ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q3 2023 Earnings Conference Call November 2, 2023 5:00 PM ET Company Participants Jessica Tieszen - Associate Director of Investor Relations Albert Kildani - Senior Vice President, Investor Relations & Corporate Communications Steve Davis - Chief Executive Officer Brendan Teehan - Chief Operating Officer, Head of Commercial Doug Williamson - Head of Research & Development Mark Schneyer - Chief Financial Officer Parag Meswani - Senior Vice President: Trofinetide, Rar ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-50768 ACADIA PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 06-1376651 (State of Incorporation) (I.R.S. Employer Identification No ...

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q2 2023 Earnings Conference Call August 2, 2023 4:30 PM ET Company Participants Jessica Tieszen - Associate Director of Investor Relations Mark Johnson - Vice President of Investor Relations Steve Davis - Chief Executive Officer Brendan Teehan - Chief Operating Officer, Head of Commercial Doug Williamson - Head of Research & Development Mark Schneyer - Chief Financial Officer Kathie Bishop - Head of Rare Diseases and External Innovation Conference Call Participants ...

Second Quarter 2023 Earnings Call Call Agenda Welcome Jessica Tieszen | Associate Director, Investor Relations CEO Opening Remarks Steve Davis | Chief Executive Officer Comm ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements for Q2 2023, showing increased revenues and a shift to net income driven by the DAYBUE launch Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Indicator | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$165,235** | **$134,563** | **$283,697** | **$250,031** | | Total Operating Expenses | $162,198 | $168,214 | $334,244 | $396,698 | | Income (Loss) from Operations | $3,037 | $(33,651) | $(50,547) | $(146,667) | | **Net Income (Loss)** | **$1,114** | **$(34,011)** | **$(41,907)** | **$(147,067)** | | Basic Earnings (Loss) Per Share | $0.01 | $(0.21) | $(0.26) | $(0.91) | | Diluted Earnings (Loss) Per Share | $0.01 | $(0.21) | $(0.26) | $(0.91) | Condensed Consolidated Balance Sheets (in thousands) | Assets & Liabilities | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $107,941 | $114,846 | | Total current assets | $492,628 | $507,937 | | **Total Assets** | **$642,769** | **$587,812** | | Total current liabilities | $187,942 | $125,630 | | **Total Liabilities** | **$246,976** | **$187,399** | | **Total Stockholders' Equity** | **$395,793** | **$400,413** | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,732) | $(89,454) | | Net cash (used in) provided by investing activities | $(1,765) | $75,548 | | Net cash provided by financing activities | $6,944 | $6,298 | | **Net increase in cash, cash equivalents and restricted cash** | **$(4,555)** | **$(7,602)** | - The company's second drug, DAYBUE™ (trofinetide), was approved by the FDA in March 2023 for the treatment of Rett syndrome and became available for prescription in April 2023[19](index=19&type=chunk) Revenues by Product (in thousands) | Product | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | NUPLAZID | $142,018 | $260,480 | | DAYBUE | $23,217 | $23,217 | | **Total Product Sales, Net** | **$165,235** | **$283,697** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting a 23% increase in Q2 2023 net product sales driven by DAYBUE and NUPLAZID, detailing expense changes, key development programs, and strong liquidity - The company's commercial portfolio includes two products: NUPLAZID, approved in 2016 for Parkinson's disease psychosis, and DAYBUE, approved in March 2023 for Rett syndrome[91](index=91&type=chunk) Comparison of Net Product Sales (in millions) | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | | | | | NUPLAZID | $142.0 | $134.6 | +$7.4 | | DAYBUE | $23.2 | $0.0 | +$23.2 | | **Total** | **$165.2** | **$134.6** | **+$30.6** | | **Six Months Ended June 30** | | | | | NUPLAZID | $260.5 | $250.0 | +$10.5 | | DAYBUE | $23.2 | $0.0 | +$23.2 | | **Total** | **$283.7** | **$250.0** | **+$33.7** | - Research and development expenses decreased to **$127.9 million** for the first six months of 2023 from **$204.5 million** in the same period of 2022, mainly due to a **$60 million** upfront payment to Stoke for a license agreement in 2022[127](index=127&type=chunk) - Selling, general and administrative expenses increased to **$197.2 million** for the first six months of 2023 from **$186.6 million** in the prior year period, primarily due to increased commercial costs associated with the DAYBUE launch[128](index=128&type=chunk) - In July 2023, the company expanded its licensing agreement with Neuren for trofinetide and NNZ-2591, involving an upfront payment of **$100.0 million** and potential future milestones[96](index=96&type=chunk) - The company expects top-line results from its ADVANCE-2 Phase 3 study of pimavanserin for the negative symptoms of schizophrenia in the first quarter of 2024[97](index=97&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from its investment-grade, interest-bearing securities, with management concluding a 10% rate change would not materially affect portfolio fair value - The company's primary market risk is interest rate risk from its investments in money market funds, municipal bonds, and government-sponsored enterprises[141](index=141&type=chunk) - The investment policy focuses on preserving principal and maintaining liquidity, with all securities having a credit rating of at least Aa3/AA- or better[141](index=141&type=chunk) - Management concluded that a **10%** change in interest rates as of June 30, 2023, would not have had a material effect on the fair value of its investment portfolio[141](index=141&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2023, management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023[143](index=143&type=chunk) - No changes in internal control over financial reporting were identified during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[145](index=145&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company faces ongoing patent infringement litigation for NUPLAZID and a securities class action lawsuit, but management believes these will not materially adversely affect its business or financial position - The company is engaged in patent infringement lawsuits against several generic drug manufacturers (including Aurobindo, MSN, and Zydus) concerning its Orange Book-listed patents for NUPLAZID[63](index=63&type=chunk)[70](index=70&type=chunk) - A putative securities class action lawsuit was filed against the company and certain officers, alleging violations of the Securities Exchange Act of 1934 related to the sNDA for pimavanserin for dementia-related psychosis[70](index=70&type=chunk) - Management does not believe that the pending legal proceedings are likely to have a material adverse effect on the company's business, liquidity, or financial position[71](index=71&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section outlines substantial risks, including dependency on NUPLAZID and DAYBUE, reliance on third-party manufacturers, high drug development failure rates, intellectual property protection, regulatory hurdles, and healthcare reform impacts - The company's prospects are highly dependent on the continued successful commercialization of NUPLAZID and the successful launch of DAYBUE[152](index=152&type=chunk) - The company relies on third parties for manufacturing, and any failure by these manufacturers to supply adequate product or comply with regulations could halt development and commercialization[230](index=230&type=chunk) - Drug development is a long, expensive, and unpredictable process with a high risk of failure, with past unsuccessful Phase 3 trials for pimavanserin in MDD and DRP[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - The company's ability to compete may be compromised if it cannot adequately protect its proprietary rights, including defending against ANDA filings by generic drug companies for NUPLAZID[241](index=241&type=chunk) - Healthcare reform measures, such as the Inflation Reduction Act of 2022 (IRA), may negatively impact the company's ability to sell its products profitably through government price negotiation and inflation-based rebates[260](index=260&type=chunk)[264](index=264&type=chunk) [Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, stock-related forms, licensing agreements, and CEO/CFO certifications under Sarbanes-Oxley Act - This section lists all exhibits filed with the quarterly report, including corporate governance documents and required certifications[322](index=322&type=chunk) - Includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[322](index=322&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2023, the company recorded net sales of $118.5 million, representing a 3% increase year-over-year [26] - Gross to net adjustment for the quarter was 29.3%, with year-over-year demand growth up approximately 2% [26] - R&D expenses decreased to $69.1 million from $128.9 million in Q1 2022, primarily due to a $60 million upfront payment recorded in Q1 2022 [26] - SG&A expenses increased slightly to $101.2 million from $96.7 million in Q1 2022, with expectations for flat SG&A expenses for 2023 compared to 2022 [27] Business Line Data and Key Metrics Changes - The NUPLAZID franchise generated steady volumes, with a 2% increase in demand bottles year-over-year [18] - The launch of DAYBUE for Rett syndrome began in mid-April 2023, with positive feedback from healthcare providers and early patient enrollment forms received [13][14] - The company is seeing early indicators of growth in new patient starts for NUPLAZID, despite a contracted market [19] Market Data and Key Metrics Changes - The company is experiencing a return to growth in Parkinson's medication prescriptions and in-person patient visits, which had been negatively impacted during the pandemic [10] - The market share for new-to-therapy patients for NUPLAZID is increasing, driven by real-world evidence publications [9] Company Strategy and Development Direction - The company is focused on four strategic priorities: the launch of DAYBUE, growth of the NUPLAZID franchise, completion of the