ACADIA Pharmaceuticals(ACAD) - 2023 Q4 - Annual Report

PART I Item 1. Business. This section provides an overview of Acadia Pharmaceuticals Inc., a biopharmaceutical company focused on central nervous system (CNS) disorders and rare diseases, detailing its commercial products, strategic objectives, pipeline, competitive landscape, intellectual property, regulatory environment, and operational aspects Company Overview Acadia Pharmaceuticals is a biopharmaceutical company focused on CNS disorders and rare diseases, with commercial products NUPLAZID and DAYBUE - Acadia Pharmaceuticals is a biopharmaceutical company focused on developing and commercializing innovative medicines for unmet medical needs in CNS disorders and rare diseases[11] - NUPLAZID was approved by the FDA in April 2016 for the treatment of hallucinations and delusions associated with Parkinson's disease psychosis (PDP), being the first and only drug approved for this condition in the U.S.[12] - DAYBUE was approved by the FDA in March 2023 for the treatment of Rett syndrome, also the first and only drug approved for this condition, and became available in the U.S. in April 2023[12] Our Strategy The company's strategy focuses on maximizing sales of commercial products and advancing late-stage pipeline candidates in key therapeutic areas - The company's strategy focuses on building strong commercialization for DAYBUE in Rett syndrome and maximizing NUPLAZID sales for Parkinson's disease psychosis in the U.S.[22] - Key strategic elements include advancing late-stage opportunities like the Phase 3 ADVANCE-2 study for pimavanserin in schizophrenia (top-line results expected Q1 2024), and initiating Phase 3 COMPASS study for ACP-101 in PWS and Phase 2 for ACP-204 in ADP[23] - Plans include delivering DAYBUE to international markets, with a new drug submission expected in Canada in Q1 2024 and a marketing authorization application in Europe in H1 2025[23] Our Pipeline This section details Acadia's drug pipeline, including NUPLAZID, DAYBUE, ACP-101, ACP-204, and ASO programs for neurodevelopmental diseases NUPLAZID (pimavanserin) NUPLAZID is the first and only FDA-approved drug for Parkinson's disease psychosis, also being evaluated for schizophrenia's negative symptoms - NUPLAZID (pimavanserin) is the first and only FDA-approved drug in the U.S. for hallucinations and delusions associated with Parkinson's disease psychosis (PDP), approved in April 2016[25] - Pimavanserin is being evaluated in a Phase 3 clinical development program (ADVANCE-2) for the treatment of negative symptoms of schizophrenia, with top-line results expected in Q1 2024[16][31] DAYBUE (trofinetide) as a Treatment for Rett Syndrome DAYBUE is the first and only FDA-approved treatment for Rett syndrome, a novel synthetic analog of IGF-1 with Fast Track and Orphan Drug designations - DAYBUE (trofinetide) was approved by the FDA in March 2023 for the treatment of Rett syndrome, marking it as the first and only drug for this condition[34] - Trofinetide is a novel synthetic analog of IGF-1 designed to reduce neuroinflammation and support synaptic function, and has been granted FDA Fast Track Status and Orphan Drug Designation[32] ACP-101 as a Treatment for Prader-Willi syndrome ACP-101 is a Phase 3 investigational drug for hyperphagia in Prader-Willi syndrome, a rare genetic disorder with no FDA-approved treatment - ACP-101 (intranasal carbetocin) is an investigational drug in Phase 3 development for the treatment of hyperphagia in Prader-Willi syndrome (PWS), a rare neurobehavioral genetic disorder with no FDA-approved treatment for hyperphagia[17][35][36] - The Phase 3 COMPASS PWS study was initiated in Q4 2023 to evaluate the efficacy and safety of ACP-101 for hyperphagia in PWS[17][37] ACP-204 as a Treatment for Alzheimer's Disease Psychosis ACP-204 is a Phase 2 investigational drug for Alzheimer's disease psychosis, leveraging pimavanserin learnings for a favorable safety and efficacy profile - ACP-204, an internally discovered new molecule, is in a Phase 2 study for the treatment of hallucinations and delusions associated with Alzheimer's disease psychosis (ADP), an area with high unmet medical need and no FDA-approved treatments[18][39][41] - ACP-204 is designed to leverage learnings from pimavanserin, targeting the serotonergic system to potentially offer a favorable safety and tolerability profile while maximizing efficacy[40][41] Antisense Oligonucleotide (ASO) Programs Acadia collaborates with Stoke Therapeutics to develop novel RNA-based medicines for severe and rare genetic neurodevelopmental diseases of the CNS - In January 2022, Acadia entered a collaboration with Stoke Therapeutics to discover, develop, and commercialize novel RNA-based medicines for severe and rare genetic neurodevelopmental diseases of the CNS[19][42] - The collaboration includes programs for SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed neurodevelopmental target, currently in various stages of pre-clinical development[19][42] Competition Acadia faces intense competition from pharmaceutical and biotechnology companies, with NUPLAZID and DAYBUE competing against off-label uses and pipeline products - Acadia faces intense competition from pharmaceutical and biotechnology companies, academic institutions, and governmental agencies, many of which have greater resources and experience[43][46][47] - NUPLAZID for PDP competes with off-label use of various antipsychotic drugs, including generic quetiapine, clozapine, risperidone, aripiprazole, and olanzapine[43] - DAYBUE for Rett syndrome competes indirectly with off-label usage of branded and generic medications targeting individual symptoms, and directly with products in development by Anavex, Taysha Gene Therapies, and Neurogene[45] Intellectual Property Acadia protects its proprietary rights through patents, trade secrets, and confidentiality agreements, holding numerous U.S. patents and exclusive licenses - Acadia relies on a combination of patents, trade secret protection, and confidentiality agreements to protect its intellectual property, holding 59 issued U.S. patents and exclusively licensing rights to an additional 35[50] Pimavanserin Acadia holds multiple U.S. patents for pimavanserin, NUPLAZID, and their uses, with composition of matter patent expiring in 2030 - Acadia holds 36 U.S. patents related to pimavanserin, NUPLAZID, and its methods of use. The composition of matter patent covering pimavanserin and its salts has an expiration date