ACADIA Pharmaceuticals(ACAD) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 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 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 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 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 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 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 This section provides detailed explanations of the accounting policies, significant estimates, and other relevant financial information supporting the consolidated statements 1. Organization and Business 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] - NUPLAZID® (pimavanserin) was approved by the FDA in April 2016 for Parkinson's disease psychosis (PDP)[19] - DAYBUE™ (trofinetide) was approved by the FDA in March 2023 for Rett syndrome and became available in April 2023[19] 2. Basis of Presentation and Significant Accounting Policies 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] - The company's business has been negatively impacted by the COVID-19 pandemic, affecting NUPLAZID sales growth[21] - 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] 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] - License fees for products under development are expensed if recoverability is uncertain and technology has no alternative future use[27] - Finite-lived intangible assets are amortized over their estimated useful lives; no impairment loss was recorded in Q1 2023 or Q1 2022[28] 3. Net Loss Per Share 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] - 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] - 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] 4. Stock-Based Compensation 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] - Expense is recognized over the requisite service period, generally the vesting period[31] 5. Balance Sheet Details 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] 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 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] 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] - 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] 7. Fair Value Measurements 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] - Level 1 financial instruments are valued using quoted market prices, and Level 2 instruments use third-party pricing services with observable inputs[43] - 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][45] 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 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][52] - 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] - 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] 9. Commitments and Contingencies 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] - 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] - 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] - 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] - 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][62][63][64][65] - 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] - 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] 10. Leases 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] 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] 11. Income Taxes 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] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] - 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][80] - 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][84] - 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] Financial Operations Overview 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] - Cost of product sales includes third-party manufacturing, freight, indirect overhead, and may include period costs for inventory, obsolescence, and unabsorbed manufacturing[88] - Research and development expenses are primarily external service provider fees, personnel expenses, and facilities costs, charged to operations as incurred[89] 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] - 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] Critical Accounting Policies and Estimates 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] Results of Operations 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] 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 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] - Cash, cash equivalents, and investment securities are expected to fund planned operations through and beyond the next 12 months[104] - 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][106] - Additional financing may be required, but availability on acceptable terms is uncertain due to market volatility and macroeconomic developments[107] - 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][110] 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - 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] - Anticipated changes in interest rates are not expected to materially affect interest rate risk in future reporting periods[116] ITEM 4. CONTROLS AND PROCEDURES 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] - 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] - 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] PART II. OTHER INFORMATION This section provides additional disclosures including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS 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] ITEM 1A. RISK FACTORS 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 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] - FDA approval terms for NUPLAZID may limit commercial potential, and it is subject to ongoing post-marketing commitments[124] - Reliance on a limited internal commercial team and third-party distributors/pharmacies for NUPLAZID and DAYBUE[124] - Failure to obtain regulatory approval for pimavanserin in other indications will limit commercial revenues[124] - Expected net losses to continue for the next few years, with inability to predict future profitability[124] - Inability to obtain necessary capital could hinder development and commercialization efforts[124] - Unfavorable global economic conditions and public health threats (e.g., COVID-19, Ukraine-Russia conflict) could adversely affect business[124][125] - Dependence on third parties for manufacturing and clinical trials[125] - Risk of declining ability to compete if proprietary rights are not adequately protected[125] - Healthcare reform measures may negatively impact profitability[125] - Stock price historically volatile and likely to remain so[125] Risks Related to Our Business 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] - NUPLAZID's FDA approval for PDP includes a 'boxed' warning for increased death risk in elderly DRP