ADVANCE-2 study for schizophrenia, and development of ACP-204 for Alzheimer's disease psychosis [6][28] - The company is engaging with payers to ensure access to DAYBUE for patients, with discussions ongoing regarding reimbursement policies [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the launch of DAYBUE and the ongoing performance of the NUPLAZID franchise, highlighting the importance of real-world evidence in driving adoption [6][19] - The company anticipates topline results from the ADVANCE-2 study in early 2024, which could lead to a supplemental new drug application [11][24] Other Important Information - The company has completed Phase 1 development of ACP-204 and plans to meet with the FDA to discuss the clinical development plan [7][25] - The company is actively engaging with the Rett community and healthcare providers to support the launch of DAYBUE [21][22] Q&A Session Summary Question: Can you provide more color on payer discussions for DAYBUE? - Management indicated that discussions with payers have been constructive, and they are working to get early patient access through medical exceptions [32] Question: How will the Rett registry help drive adoption for DAYBUE? - Management noted that they are proactively communicating the benefits and tolerability profile of DAYBUE to clinicians and families, which has been well received [36] Question: What key metrics will be provided to gauge the health of the DAYBUE launch? - Management stated that they will provide net revenue and meaningful metrics on the next earnings call, but specific metrics are not available yet [41] Question: What is the current penetration of NUPLAZID in the PDP population? - Management reported that they have increased their share of new patient starts and are over 20% market share across both community and long-term care settings [49] Question: What are the plans for ACP-204's clinical development? - Management indicated that they are eager to move aggressively with the program and will provide more details after meeting with the FDA [58]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Acadia Pharmaceuticals Inc.'s financial data for the quarter ended March 31, 2023, including financial statements and detailed notes [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Acadia Pharmaceuticals Inc.'s unaudited condensed consolidated financial statements for Q1 2023, covering balance sheets, statements of operations, comprehensive loss, cash flows, stockholders' equity, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 (unaudited) | December 31, 2022 | |:---|:---|:---| | **Assets** ||| | Cash and cash equivalents | $290,895 | $114,846 | | Investment securities, available-for-sale | 111,978 | 301,977 | | Total current assets | 502,850 | 507,937 | | Intangible assets, net | 69,583 | — | | Total assets | $655,305 | $587,812 | | **Liabilities and Stockholders' Equity** ||| | Accounts payable | $17,422 | $12,746 | | Accrued liabilities | 206,879 | 112,884 | | Total current liabilities | 224,301 | 125,630 | | Total liabilities | 281,047 | 187,399 | | Total stockholders' equity | 374,258 | 400,413 | | Total liabilities and stockholders' equity | $655,305 | $587,812 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section outlines the company's financial performance, including revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Product sales, net | $118,462 | $115,468 | | Total revenues | 118,462 | 115,468 | | Cost of product sales | 1,667 | 2,950 | | Research and development | 69,144 | 128,855 | | Selling, general and administrative | 101,235 | 96,679 | | Total operating expenses | 172,046 | 228,484 | | Loss from operations | (53,584) | (113,016) | | Interest income, net | 3,800 | 105 | | Other income | 4,845 | 340 | | Loss before income taxes | (44,939) | (112,571) | | Income tax (benefit) expense | (1,918) | 485 | | Net loss | $(43,021) | $(113,056) | | Net loss per common share, basic and diluted | $(0.27) | $(0.70) | | Weighted average common shares outstanding, basic and diluted | 162,263 | 161,231 | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) This section details the company's net loss and other comprehensive income or loss components for the reporting periods Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net loss | $(43,021) | $(113,056) | | Other comprehensive income (loss): ||| | Unrealized gain (loss) on investment securities | 757 | (422) | | Foreign currency translation adjustments | (2) | 2 | | Comprehensive loss | $(42,266) | $(113,476) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net cash used in operating activities | $(17,933) | $(76,329) | | Net cash provided by investing activities | 192,518 | 131,345 | | Net cash provided by financing activities | 1,466 | 2,467 | | Net increase in cash, cash equivalents and restricted cash | 176,049 | 57,485 | | Cash, cash equivalents and restricted cash, Beginning of period | 120,616 | 153,205 | | Cash, cash equivalents and restricted cash, End of period | $296,665 | $210,690 | | Accrued milestone and contingent payments in connection with asset acquisition | $69,583 | $— | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This section presents the changes in the company's equity accounts, including capital and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Total stockholders' equity, beginning balances | $400,413 | $540,894 | | Additional paid-in capital, ending balance | 2,787,034 | 2,712,025 | | Accumulated deficit, ending balance | (2,412,572) | (2,266,632) | | Total stockholders' equity, ending balances | $374,258 | $444,797 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of the accounting policies, significant estimates, and other relevant financial information supporting the consolidated statements [1. Organization and Business](index=8&type=section&id=1.%20Organization%20and%20Business) This section describes Acadia Pharmaceuticals Inc.'s core focus as a biopharmaceutical company and its key commercial products - Acadia Pharmaceuticals Inc. is a biopharmaceutical company focused on CNS disorders and rare diseases[19](index=19&type=chunk) - **NUPLAZID®** (pimavanserin) was approved by the FDA in **April 2016** for Parkinson's disease psychosis (PDP)[19](index=19&type=chunk) - **DAYBUE™** (trofinetide) was approved by the FDA in **March 2023** for Rett syndrome and became available in **April 2023**[19](index=19&type=chunk) [2. Basis of Presentation and Significant Accounting Policies](index=8&type=section&id=2.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This section outlines the preparation of unaudited financial statements, the impact of macroeconomic factors, and key accounting methods - The financial statements are unaudited, prepared in accordance with GAAP for interim information, and include normal recurring adjustments[20](index=20&type=chunk) - The company's business has been negatively impacted by the COVID-19 pandemic, affecting NUPLAZID sales growth[21](index=21&type=chunk) - Ongoing macroeconomic uncertainties, including labor shortages, inflation, recession risks, and bank failures, continue to be monitored for their potential impact on financial condition and operations[22](index=22&type=chunk) Cash, Cash Equivalents and Restricted Cash Reconciliation (in thousands) | Metric | March 31, 2023 (End of period) | March 31, 2022 (End of period) | |:---|:---|:---| | Cash and cash equivalents | $290,895 | $204,920 | | Restricted cash | 5,770 | 5,770 | | Total cash, cash equivalents and restricted cash | $296,665 | $210,690 | - Accounts receivable are recorded net of allowances; no allowance for credit loss was required as of **March 31, 2023**[26](index=26&type=chunk) - License fees for products under development are expensed if recoverability is uncertain and technology has no alternative future use[27](index=27&type=chunk) - Finite-lived intangible assets are amortized over their estimated useful lives; no impairment loss was recorded in **Q1 2023** or **Q1 2022**[28](index=28&type=chunk) [3. Net Loss Per Share](index=9&type=section&id=3.%20Net%20Loss%20Per%20Share) This section explains the calculation of basic and diluted net loss per common share, including the treatment of common stock equivalents - Basic net loss per share is calculated by dividing net loss by weighted average common shares outstanding[29](index=29&type=chunk) - Diluted net loss per share includes common stock equivalents, but these were excluded for all periods presented as their effect would be anti-dilutive due to net losses[29](index=29&type=chunk) - Approximately **20.8 million** and **17.5 million** common stock equivalents were excluded from diluted EPS calculations at **March 31, 2023**, and **2022**, respectively[29](index=29&type=chunk) [4. Stock-Based Compensation](index=10&type=section&id=4.%20Stock-Based%20Compensation) This section details the stock-based compensation expense recognized across various categories and the valuation methodologies used Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Cost of product sales | $168 | $323 | | Research and development | 3,972 | 5,464 | | Selling, general and administrative | 10,565 | 9,176 | | Total | $14,705 | $14,963 | - Fair value of stock options and purchase plan rights is estimated using the Black-Scholes model, while restricted stock units are based on market price at grant date[31](index=31&type=chunk) - Expense is recognized over the requisite service period, generally the vesting period[31](index=31&type=chunk) [5. Balance Sheet Details](index=10&type=section&id=5.%20Balance%20Sheet%20Details) This section provides a detailed breakdown of inventory components and accrued liabilities, including long-term inventory strategies Inventory Breakdown (in thousands) | Inventory Type | March 31, 2023 | December 31, 2022 | |:---|:---|:---| | Finished goods | $1,594 | $1,926 | | Work in process | 4,251 | 4,427 | | Raw material | 5,174 | 5,207 | | Total | $11,019 | $11,560 | | Reported as: ||| | Inventory (current) | $6,095 | $6,636 | | Long-term inventory | 4,924 | 4,924 | - Long-term inventory consists of raw materials beyond a one-year production plan to mitigate supply interruption risks[32](index=32&type=chunk) Accrued Liabilities Breakdown (in thousands) | Accrued Liability | March 31, 2023 | December 31, 2022 | |:---|:---|:---| | Accrued milestone and contingent payments | $69,583 | $— | | Accrued sales allowances | 50,137 | 26,046 | | Accrued research and development services | 33,656 | 35,048 | | Accrued compensation and benefits | 21,192 | 28,023 | | Accrued consulting and professional fees | 12,876 | 11,377 | | Current portion of lease liabilities | 9,173 | 9,305 | | Other | 10,262 | 3,085 | | Total | $206,879 | $112,884 | [6. Investments](index=11&type=section&id=6.