in 2030 (including patent term extension)[51] - Patents covering the 10 mg tablet formulation expire in 2037, and those for the 34 mg capsule formulation expire in 2038[54] Trofinetide Acadia holds exclusive licenses for U.S. patents related to trofinetide from Neuren Pharmaceuticals, including a use patent for Rett syndrome expiring in 2032 - Acadia holds exclusive licenses to 8 U.S. patents from Neuren Pharmaceuticals related to trofinetide, including a use patent for treating Rett syndrome with an expiration date in 2032, potentially extendable to January 2036[55] Government Regulation Acadia's business is extensively regulated by governmental authorities, covering all aspects from drug development and approval to post-marketing requirements - Acadia's business activities are subject to extensive regulation by governmental authorities in the U.S. and other countries, covering development, testing, manufacturing, safety, efficacy, labeling, approval, advertising, promotion, and distribution of biopharmaceutical products[56] - The regulatory review and approval process, including preclinical testing and clinical trials (Phase 1, 2, 3), is lengthy, expensive, and uncertain, requiring submission of an Investigational New Drug Application (IND) and New Drug Application (NDA)[56][57][59] - Post-marketing requirements include ongoing risk management, Phase 4 studies, compliance with advertising and promotion laws, anti-fraud and abuse laws, data privacy laws, and periodic FDA inspections[61][65] Coverage and Reimbursement Product sales depend on coverage and reimbursement from third-party payors, which are increasingly limiting coverage and reducing rates - Sales of NUPLAZID and DAYBUE depend on coverage and reimbursement from third-party payors (government, commercial insurance, managed healthcare organizations), which are increasingly limiting coverage and reducing reimbursements[68] - A payor's decision to cover a drug does not guarantee an adequate reimbursement rate, and coverage policies and rates can change at any time, potentially diminishing product revenues[68] - NUPLAZID and DAYBUE are available under Medicare Part D, but changes in policy regarding 'clinical concern' drug classes could give plans more discretion to reduce coverage[69] Healthcare Laws and Regulations Acadia is subject to federal and state healthcare laws, including anti-kickback and false claims statutes, with non-compliance leading to significant penalties - Acadia is subject to federal and state healthcare laws, including the Anti-Kickback Statute, False Claims Act, HIPAA (and HITECH), and the Physician Payments Sunshine Act, which restrict business practices in the pharmaceutical industry[70][71] - Non-compliance with these laws can result in significant administrative, civil, and/or criminal penalties, fines, exclusion from federal healthcare programs, and reputational harm[73] - The company is also subject to EU and UK GDPR, which impose strict requirements for processing health information and cross-border data transfers, with potential for high sanctions[71] Healthcare Reform Healthcare reform measures, such as the ACA and IRA, are impacting the pharmaceutical industry through drug pricing controls and reduced profitability - Healthcare reform measures, such as the Affordable Care Act (ACA) and the Inflation Reduction Act of 2022 (IRA), are being enacted or considered in the U.S. and foreign jurisdictions, potentially impacting profitability[74][76][78] - The IRA, effective progressively from FY2023, directs HHS to negotiate Medicare drug prices and imposes rebates for price increases exceeding inflation, which is likely to significantly impact the pharmaceutical industry[78] - State-level legislation is also increasing, with measures designed to control pharmaceutical pricing, including potential drug importation programs, which could result in lower drug prices[79] Manufacturing and Distribution Acadia outsources all manufacturing to third-party contract manufacturers and distributes products through specialty pharmacies and a wholesale distributor - Acadia outsources all manufacturing activities for NUPLAZID, DAYBUE, and product candidates to third-party contract manufacturers (e.g., Siegfried AG for pimavanserin API, Patheon for NUPLAZID and trofinetide drug product, Corden and FIS for trofinetide API, CoreRx for trofinetide products)[81][82][84][86][87][88] - NUPLAZID is sold to a limited number of specialty pharmacies (SPs) and specialty distributors (SDs), with four customers accounting for approximately 73% of NUPLAZID product revenue and 56% of total product revenue in 2023[85] - DAYBUE is sold to a single wholesale distributor, which handles warehousing, customer service, and order processing[89] Sales and Marketing Acadia employs U.S. sales specialists to promote NUPLAZID and DAYBUE to relevant physicians, supported by patient access and clinical support programs - Acadia employs U.S. sales specialists to promote NUPLAZID to neurologists, psychiatrists, and long-term care physicians, aiming to establish it as the standard of care for PDP[90][91] - U.S. sales specialists also promote DAYBUE to physicians treating Rett syndrome patients, supported by the Acadia Connect hub which provides resources for access, reimbursement, and clinical support[92][93] Long-Lived Assets This section provides a summary of Acadia's property, equipment, and intangible assets, net, as of December 31, 2023, 2022, and 2021 Long-Lived Assets (in millions) | Asset Type | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | | :----------- | :----------- | :----------- | :----------- | | Property and equipment, net | $4.6 | $6.0 | $8.0 | | Intangible assets, net | $117.3 | $55.6 | $58.3 | - All tangible long-lived assets are located in the United States[95] Employees and Human Capital As of December 31, 2023, Acadia had 598 employees, with success dependent on attracting and retaining qualified personnel through competitive compensation and inclusive culture - As of December 31, 2023, Acadia had 598 employees, with 597 being full-time, across various functions including R&D, clinical, regulatory, manufacturing, marketing, sales, finance, and legal[96] - The company's success depends on attracting, retaining, and motivating highly qualified personnel through competitive compensation, equity opportunities, comprehensive benefits, and development programs[97] - Acadia values diversity, equity, and inclusion, focusing on initiatives that support