ACADIA Pharmaceuticals(ACAD) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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] 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 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] 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] - 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] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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][70] - 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] - 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] Risk Factors 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] - 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] - 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][185][186] - 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] - 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][264] Exhibits 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] - Includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[322]