%20Investments) This section details the company's available-for-sale investment securities, their fair values, and unrealized gains or losses Available-for-Sale Investment Securities (in thousands) | Security Type | March 31, 2023 (Estimated Fair Value) | December 31, 2022 (Estimated Fair Value) | |:---|:---|:---| | Government sponsored enterprise securities | $104,648 | $80,941 | | Municipal bonds | 7,330 | — | | U.S. Treasury notes | — | 15,945 | | Corporate debt securities | — | 20,775 | | Commercial paper | — | 184,316 | | Total | $111,978 | $301,977 | - All available-for-sale investment securities are classified as current assets due to their highly liquid nature and availability for current operations[36](index=36&type=chunk) Gross Unrealized Losses on Available-for-Sale Investment Securities (in thousands) | Security Type | March 31, 2023 (Unrealized Losses) | December 31, 2022 (Unrealized Losses) | |:---|:---|:---| | Government sponsored enterprise securities | $(231) | $(291) | | Municipal bonds | (30) | — | | U.S. Treasury notes | — | (11) | | Corporate debt securities | — | (98) | | Commercial paper | — | (637) | | Total | $(261) | $(1,037) | - For the three months ended March 31, 2023, the Company sold all its commercial paper investments for **$183.0 million**, realizing net losses of **$0.5 million**[38](index=38&type=chunk) - The Company does not intend to sell investments in an unrealized loss position and does not anticipate being required to sell them before recovery of amortized cost basis[41](index=41&type=chunk) [7. Fair Value Measurements](index=12&type=section&id=7.%20Fair%20Value%20Measurements) This section describes the valuation methodologies for financial assets and liabilities, categorizing them by fair value hierarchy levels - Investments include cash equivalents, available-for-sale investment securities (money market funds, municipal bonds, government sponsored enterprises), and equity securities, all with high credit ratings[42](index=42&type=chunk) - Level 1 financial instruments are valued using quoted market prices, and Level 2 instruments use third-party pricing services with observable inputs[43](index=43&type=chunk) - Contingent cash awards and acquisition-related contingent payments are measured at fair value using **Level 3** inputs (Monte Carlo simulation for cash awards, publicly announced PRV sales for contingent payment)[44](index=44&type=chunk)[45](index=45&type=chunk) Recurring Fair Value Measurements of Financial Assets and Liabilities (in thousands) - March 31, 2023 | Asset/Liability | Total Fair Value | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---| | **Financial Assets:** ||||| | Money market funds | $287,113 | $287,113 | $— | $— | | Equity securities | 12,026 | 12,026 | — | — | | Government sponsored enterprise securities | 104,648 | — | 104,648 | — | | Municipal bonds | 7,330 | — | 7,330 | — | | **Total Financial Assets** | **$411,117** | **$299,139** | **$111,978** | **$—** | | **Financial Liabilities:** ||||| | Contingent cash awards | $1,247 | $— | $— | $1,247 | | Acquisition related contingent payment | 29,583 | — | — | 29,583 | | **Total Financial Liabilities** | **$30,830** | **$—** | **$—** | **$30,830** | Changes in Estimated Fair Value of Contingent Cash Awards (in thousands) | Metric | Amount | |:---|:---| | Balance as of December 31, 2022 | $898 | | Vesting of awards | 169 | | Expense forfeited | (19) | | Change in fair value | 199 | | Balance as of March 31, 2023 | $1,247 | [8. Stockholders' Equity](index=13&type=section&id=8.%20Stockholders'%20Equity) This section discusses contingent cash awards for employees and the company's 2023 Inducement Plan for stock awards - Contingent cash awards for employees (excluding executive management) are based on continued employment and stock price targets, classified as liabilities and measured at fair value each period[51](index=51&type=chunk)[52](index=52&type=chunk) - The maximum potential payout for contingent cash awards at **March 31, 2023**, was **$11.6 million**, with a fair value of approximately **$2.1 million**[52](index=52&type=chunk) - The **2023 Inducement Plan**, adopted **February 1, 2023**, allows for various stock awards to new employees/non-employee directors, with **1,750,000 shares** authorized and **1,344,680 shares** available at **March 31, 2023**[53](index=53&type=chunk) [9. Commitments and Contingencies](index=14&type=section&id=9.%20Commitments%20and%20Contingencies) This section outlines the company's collaboration agreements, potential milestone payments, and ongoing legal proceedings - The Company has various collaboration, license, and merger agreements, with potential milestone payments up to **$1.6 billion** in aggregate for pipeline candidates[54](index=54&type=chunk) - Following FDA approval of DAYBUE in **March 2023**, a **$40.0 million** milestone payment is due to Neuren after the first commercial sale, capitalized as an intangible asset[55](index=55&type=chunk) - The Company was granted a Rare Pediatric Disease Priority Review Voucher (PRV) for DAYBUE, requiring a payment to Neuren of one-third of its value upon sale or use, capitalized at **$29.6 million**[55](index=55&type=chunk) - In **January 2022**, a collaboration with Stoke Therapeutics involved a **$60.0 million** upfront payment (expensed to R&D) and potential milestones up to **$907.5 million**, plus tiered royalties, for RNA-based medicines[57](index=57&type=chunk) - The Company is involved in patent infringement lawsuits (Pimavanserin I and II Cases) against generic drug manufacturers regarding NUPLAZID, with some settlements reached (Hetero, Zydus) and MSN remaining an active defendant[60](index=60&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - A securities class action lawsuit (Marechal v. Acadia Pharmaceuticals, Inc.) alleges violations of the Securities Exchange Act of 1934 related to sNDA submissions for pimavanserin, with discovery ongoing[66](index=66&type=chunk) - Management believes current legal proceedings are unlikely to have a material adverse effect on the Company's business, liquidity, financial position, or results of operations[67](index=67&type=chunk) [10. Leases](index=17&type=section&id=10.%20Leases) This section details the company's operating lease arrangements, associated costs, and future lease liabilities - The Company leases facilities and equipment under noncancelable operating leases with terms ranging from **0.8 to 8.2 years**[68](index=68&type=chunk) Operating Lease Costs (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Operating lease cost | $2,181 | $2,110 | Supplemental Cash Flow Information Related to Leases (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Operating cash flows from operating leases | $2,370 | $2,190 | | Right-of-use assets obtained in exchange for operating lease obligations | 304 | 1,440 | Operating Lease Liabilities (in thousands) | Metric | March 31, 2023 | December 31, 2022 | |:---|:---|:---| | Current portion included in accrued liabilities | $9,173 | $9,305 | | Operating lease liabilities | 51,441 | 52,695 | | Total operating lease liabilities | $60,614 | $62,000 | Maturities of Lease Liabilities (in thousands) | Period | Operating Leases | |:---|:---| | Remainder of 2023 | $7,127 | | Years ending December 31, 2024 | 9,228 | | Years ending December 31, 2025 | 9,308 | | Years ending December 31, 2026 | 8,672 | | Years ending December 31, 2027 | 8,389 | | Thereafter | 28,691 | | Total lease payments | 71,415 | | Less: Imputed interest | (10,801) | | Total operating lease liabilities | $60,614 | - As of **March 31, 2023**, the weighted average remaining lease term was **7.7 years**, and the weighted average discount rate was **4.4%**[69](index=69&type=chunk) [11. Income Taxes](index=18&type=section&id=11.%20Income%20Taxes) This section presents the income tax benefit or expense and the effective tax rate, explaining variances from the statutory rate Income Tax (Benefit) Expense (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Income tax (benefit) expense | $(1,918) | $485 | | Pre-tax loss | $(44,939) | $(112,571) | | Effective tax rate | 4.3% | -0.4% | - The effective tax rate for **Q1 2023 (4.3%)** and **Q1 2022 (-0.4%)** varied from the U.S. federal statutory rate of **21%** due to federal and state income tax expense from current taxable income, offset by valuation allowance[71](index=71&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=19&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion and analysis of financial condition and operational results, highlighting COVID-19 and macroeconomic impacts, product portfolio, and revenue and expense trends for Q1 2023 [Overview](index=19&type=section&id=Overview) This section provides a high-level summary of the company's business, product portfolio, and the impact of external factors on its operations - COVID-19 pandemic has negatively impacted NUPLAZID sales growth due to reduced patient office visits, lower long-term care facility occupancy, and limited access to healthcare professionals[77](index=77&type=chunk) - Acadia is a biopharmaceutical company focused on CNS disorders and rare diseases, with commercial products **NUPLAZID** (Parkinson's disease psychosis) and **DAYBUE** (Rett syndrome)[79](index=79&type=chunk)[80](index=80&type=chunk) - The Company is developing pimavanserin for negative symptoms of schizophrenia (**Phase 3 ADVANCE-2** study, results expected early **2024**) and ACP-204 for Alzheimer's disease psychosis (**Phase 1** clinical program)[83](index=83&type=chunk)[84](index=84&type=chunk) - Acadia has an accumulated deficit of **$2.4 billion** as of **March 31, 2023**, and expects to incur operating losses for the next few years due to R&D and DAYBUE commercialization