including cost of goods sold, were $103.7 million in the first quarter of 2018. This amount includes $20.4 million of non-cash stock-based compensation expense. Total operating expenses were flat compared to Q1 2017. Our R&D expenses increased to $39.3 million in the first quarter of 2018 from $35.4 million in the first quarter of 2017. Our SG&A expense declined to $60.9 million in Q1 2018 from $65.7 million in the first quarter of last year. With respect to expense gains, for the second quarter of 2018, we expect our R&D expense to be in the mid-$40 million range and SG&A expense to be approximately $70 million. As a reminder, all expense announced provided in our press release and on the call today are U.S. GAAP amounts that include non-cash stock-based compensation. Turning to cash. In Q1 2018, cash used in operations was $45.2 million compared to $70.6 million for the first quarter of 2017. We ended Q1 with $298.1 million of cash and investment securities on our balance sheet compared to $341.3 million of cash and investment securities at the end of 2017. At the end of this year, we continue to expect to have more than $200 million of cash on the balance sheet. And with that, I’ll turn the call back to Steve.

[Steve Davis:]

Thank you, Todd. This was another strong quarter for ACADIA, which demonstrates our continued progress advancing in NUPLAZID. We are confident in NUPLAZID’s efficacy its positive benefit risk profile and its tremendous growth potential. We also deeply appreciative of the hardware of our talented employees we remain committed to our mission of improving the lives of patients and caregivers in CNS disorders. And with that, I’ll open the call up for questions.

[Operator:]

[Operator Instructions] The first question comes from the line of Cory Kasimov with J.P. Morgan. Your line is now open.

[Unidentified Analyst:]

Hey guys, this is Matthew on for Cory, and thanks for taking my questions. So for my first question, I’m just curious about the marketplace reaction to the sales and article. I’m wondering if you could provide qualitative or quantitative metrics for how scripts have been tracking over the last month? And whether you’re seeing any broader shift and uptake in reaction to the headline?

[Steve Davis:]

Sure. Thank you, Matthew. First, in Q1, we delivered, as we noted, 13.5% sequential volume growth. And following the article, we’re continuing to see new patients start in NUPLAZID. As Serge mentioned in his prepared remarks, we think that CNN article is based on broad analysis, and our placebo-controlled studies, our post marketing safety reviews, our signal-detection analysis of serious events do not identify the presence of any common ideology or any unified pathophysiological mechanisms. So in other words, there's just no common threat that would suggest across our relationship to NUPLAZID. Just like to note that the average age of our patients in the specialty, pharmacy part of our business is 76 years old. In LTC, they're certainly more advanced and the reported death remained consistent with our patients' advanced age with their medical condition and there are comorbidities. But our field team is very well prepared to immediately address any questions they receive from physicians about the article. In addition, our distribution hub was also immediately prepared to answer any questions for patients. And quite simply, the feedback you're hearing for our field team as their interaction with physicians once they address questions and concerns, physicians remain interested in receptive to hearing more about the benefits in new clients with patients for PDP. So while it's early and may be a little bumpy in the near-term as we work through this, we have not seen a meaningful impact on the business that will lead us to change our full year 2018 guidance of a $255 million to $270 million. We're confident in the compelling profile, I’ll provide NUPLAZID the long-term potential for the product and the team we have supporting this continued growth.

[Unidentified Analyst:]

Great, thank you. And I guess, just one follow-up. Curious to hear your thoughts on what you're seeing commercially in terms of PDP patients being treated with NUPLAZID on top of an antipsychotic? And how is your thinking about this in terms of safety.

[Steve Davis:]

I'm going to ask Serge to answer that question.

[Serge Stankovic:]

Well, it's – the data we have in analysis that we have, we do see that there are – that this is through a postmarketing safety reports. We do see that some smaller portion of patients may be receiving concomitantly other antipsychotics. Now it is very difficult for us we don't have a full information to understand whether this is the cross titration for certain patients or it's a real concomitant use. There are no indications, based on what we are seeing and, like I said, this is a postmarketing review with a limited information, that there are differences in safety profile of what we are seeing for this patients. But like I said, ACADIA had not conducted a studies with concomitant use with other antipsychotic, neither that we recommend such use in accordance to label.

[Unidentified Analyst:]

Great. Thanks for taking my question.

[Operator:]

Your next question comes from Tazeen Ahmad from Bank of America. Your line is now open.

[Tazeen Ahmad:]

Hey, good morning guys. Thanks for taking my questions. A couple, maybe one, on your guidance. You issued six new guidance for NUPLAZID, and I just want to get a sense of how you're thinking about the cadence for the rest of the year. So you've maintained full year guidance. What is your view of how the rest of the year is going to look like just based on interactions that you've had with physicians so far? And I know it's a little bit difficult to answer this question, but when do you think you'll be in a clear from any impact from the negative publicities surrounding the articles.

[Steve Davis:]

I’m going to ask Todd to respond to the cadence question.