a culture of belonging aligned with its corporate mission and values[97] Item 1A. Risk Factors. This section outlines significant risks and uncertainties that could materially and adversely affect Acadia's business, financial condition, results of operations, and future growth prospects, potentially leading to a decline in its common stock price Risks Related to Our Business Acadia's business faces significant risks related to commercialization success, the lengthy and unpredictable drug development process, and a history of net losses - Acadia's prospects are highly dependent on the continued successful commercialization of NUPLAZID and DAYBUE; failure to maintain or increase sales could materially adversely affect the business[99] - Drug development is a long, expensive, and unpredictable process with a high risk of failure, and delays, suspensions, or terminations in clinical trials could increase costs and delay revenue generation[134][138] - Acadia has a history of net losses, with an accumulated deficit of approximately $2.4 billion as of December 31, 2023, and may not be able to predict the extent of future losses or generate sufficient capital to fund operations[152][154] Risks Related to Our Relationships with Third Parties Acadia relies on third-party collaborations and manufacturers, facing risks of non-performance, disputes, or supply chain disruptions - Acadia depends on collaborations with third parties (e.g., Neuren, Stoke) to develop and commercialize certain product candidates, and these collaborators may fail to perform as expected or terminate agreements[174][175][176] - Conflicts or disputes may arise in collaborations regarding payments, strategy, intellectual property rights, or development responsibilities, potentially harming progress and financial results[177][178][181] - The company relies on third parties to manufacture NUPLAZID, DAYBUE, and product candidates; failures by these manufacturers to provide adequate supplies or comply with regulatory requirements could impede development or commercialization[187][190][191] Risks Related to Our Intellectual Property Acadia's competitive ability depends on protecting its intellectual property, facing risks from patent challenges and inadequate trade secret protection - Acadia's ability to compete depends on adequately protecting its proprietary rights through patents, trade secrets, and confidentiality agreements; successful challenges to its intellectual property could enable competitors[194][195] - The company faces substantial litigation risks concerning patents and other intellectual property rights, including challenges to patent validity (e.g., ANDA filings, inter partes review), which can be costly and time-consuming[195][202][203][204] - Confidentiality agreements with employees and third parties may not adequately prevent disclosure of trade secrets, potentially limiting competitive advantage[200][201] Risks Related to Government Regulation and Our Industry Acadia is exposed to risks from healthcare reform, stringent regulations, and intense competition, potentially impacting profitability and market opportunity - Healthcare reform measures (e.g., ACA, IRA) and heightened governmental scrutiny over drug pricing may negatively impact Acadia's ability to sell products profitably through increased rebates, price negotiations, and lower reimbursements[213][214][216] - Acadia is subject to stringent federal, state, and foreign healthcare laws and regulations (e.g., anti-kickback, false claims, data privacy), and non-compliance could lead to substantial penalties, fines, and operational restrictions[219][220][222] - The company faces intense competition from other pharmaceutical and biotechnology companies, and if competitors develop more effective, safer, or more affordable products, Acadia's commercial opportunity could be reduced or eliminated[245][249] Risks Related to Our Common Stock The market price of Acadia's common stock is highly volatile, influenced by company performance, clinical results, regulatory developments, and anti-takeover provisions - The market price for Acadia's common stock has historically been, and is likely to remain, highly volatile, influenced by factors such as commercialization success, clinical trial results, regulatory developments, and market trends[263] - Officers, directors, and largest stockholders beneficially own a substantial portion of outstanding common stock, potentially allowing them to significantly influence management and operations in their own interests[268] - Anti-takeover provisions in charter documents and Delaware law may make an acquisition more complicated and make the removal and replacement of directors and management more difficult[269][270] General Risk Factors General risks include management's discretion over cash use, significant corporate governance costs, and adverse securities and credit market conditions impacting capital raising - Management has broad discretion over the use of cash, which may not always align with stockholder interests or increase market value[273] - Acadia incurs significant costs due to laws and regulations related to corporate governance (e.g., Dodd-Frank, Sarbanes-Oxley Act), which can impact financial results and the ability to attract qualified personnel[274][275] - Adverse securities and credit market conditions, exacerbated by geopolitical and macroeconomic developments, may significantly affect the company's ability to raise capital on acceptable terms[276] Item 1B. Unresolved Staff Comments. This item states that there are no unresolved staff comments applicable to the company Item 1C. Cybersecurity. This section details Acadia's approach to cybersecurity, including its risk management and strategy for identifying, assessing, and mitigating threats, as well as the governance structure involving board oversight and management responsibilities Risk management and strategy Acadia implements information security processes to identify, assess, and manage cybersecurity risks to its networks and data, employing various mitigation measures - Acadia has implemented information security processes to identify, assess, and manage material risks from cybersecurity threats to its critical computer networks, third-party hosted services, and data[277] - The company uses various methods for risk assessment, including monitoring threat environments, vulnerability assessments, external intelligence feeds, and third-party incident response exercises[278] - Mitigation