costs[85](index=85&type=chunk) [Financial Operations Overview](index=21&type=section&id=Financial%20Operations%20Overview) This section describes the key components of the company's financial operations, including revenue recognition and expense categories - Net product sales primarily consist of **NUPLAZID**, approved in **April 2016** and launched in **May 2016**[87](index=87&type=chunk) - Cost of product sales includes third-party manufacturing, freight, indirect overhead, and may include period costs for inventory, obsolescence, and unabsorbed manufacturing[88](index=88&type=chunk) - Research and development expenses are primarily external service provider fees, personnel expenses, and facilities costs, charged to operations as incurred[89](index=89&type=chunk) Research and Development Expenses (in thousands) | Expense Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | NUPLAZID (pimavanserin) | $14,307 | $21,806 | | DAYBUE (trofinetide) | 17,436 | 11,080 | | Early-stage programs | 18,216 | 14,824 | | Upfront and milestone payments* | — | 60,000 | | Subtotal | 49,959 | 107,710 | | Internal costs | 15,213 | 15,681 | | Stock-based compensation | 3,972 | 5,464 | | Total research and development expenses | $69,144 | $128,855 | - Selling, general and administrative expenses include commercial personnel costs, external service provider fees for commercial activities, professional fees, and intellectual property costs[94](index=94&type=chunk) - Income tax expense is expected to primarily consist of current federal and state tax expense due to current taxable income, offset by valuation allowance[95](index=95&type=chunk) [Critical Accounting Policies and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no significant changes to the company's critical accounting policies and estimates since the last fiscal year-end - There have been no significant changes to critical accounting policies and estimates since **December 31, 2022**[96](index=96&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in product sales, cost of sales, and operating expenses - Operating results fluctuate significantly due to commercial activities for **NUPLAZID** and **DAYBUE**, R&D expenditures, post-marketing commitments, sales allowances, and macroeconomic developments[97](index=97&type=chunk) Product Sales, Net (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | |:---|:---|:---|:---| | Net product sales (NUPLAZID) | $118,462 | $115,468 | +$3,000 | | Primary reason for change | Higher average net selling price | | | Sales Allowances and Accruals Activity (in thousands) - Three Months Ended March 31, 2023 | Metric | Distribution Fees, Discounts & Chargebacks | Co-Pay Assistance | Data Rebates, Fees & Returns | Total | |:---|:---|:---|:---|:---| | Balance as of December 31, 2022 | $10,923 | $(340) | $26,046 | $36,629 | | Provision related to current period sales | 19,071 | 1,114 | 37,763 | 57,948 | | Credits/payments for current period sales | (7,474) | (1,339) | (134) | (8,947) | | Credits/payments for prior period sales | (10,923) | 340 | (14,245) | (24,828) | | Balance as of March 31, 2023 | $11,597 | $(225) | $49,430 | $60,802 | Cost of Product Sales (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | |:---|:---|:---|:---| | Cost of product sales | $1,667 | $2,950 | $(1,283) | | As percentage of net product sales | 1% | 3% | -2% | | Primary reason for decrease | Higher average selling price for NUPLAZID and higher inventory cost absorption in 2022 | | | Research and Development Expenses (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | |:---|:---|:---|:---| | R&D expenses | $69,144 | $128,855 | $(59,711) | | Stock-based compensation | 4,000 | 5,500 | $(1,500) | | Primary reason for decrease | $60 million upfront payment to Stoke in 2022 | | | Selling, General and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | |:---|:---|:---|:---| | SG&A expenses | $101,235 | $96,679 | +$4,556 | | Stock-based compensation | 10,600 | 9,200 | +$1,400 | | Primary reason for change | Optimization of PDP commercial franchise offset by DAYBUE launch investments | | | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's funding sources, future capital requirements, and cash flow activities - Operations are funded by equity sales, collaboration payments, debt, interest income, and product sales (**NUPLAZID**, **DAYBUE**)[104](index=104&type=chunk) - Cash, cash equivalents, and investment securities are expected to fund planned operations through and beyond the next **12 months**[104](index=104&type=chunk) - Future capital requirements depend on factors like acquiring product candidates, R&D program scope, milestone payments, commercialization costs for **NUPLAZID** and **DAYBUE**, and intellectual property defense[105](index=105&type=chunk)[106](index=106&type=chunk) - Additional financing may be required, but availability on acceptable terms is uncertain due to market volatility and macroeconomic developments[107](index=107&type=chunk) - Material cash requirements include operational, manufacturing, and capital expenditures, as well as the **$40.0 million DAYBUE** milestone payment and PRV payment to Neuren[109](index=109&type=chunk)[110](index=110&type=chunk) Cash, Cash Equivalents, and Investment Securities (in millions) | Metric | March 31, 2023 | December 31, 2022 | Change | |:---|:---|:---|:---| | Total cash, cash equivalents, and investment securities | $402.9 | $416.8 | $(13.9) | | Primary reason for decrease | Cash used in operating activities | | | Net Cash Flow Activities (in millions) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | |:---|:---|:---|:---| | Net cash used in operating activities | $(17.9) | $(76.3) | +$58.4 | | Net cash provided by investing activities | 192.5 | 131.3 | +$61.2 | | Net cash provided by financing activities | 1.5 | 2.5 | $(1.0) | | Primary reason for operating cash flow decrease | Increased net revenues and decreased R&D costs (due to 2022 Stoke payment) | | | - The Company has no off-balance sheet arrangements with unconsolidated entities or financial partnerships[114](index=114&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=26&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the Company's exposure to market risks, primarily focusing on interest rate risk and its investment strategy to preserve principal and liquidity - The Company invests excess cash in investment-grade, interest-bearing securities (money market funds, municipal bonds, government sponsored enterprises) with maturities generally less than **one year**[116](index=116&type=chunk) - A **10 percent** change in interest rates on **March 31, 2023**, would not have had a material effect on the fair value of the investment portfolio[116](index=116&type=chunk) - Anticipated changes in interest rates are not expected to materially affect interest rate risk in future reporting periods[116](index=116&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=26&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures as of March 31, 2023, and reports no material changes in internal control over financial reporting during the last fiscal quarter - Disclosure controls and procedures are designed to ensure timely and accurate reporting of SEC-required information[117](index=117&type=chunk) - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of **March 31, 2023**[118](index=118&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the last fiscal quarter[120](index=120&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=28&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section incorporates by reference the detailed information on legal proceedings from Note 9 to the condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from **Note 9** of the financial statements[122](index=122&type=chunk) [ITEM 1A. RISK FACTORS](index=28&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines various risks and uncertainties that could materially and adversely affect the Company's business, financial condition, results of operations, and future growth, covering product commercialization, regulatory approvals, intellectual property, government regulations, and stock price volatility [Summary Risk Factors](index=28&type=section&id=Summary%20Risk%20Factors) This section provides a concise overview of the primary risks impacting the company's commercialization efforts, regulatory approvals, financial stability, and market conditions - Prospects are highly dependent on successful commercialization of **NUPLAZID** and **DAYBUE**[124](index=124&type=chunk) - FDA approval terms for **NUPLAZID** may limit commercial potential, and it is subject to ongoing post-marketing commitments[124](index=124&type=chunk) - Reliance on a limited internal commercial team and third-party distributors/pharmacies for **NUPLAZID** and **DAYBUE**[124](index=124&type=chunk) - Failure to obtain regulatory approval for pimavanserin in other indications will limit commercial revenues[124](index=124&type=chunk) - Expected net losses to continue for the next few years, with inability to predict future profitability[124](index=124&type=chunk) - Inability to obtain necessary capital could hinder development and commercialization efforts[124](index=124&type=chunk) - Unfavorable global economic conditions and public health threats (e.g., COVID-19, Ukraine-Russia conflict) could adversely affect business[124](index=124&type=chunk)[125](index=125&type=chunk) - Dependence on third parties for manufacturing and clinical trials[125](index=125&type=chunk) - Risk of declining ability to compete if proprietary rights are not adequately protected[125](index=125&type=chunk) - Healthcare reform measures may negatively impact profitability[125](index=125&type=chunk) - Stock price historically volatile and likely to remain so[125](index=125&type=chunk) [Risks Related to Our Business](index=29&type=section&id=Risks%20Related%20to%20Our%20Business) This section details risks associated with product commercialization, regulatory approvals, drug development, personnel, financial performance, and external economic factors - Successful commercialization of **NUPLAZID** and **DAYBUE** is subject to risks, including market acceptance, pricing, and reimbursement challenges[127](index=127&type=chunk) - **NUPLAZID's** FDA approval