[Todd Young:]

Thanks Tazeen. Yes, overall, we feel very good about the re-acceleration of growth that we had in Q1 versus Q4 and additional patients coming on the therapy for NUPLAZID. As we look forward, we’re confident in the information we’re getting from multiple sources on the use of NUPLAZID from both the qualitative feedback from our sales force physician discussions as well as the sales into our different channels. And as we look forward, we expect the $57 million to $61 million in sales in Q2, and then continue to expect the full year to come in as we’ve guided, the $255 million to $270 million in sales. That will obviously require continued strong high-single digit to low double digit volume, very consistent with what we delivered here in Q1.

[Tazeen Ahmad:]

Have you proactively thought feedback from physicians? Or do you get comfortable with the guidance?

[Steve Davis:]

We had. As Todd mentioned, we look at the totality of information coming from what we’re seeing in the field, what we’re hearing in the field as well as market surveys that we do on, on an ongoing basis.

[Tazeen Ahmad:]

Okay. And then second question would be on your interactions with FDA so far as it relates to your current studies. Can you share with us any discussions you’ve been having with them as it relates to safety? So have the agency asked for additional safety data following this increased focus on safety? And are you aware of any safety events that would be outside the normal profile of the drug you’ve seen so far?

[Steve Davis:]

Yes, sure. Serge, do you want to respond to that question.

[Serge Stankovic:]

Yes. As you said, Tazeen, as the manufacturer of a newly launched drug, we are routinely in contact with the FDA throughout – through our periodic safety updates, also responding to any questions related to the new programs that we are conducting. And including also the recent addition – providing additional information on NUPLAZID from the post-marketing safety surveillance. We don’t generally, in detail, comment on the specific interactions with the FDA, but I will say that, as I mentioned in my prepared remarks, we stand behind the risk-benefit profile. And in all of our discussions, there have not been discussion on any new or changed safety information from what is adequately described in the current product label.

[Tazeen Ahmad:]

Okay. Thanks, guys.

[Operator:]

Your next question comes from the line of Jason Butler for JMP Securities. Your line is now open.

[Jason Butler:]

Hi. Thanks for taking the question. Just one in terms of the trials are ongoing, have you looked at blinded safety data from those studies? And it’s obviously different patient populations, but are you seeing anything with different than the safety profile reflected in the label? Thanks.

[Steve Davis:]

Yes. Serge, do you want to respond to that question.

[Serge Stankovic:]

Yes. Thanks, Jason. Of course, we are regularly on an ongoing basis reviewing safety information from all of our ongoing clinical trials as well as post-marketing information. Obviously ongoing clinical trials that are placebo-controlled and double-blind, we do that in a blinded fashion. But in addition to that, our trials in a frail elderly patients and in the frail patient population, to be specific, our dementia-related psychosis trial, our all Alzheimer trials that we conducted as well as our schizophrenia trial have independent data safety monitoring committee that independently reviews our periodically our safety data. So neither ourselves in our ongoing review, nor this data safety monitoring boards, so far, provided any recommendation on the change of the benefit-risk profile as we know it for pimavanserin or any new safety information.

[Jason Butler:]

Great. Thanks for taking the question.

[Operator:]

Your next question comes from the line of Ritu Baral from Cowen. Your line is now open.

[Ritu Baral:]

Hi, guys. Thanks for taking the question. So Steve, your hope gives you really good real time insight into how your patients are taking the drug. Have you seen any impact on refills over the last few weeks? And also, do you have any plans for more real world safety presentations, like we saw at A and say it like AIC. And I have a follow-up.

[Steve Davis:]

Yes. So Ritu, let me take the first part of that. And I’ll let Serge to respond to the presentation portion of the question. So first, let me just say, it’s a hub, we've not seen any meaningful uptick in inbound increase from patients. It does give us a good view as to what's happening out there, and we're just not seeing much. The – as it relates to the – sorry, I'm blanking on the…

[Ritu Baral:]

On refills.

[Steve Davis:]

Yes, I’m sorry. On refills. We're not seeing any impact on refills. Serge, do you want to respond to the question regarding presentation – upcoming presentations?

[Serge Stankovic:]

Yes. We have, as Michael said, quite good scientific presence the upcoming meetings, just specifically asked about the Alzheimer's Association International Congress in Chicago in July. We have accepted two presentations. One is an oral presentation and one is a poster, both are related to our efforts in the – obviously, Alzheimer's and dementia. Clive Ballard and [indiscernible] will be presenting pimavanserin Alzheimer's disease psychosis data, particularly subgroup analysis of the more severe patients. And then Devin and Dr. Cummings and Dr. Ballard will be – there is an oral presentation, which will probably be given by Dr. Cummings on the rationale and design of our Phase 3 HARMONY trial with pimavanserin. We are also – have both oral presentation and poster at the American Society of Clinical Psychopharmacology. We will be present at the International Society for Pharmacoeconomics and Outcome Research. There, there will be some presentations on our insight real world trial in Parkinson disease psychosis, MDs as well Movement Disorder. We are preparing presentation. Those are submitted at this point. And then, we did have presentation at the American Academy – American Association for Geriatric Psychiatry. As well as the Parkinson's study group meeting in May, [indiscernible] will be presenting Parkinson's disease psychosis subgroup analysis in patients with and without cognitive impairment. And we will be also presenting the numbers needed to treat the numbers needed to harm analysis on our Parkinson disease psychosis data as well as combination – pimavanserin in combination with selectives serotonin reuptake inhibitors. All these are accepted for presentation. So as you see, in addition to our manuscripts that we're submitting on all of the data we're generating, we have a robust presence in the scientific meetings with our data.