measures include incident detection and response, disaster recovery, encryption, network security controls, access controls, employee training, and cybersecurity insurance[279] Governance Acadia's board, through its audit committee, oversees cybersecurity risk management, with dedicated management roles for implementation and incident response escalation - Acadia's board of directors, through its audit committee, addresses and oversees the company's cybersecurity risk management processes, including the mitigation of cybersecurity threats[283] - The Director of Information Security and CIO are responsible for implementing and maintaining cybersecurity risk assessment and management processes, hiring personnel, and integrating cybersecurity into the overall risk strategy[284] - The incident response policy ensures escalation of certain cybersecurity incidents to management and the audit committee for mitigation and remediation[285] Item 2. Properties. Acadia's primary facility is approximately 67,000 square feet of office space in San Diego, California, with an additional 25,000 square feet leased in Princeton, New Jersey, expiring in January 2025 - Primary facility: approximately 67,000 square feet of office space in San Diego, California[286] - Leases approximately 25,000 square feet of office space in Princeton, New Jersey, with the lease expiring in January 2025[286] Item 3. Legal Proceedings. Acadia is involved in several legal proceedings, including patent infringement lawsuits, a securities class action, and a derivative suit, which are not currently expected to have a material adverse effect on its business Patent Infringement Acadia is engaged in patent infringement lawsuits related to NUPLAZID against generic drug manufacturers, with some settlements reached and others ongoing - Acadia filed patent infringement complaints (Pimavanserin I Cases) against Aurobindo, Teva, Hetero, MSN, and Zydus in July 2020, alleging infringement of Orange Book-listed patents covering NUPLAZID[287] - Settlements were reached with Hetero (generic launch Feb 27, 2038) and Zydus (generic launch Sep 23, 2036 for 10 mg, Feb 27, 2038 for 34 mg)[288][291] - MSN remains an active defendant in the Pimavanserin I Cases, where the Court ruled in Acadia's favor on summary judgment of invalidity on December 13, 2023, a decision MSN appealed on January 18, 2024. Pimavanserin II cases against MSN and Aurobindo are scheduled for trial in December 2024[292][293] Securities Class Action A putative securities class action was filed against Acadia in April 2021, alleging violations related to disclosures about pimavanserin in dementia-related psychosis, with motions to dismiss denied - A putative securities class action was filed on April 19, 2021, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, related to disclosures about the sNDA for pimavanserin in dementia-related psychosis[293] - Defendants' motions to dismiss and for reconsideration were denied. Briefing on a motion for class certification concluded on January 12, 2024, with oral argument scheduled for February 28, 2024[293] Derivative Suit A derivative action was filed against certain directors in December 2023, based on alleged misconduct similar to the Securities Class Action, and is currently stayed pending investigation - A derivative action was filed on December 15, 2023, against certain current directors, based on alleged misconduct similar to the Securities Class Action, asserting state and federal claims[294] - The action was stayed on February 20, 2024, pending the outcome of the company's Demand Review Committee's investigation into the underlying claims[294] Item 4. Mine Safety Disclosures. This item is not applicable to Acadia Pharmaceuticals Inc PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. This section provides information on the market for Acadia's common stock, its stockholder base, dividend policy, and equity compensation plans, including a performance graph comparing the company's stock return to relevant indices Market Information Acadia's common stock is traded on the Nasdaq Global Select Market under the symbol "ACAD" - Acadia's common stock is traded on the Nasdaq Global Select Market under the symbol "ACAD"[296] Holders As of February 21, 2024, Acadia had 164,771,521 shares of common stock outstanding, held by approximately 34 stockholders of record - As of February 21, 2024, there were 164,771,521 shares of common stock outstanding, held by approximately 34 stockholders of record[296] Dividends Acadia has not paid cash dividends and plans to retain future earnings for business development and growth - Acadia has not paid any cash dividends on its common stock to date and does not intend to pay any in the foreseeable future, planning to retain future earnings for business development and growth[296] Securities Authorized for Issuance Under Equity Compensation Plans Information regarding equity compensation plans is incorporated by reference to Item 12 of Part III of this report - Information regarding equity compensation plans is incorporated by reference to Item 12 of Part III of this report[296] Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no purchases of equity securities by the issuer or affiliated purchasers during the reporting period - There were no purchases of equity securities by the issuer or affiliated purchasers[297] Recent Sales of Unregistered Securities This section is not applicable to the company's recent activities - This section is not applicable[297] Performance Graph A graph compares the total cumulative returns of a $100 investment in Acadia's common stock against relevant indices from December 31, 2018, through December 31, 2023 - A graph compares the total cumulative returns of a $100 investment in Acadia's common stock, the Nasdaq Biotechnology Index, and the Nasdaq U.S. Benchmark TR Index from December 31, 2018, through December 31, 2023[297] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides a comprehensive discussion and analysis of Acadia's financial condition and results of operations for the years ended December 31, 2023, 2022, and 2021, covering product revenues, expenses, income taxes, critical accounting policies, liquidity, capital resources, and cash flows Overview This section provides a background of Acadia Pharmaceuticals, highlighting its focus on CNS disorders, commercial products, pipeline, and historical operating losses Background Acadia Pharmaceuticals is a biopharmaceutical