for PDP includes a 'boxed' warning for increased death risk in elderly DRP patients, potentially discouraging prescriptions[131](index=131&type=chunk) - An ongoing post-marketing commitment for **NUPLAZID** in frail and elderly patients could lead to label updates or additional regulatory actions[132](index=132&type=chunk) - The Company relies on a limited internal sales force and third-party distributors/pharmacies; failure to maintain or expand these could limit commercialization[138](index=138&type=chunk)[139](index=139&type=chunk) - Pimavanserin has not been approved for other indications or in other jurisdictions; failure to obtain such approvals will limit commercial revenues[141](index=141&type=chunk)[145](index=145&type=chunk) - Drug development is long, expensive, and unpredictable, with a high risk of failure, as evidenced by past unsuccessful trials (e.g., **Phase 3 CLARITY**, **HARMONY sNDA CRLs**)[157](index=157&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - Delays, suspensions, or terminations in clinical trials (e.g., due to regulatory issues, patient recruitment, geopolitical events like Ukraine-Russia conflict, or COVID-19) could increase costs and delay product revenues[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Inability to attract, retain, and motivate key personnel (management, R&D, sales/marketing) could delay drug development and commercialization plans[166](index=166&type=chunk) - Failure to develop, acquire, or in-license other product candidates or products would limit business prospects and leverage of the commercial organization[170](index=170&type=chunk) - The Company expects net losses to continue for the next few years and cannot predict when it will achieve profitability[174](index=174&type=chunk) - Failure to obtain necessary capital could force delays, scope reductions, or elimination of R&D programs or commercialization efforts[178](index=178&type=chunk) - Operating results are expected to fluctuate, making period-to-period comparisons unreliable indicators of future performance[179](index=179&type=chunk)[180](index=180&type=chunk) - Changes in tax laws (e.g., **Tax Cuts and Jobs Act's R&D capitalization**) or adverse interpretations could increase tax liability[181](index=181&type=chunk) - Ability to use net operating losses (**NOLs**) may be limited by ownership changes (**Sections 382/383** of the Code) or state law suspensions[182](index=182&type=chunk) - Tax authorities could reallocate taxable income among subsidiaries, increasing overall tax liability, especially concerning intercompany arrangements with **Acadia Pharmaceuticals GmbH**[184](index=184&type=chunk) - Unfavorable global economic conditions, including inflation, rising interest rates, and geopolitical conflicts, could adversely affect business operations and financial results[185](index=185&type=chunk)[186](index=186&type=chunk) - Public health threats like **COVID-19** have impacted clinical trials, sales force access, and patient visits, negatively affecting **NUPLAZID** sales and potentially future launches[187](index=187&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Geopolitical turmoil from the **Russia-Ukraine conflict** has disrupted clinical trial activities in those regions, potentially delaying completion and complicating data analysis[191](index=191&type=chunk)[192](index=192&type=chunk) - Earthquake or fire damage to facilities in **San Diego** could delay R&D efforts and adversely affect business, as the Company lacks earthquake insurance[193](index=193&type=chunk) - Business involves hazardous materials, requiring compliance with environmental, health, and safety laws; non-compliance could lead to significant costs and operational interruptions[194](index=194&type=chunk)[195](index=195&type=chunk) [Risks Related to Our Relationships with Third Parties](index=43&type=section&id=Risks%20Related%20to%20Our%20Relationships%20with%20Third%20Parties) This section addresses risks arising from reliance on collaborations, contract research organizations, and third-party manufacturers for development and supply - Dependence on collaborations (e.g., **Neuren**, **Stoke**) for development and commercialization means limited control over third-party activities, which may not align with company interests[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Conflicts with collaborators could impair product progress, harm reputation, and result in financial losses[199](index=199&type=chunk)[200](index=200&type=chunk) - Reliance on CROs, medical institutions, and contract laboratories for clinical trials and data collection poses risks if these third parties fail to perform, leading to delays or increased costs[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - Even with successful clinical trials, product candidates may fail due to regulatory clearance issues, proprietary rights of others, manufacturing difficulties, adverse side effects, or competition[207](index=207&type=chunk) - Dependence on third-party manufacturers (e.g., **Patheon**, **Siegfried**) for **NUPLAZID**, **DAYBUE**, and other candidates; failure to provide adequate supplies or comply with cGMPs could jeopardize commercialization and development[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - Failure to comply with obligations in license agreements (e.g., with **Neuren**, **Stoke**) could result in loss of license rights to product candidates[215](index=215&type=chunk) - Disputes with licensors regarding intellectual property scope, diligence obligations, or ownership could adversely affect business[215](index=215&type=chunk)[217](index=217&type=chunk) - Inability to maintain or fully exploit collaborations with outside scientific and clinical advisors could impair R&D efforts[218](index=218&type=chunk) [Risks Related to Our Intellectual Property](index=47&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section outlines risks concerning the acquisition, maintenance, and defense of intellectual property rights, including patent challenges and trade secret protection - Commercial success depends on obtaining, maintaining, and defending intellectual property rights for products like **NUPLAZID** and **DAYBUE**[219](index=219&type=chunk) - Patents may be challenged (e.g., ANDA filings, IPRs), invalidated, or circumvented, leading to generic competition and reduced revenues[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Uncertainty in patentability, especially for gene sequences, due to complex legal questions and recent U.S. Supreme Court decisions[235](index=235&type=chunk) - Confidentiality agreements with employees and partners may not adequately prevent disclosure of trade secrets, limiting competitive advantage[226](index=226&type=chunk)[227](index=227&type=chunk) - Intellectual property litigation is costly, time-consuming, and unpredictable, potentially leading to significant damages, injunctions, or unfavorable license terms[232](index=232&type=chunk)[233](index=233&type=chunk) - Changes in U.S. and foreign patent laws (e.g., **America Invents Act**) or different interpretations could limit exclusivity rights or patent protection[236](index=236&type=chunk) [Risks Related to Government Regulation and Our Industry](index=50&type=section&id=Risks%20Related%20to%20Government%20Regulation%20and%20Our%20Industry) This section covers risks from healthcare reform, fraud and abuse laws, data privacy regulations, competition, product liability, and cybersecurity threats - Healthcare reform measures (e.g., **ACA**, **IRA**) may negatively impact profitability by increasing rebates, lowering reimbursement rates, or imposing price controls[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Non-compliance with federal, state, and foreign healthcare fraud and abuse laws (e.g., **Anti-Kickback Statute**, **False Claims Act**, **HIPAA**) could lead to substantial penalties, exclusion from government programs, and reputational harm[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - Stringent and evolving data privacy and security laws (e.g., **CCPA**, **CPRA**, **GDPR**, **LGPD**, **PIPL**) pose risks of regulatory investigations, litigation, fines, and business disruptions if not complied with[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) - Failure to comply with **Medicaid Drug Rebate Program** and other governmental pricing programs could result in additional reimbursement requirements, fines, and **False Claims Act** exposure[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Promoting **NUPLAZID** or **DAYBUE** for 'off-label' uses could lead to significant civil and criminal sanctions[261](index=261&type=chunk) - Changes or disruptions at the **FDA** and other government agencies (e.g., budget issues, shutdowns) could delay product development and commercialization[263](index=263&type=chunk)[264](index=264&type=chunk) - Stringent regulation in marketing products requires extensive preclinical testing, clinical trials, and regulatory clearance, which is time-consuming and resource-intensive[265](index=265&type=chunk)[266](index=266&type=chunk) - Intense competition from other pharmaceutical and biotechnology companies, including off-label use of generic drugs, could reduce commercial opportunity for **NUPLAZID** and **DAYBUE**[267](index=267&type=chunk)[268](index=268&type=chunk)[270](index=270&type=chunk) - Product liability lawsuits could result in substantial liabilities, decreased demand, reputational harm, and limit commercialization efforts[271](index=271&type=chunk)[273](index=273&type=chunk) - Compromised information technology systems or data (due to cyberattacks, ransomware, human error) could lead to regulatory actions, operational interruptions, reputational harm, and financial losses[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) [Risks Related to Our Common Stock](index=59&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This section discusses risks associated with stock price volatility, potential litigation, influence of large stockholders, anti-takeover provisions, and dividend policy - The Company's stock price has been and is likely to remain highly volatile, influenced by commercial success, R&D progress, regulatory communications, market trends, and