[Ritu Baral:]

Got it. My follow-up was actually on harmony. How is that going with your screen failure rate and patient makeup between the different…

[Srdjan Stankovic:]

Yes. I will describe it qualitatively. It is going as well or better than we anticipated. We are really pleased with the progress on the dementia-related psychosis trial, and our assumptions are holding very well. And we are doing, as I said, as well or better than we hoped.

[Ritu Baral:]

Great. Thanks for taking the question.

[Operator:]

Your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is now open.

[Salveen Richter:]

Thanks for taking my question. So with regard to non-GAAP SG&A, it looks like there was a decline in 1Q. Could you just provide us the rationale here? I think you mentioned external selling. Can you clarify what this means as I think there were some sales changes in 4Q 2018. And then just the outlook for this line item this year on light of potentially higher marketing needs?

[Steve Davis:]

Sure. Todd, do you want to take the question?

[Todd Young:]

Thanks, Salveen. yes. We have a decline in SG&A in Q1 compared to a year ago as well as quarter-over-quarter decline. So that relates to the disease awareness campaign we ran and increased of costs in Q4 from a production perspective, and we also had a decline in our charitable contributions in Q1. We've also provided guidance here for Q2 on the SG&A side at approximately $70 million and we expect that to be reasonable range for the whole year.

[Salveen Richter:]

Great. And then in terms of your 2018 guidance, what is your assumption regarding price increases versus last year? And what's playing out on the XUS front with getting NUPLAZID approved?

[Stephen Davis:]

Yeah, sure, let me take that U.S. front first. As we stated earlier, we have frame shifted the outside the United States. We – once we got the positive results from our Alzheimer's psychosis study, we made a determination that we like to friendship that and get the results of more studies. The studies that are ongoing now. So I studies readout will continue to assess that and determine whether we want to continue frame shifting or not. With regard to assumption, I'll ask Todd to respond to that.

[Todd Young:]

With respect to our guidance for the full year, that is predominantly driven by increasing volume growth as we continue to add patients onto NUPLAZID, and they get the benefits of treating their Parkinson’s disease psychosis. It does assume a price increase. We’ve not come on what that will be but as we said, previously, it will be in line with typical pharmaceutical pricing.

[Salveen Richter:]

Great. And when you see typical is that typical to what you saw last year with your own drug? Or more in context of other neuro therapies?

[Todd Young:]

We would expect it to be in – we would not expect it to be in sync with what we did last year. We would expect to be more in line with what we typically see in the pharmaceuticals.

[Salveen Richter:]

Okay. Thank you.

[Operator:]

And your next question comes from Alan Carr from Needham & Company. Your line is now open.

[Alan Carr:]

Hi, thanks for taking my questions. There’s a couple. One of them is this has been asked explicitly, I’m sorry if it has. But any impact from the CNN article enrollment in any of the trials that you’re running? And then also, can you give us an update on the percentage of patients treated that are in the long-term care/ VA group? Thanks.

[Steve Davis:]

Yes, sure. Both are pretty straightforward. We see no impact on enrollment at all. With regard to the split between our specialty distribution business, which includes long-term care, TRICARE, VA versus the specialty pharmacy business, we split it about 35% in the last quarter on the specialty distribution side, about 65% on the specialty pharmacy side.

[Alan Carr:]

I think that 35%, I think that’s up from what you’ve seen in the past, do you think it’s going to be stable at 35% return to 30% or your continue arise which we are thinking?

[Steve Davis:]

Each start the business goes a different rates from quarter to quarter, it can vary. I think what we see over several quarters now is it’s been in that kind of low 30s range and so we’ll just evaluate as we go forward.

[Alan Carr:]

Okay, great. Thanks for taking my questions.

[Operator:]

There are no further questions. Mr. Davis, please proceed to closing remarks.

[Steve Davis:]

Great. Thanks to all of you for participating in our first quarter 2018 earnings call. Our mission is to offer effective solutions to address serious medical conditions and we care deeply about the well-being of those individuals who use our medication. Demand for NUPLAZID among physicians and patients continues to grow, and we expect it to continue driving strong financial results. We continue to see strong fundamentals for NUPLAZID, which is early in its growth phase and has a long pathway for attractive, year-after-year growth in PDP. We also see opportunities for pimavanserin as a new way of treating neurobehavioral symptoms, and look forward to updating you on that as we move through to 2018. Thank you for your continued support.

[Operator:]

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