company focused on CNS disorders and rare diseases, with commercial products NUPLAZID and DAYBUE, and a robust development pipeline - Acadia Pharmaceuticals is a biopharmaceutical company focused on developing and commercializing innovative medicines for CNS disorders and rare diseases, with a portfolio of commercial products and in-development opportunities[299] - Commercial products include NUPLAZID (approved April 2016 for PDP) and DAYBUE (approved March 2023 for Rett syndrome)[300] - The pipeline includes pimavanserin for negative symptoms of schizophrenia (Phase 3, top-line results Q1 2024), ACP-101 for hyperphagia in PWS (Phase 3), ACP-204 for ADP (Phase 2), and ASO programs for neurodevelopmental diseases[305][306][307][308] - Acadia has incurred substantial operating losses since inception, with an accumulated deficit of approximately $2.4 billion as of December 31, 2023[309] Financial Operations Overview This section outlines Acadia's key financial components, including product revenues, cost of sales, research and development expenses, selling, general and administrative expenses, and income tax expense Product Revenues Net product sales comprise revenues from NUPLAZID and DAYBUE in the United States, recognized at the net sales price - Net product sales consist of sales of NUPLAZID (approved April 2016, launched May 2016) and DAYBUE (approved March 2023, launched April 2023) in the United States[310] Cost of Product Sales Cost of product sales includes manufacturing, freight, overhead, inventory adjustments, and license fees/royalties, with initial DAYBUE costs affected by pre-launch inventory expensing - Cost of product sales includes third-party manufacturing costs, freight, indirect overhead, inventory adjustments, and license fees/royalties (e.g., tiered, escalating, double-digit percentages due to Neuren based on DAYBUE net sales)[311] - Cost of sales for newly launched DAYBUE in 2023 was affected by the use of initial pre-launch inventory, which was previously expensed as R&D (zero cost inventories)[312] Research and Development Expenses R&D expenses primarily cover external service providers, personnel, and facilities for pipeline programs, charged to operations as incurred - Research and development expenses primarily consist of fees paid to external service providers, salaries, personnel expenses, and facilities costs related to pimavanserin, trofinetide, ACP-101, ACP-204, and other early-stage programs[313] - All R&D expenses are charged to operations as incurred, including costs for post-marketing commitments for NUPLAZID and DAYBUE[313] Research and Development Expenses (in thousands) | Category | 2023 | 2022 | 2021 | | :-------------------------------- | :------- | :------- | :------- | | Costs of external service providers: | | | | | NUPLAZID (pimavanserin) | $55,527 | $62,746 | $73,696 | | DAYBUE (trofinetide) | $32,065 | $62,300 | $39,814 | | ACP-101 | $11,887 | $2,085 | $— | | ACP-204 | $43,768 | $16,898 | $2,569 | | Early-stage programs | $26,789 | $45,803 | $33,395 | | Upfront and milestone payments* | $102,500 | $88,741 | $10,999 | | Subtotal | $272,536 | $278,573 | $160,473 | | Internal costs | $61,675 | $60,422 | $56,973 | | Stock-based compensation | $17,408 | $22,580 | $21,969 | | Total research and development expenses | $351,619 | $361,575 | $239,415 | Selling, General and Administrative Expenses SG&A expenses include salaries, stock-based compensation, commercial costs, medical education, and professional fees, fluctuating with market dynamics and development - Selling, general and administrative expenses include salaries, stock-based compensation, commercial personnel costs (including specialty sales forces), medical education, professional fees, and patent-related costs[317] - These expenses are subject to fluctuations based on PDP and Rett syndrome market dynamics and the development of pimavanserin in additional indications[317] Income Tax Expense Income tax expense primarily reflects current federal and state taxes due to a full valuation allowance against deferred tax assets, subject to fluctuations - Income tax expense primarily consists of current federal and state tax expense due to a full valuation allowance against net deferred tax assets[318] - Income tax expense may fluctuate due to non-recurring transactions, timing of revenue and expense across jurisdictions, and changes in tax assessments[318] Critical Accounting Policies and Estimates This section details Acadia's critical accounting policies and estimates, including those for product sales, rebates, chargebacks, R&D accruals, and stock-based compensation Product Sales, Net Revenue from product sales is recognized at the net sales price, requiring significant judgment for sales discounts and allowances - Revenue from product sales is recognized at the net sales price, which includes estimates of variable consideration for which reserves are established, reflecting the company's best estimates of the consideration entitled[322] - Significant judgment is required for sales discounts and allowances, including rebates, chargebacks, and co-pay assistance[322] Rebates Allowances for rebates include mandated discounts under government programs and estimates for the Inflation Reduction Act, based on statutory rates and utilization - Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and Medicare Part D, based on statutory rates, estimated payor mix, and expected utilization[322] - Estimates also account for amounts due under the Inflation Reduction Act of 2022 for Medicare Part D unit sales with AMP increases that outpace inflation[322] Chargebacks Chargebacks represent discounts and fees for government and other entities purchasing from specialty distributors, estimated based on contractual terms - Chargebacks represent discounts and fees related to contracts with government and other entities purchasing from specialty distributors at a discounted price, estimated based on applicable contractual terms[323] Research and Development Accruals Accruals for R&D costs are estimated based on the status of trials and services provided by contract organizations, with clinical trial costs recognized by patient enrollment - Accruals for R&D costs are estimated based on the status of trials or services provided by contract organizations, with costs for clinical trials recognized based on patient enrollment[324] Stock-Based Compensation The fair value of employee stock options and purchase plan rights is estimated using the