litigation[285](index=285&type=chunk)[287](index=287&type=chunk) - Securities class action litigation, even if unsuccessful, can result in substantial costs and divert management attention[288](index=288&type=chunk) - Sales of substantial amounts of common stock by large stockholders (e.g., **Baker Entities**) or the Company itself could reduce the market price[289](index=289&type=chunk)[290](index=290&type=chunk) - Officers, directors, and largest stockholders, acting together, can significantly influence management and operations, potentially in their own best interests[291](index=291&type=chunk) - Anti-takeover provisions in charter documents and Delaware law may complicate acquisitions and make director/management removal difficult[292](index=292&type=chunk)[293](index=293&type=chunk) - The Company does not intend to pay dividends in the foreseeable future; investment return relies solely on stock appreciation[294](index=294&type=chunk) [General Risk Factors](index=61&type=section&id=General%20Risk%20Factors) This section addresses broader risks including management's discretion over cash use, corporate governance costs, and capital market conditions - Management has broad discretion over cash use, which may not always align with stockholder interests or increase market value[295](index=295&type=chunk) - Significant costs are incurred due to corporate governance laws and regulations (e.g., **Dodd-Frank**, **SOX**), potentially affecting business, financial results, and stock price[296](index=296&type=chunk)[297](index=297&type=chunk) - Adverse securities and credit market conditions may significantly affect the ability to raise capital on acceptable terms[298](index=298&type=chunk) [ITEM 6. EXHIBITS](index=63&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, stock plans, certifications, and interactive data files Selected Exhibits | Exhibit Number | Description | |:---|:---| | 3.1 | Amended and Restated Certificate of Incorporation | | 3.3 | Amended and Restated Bylaws | | 10.1 | Acadia Pharmaceuticals Inc. 2023 Inducement Plan | | 31.1 | Certification of Stephen R. Davis, CEO (Section 302) | | 31.2 | Certification of Mark C. Schneyer, CFO (Section 302) | | 32.1 | Certification of Stephen R. Davis, CEO (Section 906) | | 32.2 | Certification of Mark C. Schneyer, CFO (Section 906) | | 101 | iXBRL Financial Statements | | 104 | Cover Page Interactive Data File | [SIGNATURES](index=64&type=section&id=SIGNATURES) This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its due authorization and filing - The report is duly signed on behalf of Acadia Pharmaceuticals Inc. by **Mark C. Schneyer**, Executive Vice President and Chief Financial Officer, on **May 8, 2023**[303](index=303&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-50768 ACADIA PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 06-1376651 (State or Other Jurisdi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-50768 ACADIA PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) 12830 El Camino Real, Suite 400 San Diego, California 92130 (Address of Princip ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements detail the company's financial position and operational results Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $139,833 | $147,435 | | Investment securities, available-for-sale | 296,518 | 373,271 | | Total current assets | 532,519 | 617,823 | | Total assets | $612,766 | $700,122 | | Total current liabilities | 117,681 | 96,068 | | Total liabilities | 177,918 | 159,228 | | Total stockholders' equity | 434,848 | 540,894 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $134,563 | $115,221 | $250,031 | $221,775 | | Total revenues | 134,563 | 115,221 | 250,031 | 221,775 | | Total operating expenses | 168,214 | 158,930 | 396,698 | 332,256 | | Loss from operations | (33,651) | (43,709) | (146,667) | (110,481) | | Net loss | $(34,011) | $(43,871) | $(147,067) | $(110,319) | | Net loss per common share, basic and diluted | $(0.21) | $(0.27) | $(0.91) | $(0.69) | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(34,011) | $(43,871) | $(147,067) | $(110,319) | | Unrealized (loss) gain on investment securities | (236) | 5 | (658) | (1) | | Foreign currency translation adjustments | 5 | (1) | 7 | 3 | | Comprehensive loss | $(34,242) | $(43,867) | $(147,718) | $(110,317) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(89,454) | $(85,476) | | Net cash provided by investing activities | 75,548 | 13,670 | | Net cash provided by financing activities | 6,298 | 12,731 | | Net decrease in cash, cash equivalents and restricted cash | $(7,602) | $(59,072) | | Cash, cash equivalents and restricted cash, End of period | $145,603 | $272,726 | Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Item | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total stockholders' equity, beginning balances | $540,894 | $627,009 | | Additional paid-in capital, ending balance | 2,736,318 | 2,660,809 | | Accumulated deficit, ending balance | (2,300,643) | (2,096,025) | | Total stockholders' equity, ending balances | $434,848 | $564,838 | Notes to Condensed Consolidated Financial Statements Note 1. Organization and Business Acadia Pharmaceuticals Inc is a biopharmaceutical company specializing in medicines for central nervous system disorders - Acadia Pharmaceuticals Inc focuses on developing and commercializing medicines for central nervous system disorders[18](index=18&type=chunk) - The company's first drug, NUPLAZID® (pimavanserin), was approved by the FDA in **April 2016** for the treatment of hallucinations and delusions associated with Parkinson's disease psychosis (PDP)[19](index=19&type=chunk) Note 2. Basis of Presentation and Significant Accounting Policies The basis for preparing the unaudited financial statements is outlined, including the impact of COVID-19 - The COVID-19 pandemic has **negatively impacted** the growth of NUPLAZID sales due to reduced patient office visits, lower occupancy rates at long-term care facilities, and decreased access to healthcare professionals[21](index=21&type=chunk) Reconciliation of Cash, Cash Equivalents and Restricted Cash (in thousands) | Item | Beginning of period (2022) | End of period (2022) | Beginning of period (2021) | End of period (2021) | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $147,435 | $139,833 | $326,028 | $266,956 | | Restricted cash | 5,770 | 5,770 | 5,770 | 5,770 | | Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $153,205 | $145,603 | $331,798 | $272,726 | Note 3. Net Loss Per Share The calculation of net loss per share excludes anti-dilutive securities due to the company's net loss position - Approximately **21,646,000 shares** (June 30, 2022) and **19,489,000 shares** (June 30, 2021) from stock options, employee stock purchase plan rights, restricted stock units, and warrants were excluded from diluted net loss per share calculations because their effect would have been anti-dilutive[27](index=27&type=chunk) Note 4. Stock-Based Compensation Stock-based compensation expenses are detailed across various operational cost categories for recent reporting periods Stock-Based Compensation Expense (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Cost of product sales | $346 | $423 | $669 | $586 | | Research and development | 7,232 | 7,319 | 12,696 | 12,149 | | Selling, general and administrative | 12,934 | 14,263 | 22,110 | 22,454 | | Total | $20,512 | $22,005 | $35,475 | $35,189 | Note 5. Balance Sheet Details Detailed breakdowns of inventory and accrued liabilities are provided for the current and prior year-end periods Inventory Composition (in thousands) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Finished goods | $2,081 | $1,114 | | Work in process | 4,246 | 6,767 | | Raw material | 6,205 | 6,217 | | Total | $12,532 | $14,098 | | Reported as: | | | | Inventory | $6,327 | $7,881 | | Long-term inventory | 6,205 | 6,217 | Accrued Liabilities Composition (in thousands) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Accrued research and development services | $39,767 | $27,270 | | Accrued compensation and benefits | 23,351 | 25,896 | | Accrued sales allowances | 14,237 | 15,717 | | Accrued consulting and professional fees | 11,441 | 9,319 | | Current portion of lease liabilities | 9,024 | 8,304 | | Current portion of accrued branded prescription drug fees | 7,021 | 1,959 | | Other | 986 | 727 | | Total | $105,827 | $89,192 | Note 6. Investments The company's available-for-sale investment portfolio composition and impairment evaluation are detailed Investment Securities, Available-for-Sale (June 30, 2022, in thousands) | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury notes | $67,568 | — | $(92) | $67,476 | | Government sponsored enterprise securities | 49,502 | — | (92) | 49,410 | | Municipal bonds | 25,869 | — | (66) | 25,803 | | Commercial paper | 154,430 | 32 | (633) | 153,829 | | Total | $297,369 | $32 | $(883) | $296,518 | Investment Securities, Available-for-Sale (December 31, 2021, in thousands) | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury notes | $140,287 | — | $(100) | $140,187 | | Government sponsored enterprise securities | 49,512 | — | (38) | 49,474 | | Corporate debt securities | 26,006 | — | (22) | 25,984 | | Commercial paper | 157,670 | 9 | (53) | 157,626 | | Total | $373,475 | $9 | $(213) | $373,271 | - As of June 30, 2022, the company had **43 available-for-sale investment securities** in an unrealized loss position, with total estimated fair value of **$270,873 thousand** and unrealized losses of **$(883) thousand**[37](index=37&type=chunk)[38](index=38&type=chunk) - The company does not intend to sell these investments and does not expect to incur credit losses[39](index=39&type=chunk) Note 7. Fair Value Measurements The fair value hierarchy and valuation methods for financial assets and liabilities are described Fair Value Measurements at June 30, 2022 (in thousands) | Item | Total Fair Value | Level 1 (Quoted Prices) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :--- | :--- | :--- | :--- | :--- | | **Assets** | | | | | | Money market fund | $92,926 | $92,926 | — | — | | U.S. Treasury notes | 67,476 | 67,476 | — | — | | Equity securities | 3,481 | 3,481 | — | — | | Government sponsored enterprise securities | 65,377 | — | 65,377 | — | | Municipal