patients, potentially discouraging prescriptions[131] - An ongoing post-marketing commitment for NUPLAZID in frail and elderly patients could lead to label updates or additional regulatory actions[132] - The Company relies on a limited internal sales force and third-party distributors/pharmacies; failure to maintain or expand these could limit commercialization[138][139] - Pimavanserin has not been approved for other indications or in other jurisdictions; failure to obtain such approvals will limit commercial revenues[141][145] - 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][159][160] - 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][164][165] - Inability to attract, retain, and motivate key personnel (management, R&D, sales/marketing) could delay drug development and commercialization plans[166] - Failure to develop, acquire, or in-license other product candidates or products would limit business prospects and leverage of the commercial organization[170] - The Company expects net losses to continue for the next few years and cannot predict when it will achieve profitability[174] - Failure to obtain necessary capital could force delays, scope reductions, or elimination of R&D programs or commercialization efforts[178] - Operating results are expected to fluctuate, making period-to-period comparisons unreliable indicators of future performance[179][180] - Changes in tax laws (e.g., Tax Cuts and Jobs Act's R&D capitalization) or adverse interpretations could increase tax liability[181] - Ability to use net operating losses (NOLs) may be limited by ownership changes (Sections 382/383 of the Code) or state law suspensions[182] - Tax authorities could reallocate taxable income among subsidiaries, increasing overall tax liability, especially concerning intercompany arrangements with Acadia Pharmaceuticals GmbH[184] - Unfavorable global economic conditions, including inflation, rising interest rates, and geopolitical conflicts, could adversely affect business operations and financial results[185][186] - 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][189][190][191] - Geopolitical turmoil from the Russia-Ukraine conflict has disrupted clinical trial activities in those regions, potentially delaying completion and complicating data analysis[191][192] - 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] - Business involves hazardous materials, requiring compliance with environmental, health, and safety laws; non-compliance could lead to significant costs and operational interruptions[194][195] Risks Related to Our Relationships with Third Parties 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][197][198] - Conflicts with collaborators could impair product progress, harm reputation, and result in financial losses[199][200] - 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][203][204] - 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] - 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][209][210][211][212][213][214] - Failure to comply with obligations in license agreements (e.g., with Neuren, Stoke) could result in loss of license rights to product candidates[215] - Disputes with licensors regarding intellectual property scope, diligence obligations, or ownership could adversely affect business[215][217] - Inability to maintain or fully exploit collaborations with outside scientific and clinical advisors could impair R&D efforts[218] Risks Related to Our Intellectual Property 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] - Patents may be challenged (e.g., ANDA filings, IPRs), invalidated, or circumvented, leading to generic competition and reduced revenues[219][220][221][229][230] - Uncertainty in patentability, especially for gene sequences, due to complex legal questions and recent U.S. Supreme Court decisions[235] - Confidentiality agreements with employees and partners may not adequately prevent disclosure of trade secrets, limiting competitive advantage[226][227] - Intellectual property litigation is costly, time-consuming, and unpredictable, potentially leading to significant damages, injunctions, or unfavorable license terms[232][233] - Changes in U.S. and foreign patent laws (e.g., America Invents Act) or different interpretations could limit exclusivity rights or patent protection[236] Risks Related to Government Regulation and Our Industry 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][240][241][242] - 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][245][246] - 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][248][249][251][252][254][255] - 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][258][259] - Promoting NUPLAZID or DAYBUE for 'off-label' uses could lead to significant civil and criminal sanctions[261] - Changes or disruptions at the FDA and other government agencies (e.g., budget issues, shutdowns) could delay product development and commercialization[263][264] - Stringent regulation in marketing products requires extensive preclinical testing, clinical trials, and regulatory clearance, which is time-consuming and resource-intensive[265][266] - Intense competition from other pharmaceutical and biotechnology companies, including off-label use of generic drugs, could reduce commercial opportunity for NUPLAZID and DAYBUE[267][268][270] - Product liability lawsuits could result in substantial liabilities, decreased demand, reputational harm, and limit commercialization efforts[271][273] - 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][275][276][277][278][279][280][281][282] Risks Related to Our Common Stock 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][287] - Securities class action litigation, even if unsuccessful, can result in substantial costs and divert management attention[288] - Sales of substantial amounts of common stock by large stockholders (e.g., Baker Entities) or the Company itself could reduce the market price[289][290] - Officers, directors, and largest stockholders, acting together, can significantly influence management and operations, potentially in their own best interests[291] - Anti-takeover provisions in charter documents and Delaware law may complicate acquisitions and make director/management removal difficult[292][293] - The Company does not intend to pay dividends in the foreseeable future; investment return relies solely on stock appreciation[294] General Risk Factors 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] - 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][297] - Adverse securities and credit market conditions may significantly affect the ability to raise capital on acceptable terms[298] ITEM 6. EXHIBITS 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 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]