Black-Scholes model, while RSUs and PSUs are expensed over their vesting or performance periods - The fair value of employee stock options and purchase plan rights is estimated using the Black-Scholes valuation model and expensed over the vesting period[325] - The fair value of restricted stock units (RSUs) is based on the market price at grant date, and performance-based stock awards (PSUs) are expensed over the expected performance period once vesting is probable[325] Results of Operations This section analyzes Acadia's operating results, highlighting fluctuations driven by commercial activities, R&D expenditures, sales allowances, and macroeconomic factors Fluctuations in Operating Results Operating results are expected to continue fluctuating significantly due to commercial activities for NUPLAZID and DAYBUE, R&D expenditures, sales allowances, and geopolitical/macroeconomic developments - Operating results have fluctuated significantly and are expected to continue doing so due to commercial activities for NUPLAZID and DAYBUE, R&D expenditures, sales allowances, and geopolitical/macroeconomic developments[326] Comparison of the Years Ended December 31, 2023 and 2022 This section compares Acadia's financial performance for 2023 and 2022, detailing changes in product sales, cost of sales, and operating expenses Product Sales, Net Net product sales increased significantly in 2023 due to growth in NUPLAZID unit sales and the successful launch of DAYBUE Net Product Sales (in thousands) | Product | 2023 | 2022 | Change (YoY) | | :------ | :------- | :------- | :----------- | | NUPLAZID | $549,248 | $517,235 | +$32,013 | | DAYBUE | $177,189 | $— | +$177,189 | | Total | $726,437 | $517,235 | +$209,202 | - The increase in NUPLAZID net product sales was due to growth in unit sales and a higher average net selling price[327] - DAYBUE contributed $177.2 million in net product sales in 2023 following its launch in April 2023[327] Cost of Product Sales The cost of product sales increased in 2023, primarily due to license fees and royalties for DAYBUE, with initial DAYBUE inventory expensed as R&D prior to approval Cost of Product Sales (in thousands) | Year | Amount | % of Net Product Sales | | :--- | :------- | :--------------------- | | 2023 | $41,638 | 6% | | 2022 | $10,166 | 2% | - The increase in cost of product sales was primarily due to $21.8 million in license fees and royalties expensed for DAYBUE in 2023[329] - Cost of sales for DAYBUE in 2023 was affected by the use of initial pre-launch inventory (zero cost inventory), which had been expensed as R&D prior to approval. Had these costs been capitalized, cost of sales would have increased by approximately $9.4 million[330] Research and Development Expenses R&D expenses decreased in 2023, mainly due to reduced trofinetide commercial supply build expensed before approval Research and Development Expenses (in thousands) | Year | Amount | Stock-based Compensation | | :--- | :------- | :----------------------- | | 2023 | $351,619 | $17,408 | | 2022 | $361,575 | $22,580 | - Research and development expenses decreased by $9.9 million in 2023, mainly due to reduced trofinetide commercial supply build that was expensed prior to approval[332] Selling, General and Administrative Expenses SG&A expenses increased in 2023, driven by commercial costs for the DAYBUE launch, partially offset by reduced NUPLAZID-related expenses Selling, General and Administrative Expenses (in thousands) | Year | Amount | Stock-based Compensation | | :--- | :------- | :----------------------- | | 2023 | $406,559 | $48,006 | | 2022 | $369,090 | $44,515 | - Selling, general and administrative expenses increased by $37.5 million in 2023, primarily due to increased commercial costs associated with the DAYBUE launch, partially offset by reductions in NUPLAZID-related expenses[333] Comparison of the Years Ended December 31, 2022 and 2021 This section compares Acadia's financial performance for 2022 and 2021, detailing changes in product sales, cost of sales, and operating expenses Product Sales, Net Net product sales increased in 2022 compared to 2021, primarily due to a higher average gross selling price of NUPLAZID Net Product Sales (in thousands) | Product | 2022 | 2021 | Change (YoY) | | :------ | :------- | :------- | :----------- | | NUPLAZID | $517,235 | $484,145 | +$33,090 | | DAYBUE | $— | $— | $— | | Total | $517,235 | $484,145 | +$33,090 | - Net product sales increased by $33.1 million in 2022 compared to 2021, primarily due to a higher average gross selling price of NUPLAZID[334] Cost of Product Sales Cost of product sales decreased in 2022, mainly due to the termination of the Ipsen Group royalty obligation in October 2021 Cost of Product Sales (in thousands) | Year | Amount | % of Net Product Sales | | :--- | :------- | :--------------------- | | 2022 | $10,166 | 2% | | 2021 | $19,141 | 4% | - Cost of product sales decreased by $8.9 million in 2022, primarily due to the termination of the Ipsen Group royalty obligation in October 2021[336] Research and Development Expenses R&D expenses significantly increased in 2022 due to upfront and milestone payments to collaborators and higher development costs for pipeline programs Research and Development Expenses (in thousands) | Year | Amount | Stock-based Compensation | | :--- | :------- | :----------------------- | | 2022 | $361,575 | $22,580 | | 2021 | $239,415 | $21,969 | - Research and development expenses increased by $122.2 million in 2022, mainly due to a $60 million upfront payment to Stoke and a $10 million milestone payment to Neuren, along with increased development costs for trofinetide, ACP-204, and other early-stage programs[337] Selling, General and Administrative Expenses SG&A expenses decreased in 2022 due to optimized NUPLAZID commercial spend, partially offset by investments for trofinetide launch preparation Selling, General and Administrative Expenses (in thousands) | Year | Amount | Stock-based Compensation | | :--- | :------- | :----------------------- | | 2022 | $369,090 | $44,515 | | 2021 | $396,028 | $40,360 | - Selling, general and administrative expenses decreased by $26.9 million in 2022, primarily due to reduced and optimized commercial spend related to NUPLAZID, offset by investments in preparing for the launch of trofinetide[338] Liquidity and Capital Resources Acadia's operations are funded by product sales, equity, and interest income, with sufficient cash for the next twelve months, but future capital needs