bonds | 25,802 | — | 25,802 | — | | Commercial paper | 162,824 | — | 162,824 | — | | **Total Assets** | **$417,886** | **$163,883** | **$254,003** | **—** | | **Liabilities** | | | | | | Cash awards | $694 | — | — | $694 | | **Total Liabilities** | **$694** | **—** | **—** | **$694** | Changes in Estimated Fair Value of Contingent Cash Awards (Six Months Ended June 30, 2022, in thousands) | Item | Amount | | :--- | :--- | | Balance as of December 31, 2021 | $603 | | Vesting of awards | 1,153 | | Expense forfeited | (55) | | Change in fair value | (1,007) | | Balance as of June 30, 2022 | $694 | Note 8. Stockholders' Equity A cash bonus plan for employees is detailed, contingent on employment and stock price targets - A cash bonus plan for employees (excluding executive management) was established in November 2021, with a maximum potential payout of **$15.1 million** at the grant date[48](index=48&type=chunk) - The fair value of these awards at June 30, 2022, was approximately **$2.1 million**, with a maximum potential payout of **$13.3 million** after adjusting for forfeitures[48](index=48&type=chunk) - During the three months ended June 30, 2022, the company recorded a reversal of **$0.8 million** in compensation cost related to these awards, and a total of **$0.1 million** compensation cost for the six months ended June 30, 2022[48](index=48&type=chunk) Note 9. Commitments and Contingencies The company's collaboration agreements, potential milestone payments, and significant legal proceedings are outlined - The company may be required to make aggregate milestone payments up to **$3.1 billion** under various collaboration, licensing, and merger agreements as of June 30, 2022[49](index=49&type=chunk) - Key agreements include a license with Neuren for trofinetide (**$455.0 million** in potential milestones), Vanderbilt University for the M1 PAM program (**$515.0 million** in potential milestones), and Stoke Therapeutics for RNA-based medicines (**$907.5 million** in potential milestones)[50](index=50&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) - The company is involved in patent infringement lawsuits against several generic drug manufacturers (Aurobindo, Teva, MSN, Zydus) regarding NUPLAZID, with a joint trial scheduled for **May 15, 2023**[59](index=59&type=chunk)[61](index=61&type=chunk) - A securities class action complaint (Marechal v Acadia Pharmaceuticals, Inc) was filed in April 2021, alleging violations of the Securities Exchange Act related to pimavanserin's sNDA for Alzheimer's disease psychosis[62](index=62&type=chunk) Note 10. Leases Operating lease commitments for facilities and equipment are detailed, including costs and maturity schedules Operating Lease Costs (in thousands) | Period | 2022 (Three Months) | 2021 (Three Months) | 2022 (Six Months) | 2021 (Six Months) | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $1,737 | $2,624 | $3,848 | $5,002 | Supplemental Cash Flow Information Related to Leases (in thousands) | Item | 2022 (Three Months) | 2021 (Three Months) | 2022 (Six Months) | 2021 (Six Months) | | :--- | :--- | :--- | :--- | :--- | | Operating cash flows from operating leases | $2,285 | $696 | $4,428 | $1,710 | | Right-of-use assets obtained in exchange for operating lease obligations | 881 | 17,377 | 2,321 | 17,377 | Maturities of Lease Liabilities (in thousands) | Period | Operating Leases | | :--- | :--- | | Remainder of 2022 | 4,608 | | Years ending December 31, 2023 | 9,377 | | Years ending December 31, 2024 | 8,655 | | Years ending December 31, 2025 | 8,735 | | Years ending December 31, 2026 | 8,099 | | Thereafter | 36,642 | | Total lease payments | 76,116 | | Less: Imputed interest | (12,399) | | Total operating lease liabilities | 63,717 | - As of June 30, 2022, the weighted average remaining lease term was **8.4 years**, and the weighted average discount rate used was **4.4%**[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, pipeline updates, and future outlook Overview - The COVID-19 pandemic has **negatively impacted** NUPLAZID sales growth due to reduced patient office visits, lower long-term care facility occupancy, and reduced access to healthcare professionals[76](index=76&type=chunk) - The company submitted an NDA for trofinetide for Rett syndrome in **July 2022**, following positive Phase 3 Lavender study results[79](index=79&type=chunk) - The FDA issued a complete response letter (CRL) for the resubmission of pimavanserin for Alzheimer's disease psychosis (ADP) in **August 2022**, and the company is not planning additional studies for pimavanserin in ADP at this time[80](index=80&type=chunk) - The ACP-044 pain program and ACP-319 M1 PAM program have been **discontinued**[80](index=80&type=chunk) - The company had an accumulated deficit of **$2.3 billion** as of June 30, 2022, and expects to incur operating losses for the next few years[81](index=81&type=chunk) Financial Operations Overview - Net product sales are derived solely from NUPLAZID, approved in **April 2016** and launched in May 2016[83](index=83&type=chunk) - Cost of product sales includes third-party manufacturing, freight, indirect overhead, and potential period costs for inventory[84](index=84&type=chunk) - License fees and royalties previously included payments to the Ipsen Group, which **terminated in October 2021**[85](index=85&type=chunk) - Research and development expenses are primarily for external service providers, personnel, facilities, and pre-commercial product candidates, charged to operations as incurred[86](index=86&type=chunk) - Selling, general and administrative expenses cover commercial personnel, medical education, executive functions, external commercial support, professional fees, and intellectual property costs[93](index=93&type=chunk) Results of Operations Comparison of the Three Months Ended June 30, 2022 and 2021 Net product sales increased due to a higher average selling price, while operating expenses saw mixed changes - Net product sales (NUPLAZID) **increased by $19.4 million** to **$134.6 million** for the three months ended June 30, 2022, from $115.2 million in the prior year, driven by a higher average net selling price[96](index=96&type=chunk) - Research and development expenses **increased to $75.6 million** (including $7.2 million stock-based compensation) for the three months ended June 30, 2022, from $56.9 million (including $7.3 million stock-based compensation) in 2021, mainly due to increased costs for early-stage development programs[99](index=99&type=chunk) - Selling, general and administrative expenses **decreased to $89.9 million** (including $12.9 million stock-based compensation) for the three months ended June 30, 2022, from $96.8 million (including $14.3 million stock-based compensation) in 2021, primarily due to reduced advertising and promotional costs[100](index=100&type=chunk) - License fees and royalties **decreased to $0** for the three months ended June 30, 2022, from $2.7 million in 2021, due to the termination of the royalty obligation in October 2021[97](index=97&type=chunk) Comparison of the Six Months Ended June 30, 2022 and 2021 Net product sales grew, while a significant upfront payment drove a substantial increase in R&D expenses - Net product sales (NUPLAZID) **increased by $28.2 million** to **$250.0 million** for the six months ended June 30, 2022, from $221.8 million in the prior year, primarily due to a higher average net selling price[101](index=101&type=chunk) - Research and development expenses **increased to $204.5 million** (including $12.7 million stock-based compensation) for the six months ended June 30, 2022, from $113.9 million (including $12.1 million stock-based compensation) in 2021, mainly due to a **$60 million upfront payment** to Stoke for a license and collaboration agreement[105](index=105&type=chunk) - Selling, general and administrative expenses **decreased to $186.6 million** (including $22.1 million stock-based compensation) for the six months ended June 30, 2022, from $208.5 million (including $22.5 million stock-based compensation) in 2021, primarily due to decreased advertising, promotional, and personnel costs[107](index=107&type=chunk) - License fees and royalties **decreased to $0** for the six months ended June 30, 2022, from $5.2 million in 2021, due to the termination of the royalty obligation in October 2021[104](index=104&type=chunk) Liquidity and Capital Resources - As of June 30, 2022, cash, cash equivalents, and investment securities totaled **$436.4 million**, a decrease of **$84.3 million** from December 31, 2021, primarily due to cash used in operating activities[115](index=115&type=chunk) - Net cash used in operating activities **increased to $89.5 million** for the six months ended June 30, 2022, compared to $85.5 million in 2021, driven by increased R&D costs offset by higher net revenues[115](index=115&type=chunk) - Net cash provided by investing activities **increased to $75.5 million** for the six months ended June 30, 2022, from $13.7 million in 2021, mainly due to increased net maturities of investment securities[116](index=116&type=chunk) - Net cash provided by financing activities **decreased to $6.3 million** for the six months ended June 30, 2022, from $12.7 million in 2021, primarily due to a decrease in proceeds from employee stock option exercises[117](index=117&type=chunk) - The company expects existing cash, cash equivalents, and investment securities to fund operations for **at least the next 12 months**, but significant additional financing may be required in the future[108](index=108&type=chunk)[111](index=111&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risks, primarily interest rate risk, is assessed as not material - The company invests excess cash in investment-grade, interest-bearing securities (money market funds, U.S. Treasury notes, high-quality marketable debt instruments) with maturities generally **less than one year**[121](index=121&type=chunk) - A **10% change in interest rates** as of June 30, 2022, would not have a material effect on the fair value of the company's investment portfolio[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concludes that disclosure controls and procedures were effective with no material changes to internal controls - The