may require additional financing - Acadia's operations are funded primarily by revenues from NUPLAZID and DAYBUE sales, equity securities sales, and interest income. As of December 31, 2023, cash, cash equivalents, and investment securities totaled $438.9 million[339][347] - The company expects existing cash resources to fund operations for at least the next twelve months, but future capital requirements could increase significantly due to R&D, commercialization, and potential acquisitions[339][340] - Additional financing may be required in the future, potentially through strategic collaborations, public/private sales of securities, debt financings, or licensing, with uncertainty regarding availability and terms[342] Material Cash Requirements Material cash requirements include operational, manufacturing, and capital expenditures, along with significant potential milestone payments for pipeline candidates - Material cash requirements include operational, manufacturing, and capital expenditures, funded by current financial resources and anticipated product sales[344] - As of December 31, 2023, long-term contractual obligations related to operating leases totaled $66.5 million[345] - The company may be required to make milestone payments up to $3.4 billion in aggregate for pipeline candidates, contingent upon achieving future development, regulatory, and commercial milestones[346] Cash Flows This section provides an overview of Acadia's cash, cash equivalents, and investment securities, and analyzes net cash flows from operating, investing, and financing activities Cash, Cash Equivalents, and Investment Securities (in thousands) | Year | Amount | | :--- | :------- | | 2023 | $438,900 | | 2022 | $416,800 | Net Cash Flow by Activity (in thousands) | Activity | 2023 | 2022 | 2021 | | :-------------------------------- | :------- | :----------- | :----------- | | Operating activities | +$16,702 | $(114,035) | $(125,660) | | Investing activities | +$31,998 | +$73,241 | $(71,102) | | Financing activities | +$25,129 | +$8,199 | +$18,162 | - The increase in net cash provided by operating activities in 2023 was primarily due to increased net revenues and decreased research and development costs, partially offset by increased sales and marketing costs[348] Off-Balance Sheet Arrangements Acadia has no off-balance sheet arrangements with unconsolidated entities or financial partnerships, thus avoiding related financing, liquidity, market, or credit risks - Acadia has not entered into any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements, thus not materially exposed to related financing, liquidity, market, or credit risks[351] Recent Accounting Pronouncements This section directs to Note 2 of the Consolidated Financial Statements for a summary of significant accounting policies and recent accounting pronouncements - Refer to Note 2 of the Consolidated Financial Statements for a summary of significant accounting policies, including recent accounting pronouncements[352] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section discusses Acadia's exposure to market risks, primarily interest rate risk, and its strategies for managing these risks through investment policies Interest Rate Risk Acadia manages interest rate risk by investing excess cash in investment-grade, short-term, interest-bearing securities, prioritizing principal preservation and liquidity - Acadia invests its excess cash in investment-grade, interest-bearing securities, primarily money market funds, U.S. treasury notes, and high-quality marketable debt instruments with maturities generally less than one year[353] - The primary objective of investment activities is to preserve principal and liquidity, with all investment securities having a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better[353] - A 10 percent change in interest rates would not have had a material effect on the fair value of the investment portfolio as of December 31, 2023 and 2022, and no material effect is expected in future reporting periods[353] Item 8. Financial Statements and Supplementary Data. This section presents the audited consolidated financial statements of Acadia Pharmaceuticals Inc. for the years ended December 31, 2023, 2022, and 2021, along with the report of the independent registered public accounting firm and detailed notes to the financial statements Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued unqualified opinions on Acadia's financial statements and internal controls, highlighting Medicare Part D rebate accruals as a critical audit matter - Ernst & Young LLP issued an unqualified opinion on Acadia Pharmaceuticals Inc.'s consolidated financial statements as of December 31, 2023 and 2022, and for the three years ended December 31, 2023[394] - The firm also expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023, based on COSO criteria[395] - A critical audit matter identified was the auditing of Medicare Part D sales rebate accruals due to the subjectivity of certain assumptions and their materiality to the financial statements[398][400] Consolidated Balance Sheets This section presents key figures from Acadia's consolidated balance sheets, including total assets, liabilities, and stockholders' equity for 2023 and 2022 Consolidated Balance Sheet Highlights (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Total current assets | $616,125 | $507,937 | | Total assets | $748,956 | $587,812 | | Total current liabilities | $254,254 | $125,630 | | Total liabilities | $317,201 | $187,399 | | Total stockholders' equity | $431,755 | $400,413 | Consolidated Statements of Operations This section presents key figures from Acadia's consolidated statements of operations, including net product sales, operating expenses, and net loss for 2023, 2022, and 2021 Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Item | 2023 | 2022 | 2021 | | :-------------------------------- | :----------- | :----------- | :----------- | | Product sales, net | $726,437 | $517,235 | $484,145 | | Total operating expenses | $799,816 | $740,831 | $654,584 | | Loss from operations | $(73,379) | $(223,596) | $(170,439) | | Net loss | $(61,286) | $(215,975) | $(167,870) | | Net loss per common share, basic and diluted | $(0.37) | $(1.34) | $(1.05) | Consolidated Statements of Comprehensive Loss This section presents key figures from Acadia's consolidated statements of comprehensive loss, including net loss and other comprehensive income (loss) for 2023, 2022, and 2021 Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Item | 2023 | 2022 | 2021 | | :-------------------------------- | :----------- | :----------- | :----------- | | Net loss | $(61,286) | $(215,975) | $(167,870) | | Unrealized income (loss) on investment securities | $1,017 | $(789) | $(235) | | Foreign currency translation adjustments | $(18) | $6 | $7 | | Comprehensive loss | $(60,287) | $(216,758) | $(168,098) | Consolidated Statements of Cash Flows This section presents key figures from Acadia's consolidated statements of cash flows, detailing net cash provided by (used in) operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Item | 2023 | 2022 | 2021 | | :-------------------------------- | :----------- | :----------- | :----------- | | Net cash provided by (used in) operating activities | $16,702 | $(114,035) | $(125,660) | | Net cash provided by (used in) investing activities | $31,998 | $73,241 | $(71,102) | | Net cash provided by financing activities | $25,129 | $8,199 | $18,162 | | Cash, cash equivalents and restricted cash, end of year | $194,427 | $120,616 | $153,205 | Consolidated Statements of Stockholders' Equity This section presents key figures from Acadia's consolidated statements of stockholders' equity, including total equity and accumulated deficit for 2023, 2022, and 2021 Total Stockholders' Equity (in thousands) | Year | Amount | | :--- | :------- | | 2023 | $431,755 | | 2022 | $400,413 | | 2021 | $540,894 | - The accumulated deficit increased to $(2,430,837) thousand as of December 31, 2023, from $(2,369,551) thousand in 2022 and $(2,153,576) thousand in 2021[411] Notes to Consolidated Financial Statements This section provides detailed notes to Acadia's consolidated financial statements, covering organization, significant accounting policies, investments, fair value measurements, and other financial details Note 1. Organization and Business This note describes Acadia Pharmaceuticals Inc. as a biopharmaceutical company focused on CNS disorders and rare diseases, highlighting its commercial products NUPLAZID and DAYBUE - Acadia Pharmaceuticals Inc. is a biopharmaceutical company focused on developing and commercializing innovative medicines for central nervous system disorders and rare diseases[413] - NUPLAZID (pimavanserin) was approved by the FDA in April 2016 for Parkinson's disease psychosis, and DAYBUE (trofinetide) was approved in March 2023 for Rett syndrome[413] Note 2. Summary of Significant Accounting Policies This note outlines Acadia's significant accounting policies, including estimates for product sales, revenue recognition, R&D expenses, and concentration risk - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts, including those for cash and cash equivalents, investment securities, accounts receivable, and inventory[416] Cash, Cash Equivalents and Restricted Cash (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $188,657 | $114,846 | | Restricted cash | $5,770 | $5,770 | | Total | $194,427 | $120,616 | - Revenue from product sales is recognized at the net sales price, which includes estimates for variable consideration such as rebates, chargebacks, co-payment assistance, and product returns[443][444][445][446] - Research and development expenses are charged to operations as incurred, including costs for contract organizations, pre-commercialization manufacturing, and clinical trials[447] - The company faces concentration risk, with its four largest customers representing approximately 69% of product revenue and 73% of accounts receivable at December 31, 2023[451] Note 3. Investments This note details Acadia's investment securities, including U.S. Treasury notes and government-sponsored enterprise securities, all with maturities less than one year Investment Securities (in thousands) - December 31, 2023 | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | | :-------------------------------- | :------------- | :--------------- | :---------------- | :------------------- | | U.S. Treasury notes | $75,315 | $47 | $(28) | $75,334 | | Government sponsored enterprise securities | $174,867 | $119 | $(112) | $174,874 | | Total | $250,182 | $166 | $(140) | $250,208 | Investment Securities (in thousands) - December 31, 2022 | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | | :-------------------------------- | :------------- | :--------------- | :---------------- | :------------------- | | U.S. Treasury notes | $15,956 | $— | $(11) | $15,945 | | Government sponsored enterprise securities | $81,216 | $16 | $(291) | $80,941 | | Municipal bonds | $20,873 | $— | $(98) | $20,775 | | Commercial paper | $184,923 | $30 | $(637) | $184,316 | | Total | $302,968 | $46 | $(1,037) | $301,977 | - All available-for-sale investment securities had contractual maturity dates of less than one year as of December 31, 2023 and 2022. The company does not intend to sell investments in an unrealized loss position before recovery of amortized cost basis[468][472] Note 4. Fair Value Measurements This note explains Acadia's fair value measurements for cash equivalents, investment securities, and contingent cash awards, using Level 1, 2, and 3 inputs - Acadia classifies its cash equivalents and available-for-sale investment securities within the fair value hierarchy, primarily using Level 1 (quoted prices in active markets) and Level 2 (observable inputs) measurements[473][474] - Contingent cash awards, classified as liabilities, are measured at fair value on a recurring basis using Level 3 inputs (unobservable inputs like volatility and probabilities of success) via a Monte Carlo simulation[475] Fair Value Measurements (in thousands) - December 31, 2023 | Item | Total | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Assets: | | | | | | Money market fund | $64,586 | $64,586 | $— | $— | | U.S. Treasury notes | $75,334 | $75,334 | $— | $— | | Government sponsored enterprise securities | $174,874 | $— | $174,874 | $— | | Total Assets | $314,794 | $139,920 | $174,874 | $— | | Liabilities: | | | | | | Cash awards | $4,506 | $— | $— | $4,506 | | Total Liabilities | $4,506 | $— | $— | $4,506 | Note 5. Balance Sheet Details This note provides detailed breakdowns of Acadia's inventory, property and equipment, and accrued liabilities for 2023 and 2022 Inventory (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Finished goods | $29,583 | $— | | Work in process | $10,864 | $6,636 | | Raw material | $— | $— | | Total Inventory | $40,447 | $6,636 | | Reported as: | | | | Inventory (current) | $35,819 |