company's disclosure controls and procedures were evaluated and deemed **effective** at the reasonable assurance level as of June 30, 2022[123](index=123&type=chunk) - **No changes** in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the latest fiscal quarter[124](index=124&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Details on legal proceedings are incorporated by reference from the financial statement notes - Information on legal proceedings is **incorporated by reference** from Note 9 to the condensed consolidated financial statements[126](index=126&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to commercialization, regulation, finances, and intellectual property Summary Risk Factors - The company's prospects are **highly dependent** on the successful commercialization of NUPLAZID[128](index=128&type=chunk) - **Failure to obtain regulatory approval** for pimavanserin in other indications or trofinetide for Rett syndrome will limit commercial revenues[128](index=128&type=chunk) - NUPLAZID is subject to **substantial, ongoing regulatory requirements**, and its approval terms may limit commercial potential[128](index=128&type=chunk) - The company expects **net losses to continue** for the next few years and cannot predict future profitability[128](index=128&type=chunk) - Public health threats, including **COVID-19**, have impacted clinical trials and could adversely affect operations and financial results[130](index=130&type=chunk) Risks Related to Our Business - Commercialization of NUPLAZID is subject to risks, including market acceptance, physician prescription rates, patient adherence, and potential safety concerns, which could limit its market potential[132](index=132&type=chunk)[135](index=135&type=chunk) - The FDA issued a **Complete Response Letter** for pimavanserin in Alzheimer's disease psychosis (ADP), and the company is not planning additional studies for this indication[136](index=136&type=chunk)[179](index=179&type=chunk) - Clinical trials are long, expensive, and unpredictable, with a **high risk of failure**, as demonstrated by previous unsuccessful Phase 3 trials for pimavanserin in MDD and inadequate response schizophrenia[176](index=176&type=chunk)[178](index=178&type=chunk) - **Delays, suspensions, or terminations** in clinical trials due to various factors (e.g., patient enrollment, adverse events, regulatory holds) could increase costs and delay product revenue generation[184](index=184&type=chunk)[185](index=185&type=chunk)[188](index=188&type=chunk) - The company's success depends on **attracting and retaining** highly qualified management, scientific, and commercial personnel, especially in CNS disorders, facing intense competition for talent[189](index=189&type=chunk)[190](index=190&type=chunk) - **Failure to develop, acquire, or in-license** other product candidates or products would limit business prospects and the ability to leverage the commercial organization established for NUPLAZID[195](index=195&type=chunk)[196](index=196&type=chunk) - The company had an accumulated deficit of approximately **$2.3 billion** as of June 30, 2022, and expects to incur net losses for at least the next few years[198](index=198&type=chunk)[199](index=199&type=chunk) - **Significant additional financing** may be required to fund operations, and the inability to obtain such capital could lead to delays, reduced scope, or elimination of R&D programs or commercialization efforts[202](index=202&type=chunk)[203](index=203&type=chunk) Risks Related to Our Relationships with Third Parties - The company **relies on third-party collaborations** for product development and commercialization, with limited control over their resource allocation and strategic decisions[224](index=224&type=chunk)[225](index=225&type=chunk) - **Conflicts with collaborators** could impair product candidate progress, harm reputation, and result in revenue loss[231](index=231&type=chunk) - **Reliance on third parties** for clinical trials, data collection, and analysis poses risks of delays, increased costs, and compromised data quality if they fail to perform or meet regulatory obligations[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - The company **depends on third-party manufacturers** for NUPLAZID, trofinetide, and other product candidates, and any failure in their supply, quality control, or regulatory compliance could jeopardize commercialization and development[241](index=241&type=chunk)[243](index=243&type=chunk)[246](index=246&type=chunk) - **Failure to comply with obligations** under intellectual property license agreements (e.g., with Neuren, Vanderbilt, Stoke) could lead to termination of licenses and loss of marketing rights for covered products[252](index=252&type=chunk) Risks Related to Our Intellectual Property - The company's commercial success depends on **obtaining and maintaining intellectual property rights**, including patents and trade secrets, and defending them against third-party challenges[258](index=258&type=chunk) - Patent applications may not result in issued patents, or issued patents may be **challenged, circumvented, or invalidated**, potentially leading to generic competition (e.g., ANDA filings for NUPLAZID)[259](index=259&type=chunk)[261](index=261&type=chunk) - **Trade secrets are difficult to protect**, and confidentiality agreements may not adequately prevent disclosure, potentially limiting competitive advantage[265](index=265&type=chunk)[266](index=266&type=chunk) - **Intellectual property litigation**, including post-issuance review proceedings (IPR, post-grant review), is costly, time-consuming, and unpredictable, with a high risk of patent invalidation[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - **Changes in patent laws** or their interpretations (e.g., U.S. Supreme Court decisions, America Invents Act) could negatively impact patentability, exclusivity periods, and enforcement capabilities[278](index=278&type=chunk)[279](index=279&type=chunk) Risks Related to Government Regulation and Our Industry - **Healthcare reform measures**, such as the ACA and subsequent legislative changes, could negatively impact the company's ability to sell NUPLAZID profitably through more rigorous coverage criteria, increased rebates (e.g., Medicaid Drug Rebate Program changes), and downward pressure on drug prices[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk) - The company is subject to federal, state, and foreign healthcare and data protection laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, GDPR), and **non-compliance could lead to substantial penalties**, fines, exclusion from healthcare programs, and reputational harm[290](index=290&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[304](index=304&type=chunk) - Promoting NUPLAZID for **'off-label' uses** could result in significant liability, including civil and criminal sanctions, and diversion of management's attention[309](index=309&type=chunk)[310](index=310&type=chunk) - **Changes or disruptions at the FDA** and other government agencies (e.g., government shutdowns, resource reallocation due to COVID-19) could delay or prevent timely development and commercialization of new products[312](index=312&type=chunk)[313](index=313&type=chunk) - **Intense competition** from pharmaceutical and biotechnology companies, including off-label use of generic drugs, could reduce or eliminate the commercial opportunity for NUPLAZID and other product candidates[320](index=320&type=chunk)[321](index=321&type=chunk)[324](index=324&type=chunk) - **Product liability lawsuits**, arising from commercial sales or clinical testing, could result in substantial liabilities, decreased demand, reputational damage, and limitations on commercialization or development[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) - **Compromise of information technology systems** or data due to cyberattacks, ransomware, or other security breaches could lead to operational interruptions, clinical trial disruptions, data loss, and claims of non-compliance with data protection obligations[328](index=328&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[334](index=334&type=chunk) Risks Related to Our Common Stock - The company's stock price has historically been, and is likely to remain, **highly volatile** due to factors such as commercialization success of NUPLAZID, regulatory developments, clinical trial results, market trends, and litigation[339](index=339&type=chunk) - **Sales of substantial amounts of common stock** by officers, directors, and largest stockholders (e.g., Baker Entities) could significantly reduce the market price of the stock[341](index=341&type=chunk) - **Anti-takeover provisions** in charter documents and Delaware law may make an acquisition more complicated and make it difficult to remove and replace directors and management[344](index=344&type=chunk)[345](index=345&type=chunk) - The company **does not intend to pay dividends** in the foreseeable future, meaning investors must rely on stock appreciation for any return on investment[348](index=348&type=chunk)[349](index=349&type=chunk) General Risk Factors - Management has **broad discretion** over the use of cash, which may not always align with stockholder interests or increase market value[350](index=350&type=chunk)[351](index=351&type=chunk) - The company incurs **significant costs** due to laws and regulations related to corporate governance (e.g., Dodd-Frank, Sarbanes-Oxley), which could impact business and financial results[352](index=352&type=chunk)[353](index=353&type=chunk) - **Changes in financial accounting standards**, such as those related to revenue recognition or leases, may harm results of operations and require updates to internal controls[354](index=354&type=chunk)[355](index=355&type=chunk) - **Adverse securities and credit market conditions**, including volatility from the COVID-19 pandemic, may significantly affect the company's ability to raise capital on acceptable terms[356](index=356&type=chunk)[358](index=358&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) A list of exhibits filed with the Form 10-Q is provided [SIGNATURES](index=62&type=section&id=SIGNATURES) The report is certified with official signatures, confirming its due authorization