ACADIA Pharmaceuticals Inc. (ACAD) Earnings Call Transcript & Summary

Good morning, everybody. Thanks for joining us at the, now, Virtual Bank of America Healthcare Conference. I'm Tazeen Ahmad, I'm one of the SMid biotech analysts here at the firm. It is my pleasure to introduce our next presenting company, ACADIA Pharmaceuticals. I have several members from ACADIA management here with me. Steve Davis, who is, of course, Chief Executive Officer; Michael Yang, Executive Vice President and Chief Commercial Officer; and Elena Ridloff, who is Chief Financial Officer. Good morning, guys. Thanks so much for joining us today.

Thanks much, Tazeen, we're very pleased to participate in your conference.

So maybe, Steve, we have a few questions that we'd like to talk about as it relates to upcoming and recent events. But maybe you could just do a quick overview of the company's portfolio and catalyst to date, and then we can go from there.

That sounds great. I'll just need to start with a brief reminder that the business of pharmaceutical development and commercialization has certain inherent risks, so please see a copy of our most recent SEC filings for a description of how these risks relate to our business. Our mission is to treat very serious CNS disorders and improve the lives of patients, caregivers and families. And we remain focused on our mission because patients are waiting. We continue to move forward to deliver on a multiyear cadence of potential product approvals over the next few years. I'm very proud of what our team is accomplishing so far this year, and we expect 2020 to be a transformational year for ACADIA. As you guys have heard me say before, we're focused on 3 strategic pillars. Our first pillar is to drive positive growth in PDP. Last week, we announced first quarter net sales of $90.1 million, a 43% growth year-over-year. We've quickly pivoted to best-in-class virtual education and engagement, given the current environment. And we expect 2020 net sales to be between $420 million and $450 million. This represents a 28% year-over-year growth at the midpoint of the range. Longer term, as I've said before, we continue to see significant attractive growth opportunity in NUPLAZID and PDP, where we believe it can be a very big drug in PD alone. Second pillar is to deliver the DRP opportunity to the market. I'm very pleased to share that we held our pre-sNDA meeting with the FDA in the first quarter and remain on track to submit our sNDA for DRP this summer. Just as a brief reminder, we have breakthrough therapy designation, and we would expect a 6-month priority review with potential approval around year-end. Also, I'd just like to remind everyone that the DRP opportunity is about 10x the size of the PDP opportunity. Our third pillar is to develop innovative treatments for unmet needs. We've made great progress on that front as well. First, we're excited about the opportunity for pimavanserin in adjunctive major depressive disorder. Currently, we have an ongoing Phase III program there. And a continued update, lastly, on our earnings call and our strategy. And as you all recall, we have one pivotal -- positive pivotal study, our CLARITY study. And we need just one more additional pivotal study to submit an sNDA for MDD. In MDD, given that our 2 ongoing Phase III studies, CLARITY-2 and CLARITY-3 are identically designed studies and we're just over 50% enrolled, we're pursuing a strategy to not enroll any additional patients and instead combine these studies into one Phase III study with potential results in the third quarter. And as we mentioned on our call last week, we'll be meeting with the FDA to discuss this approach in the very near future. For negative symptoms of schizophrenia program, we have one positive pivotal study. We're preparing to initiate a second pivotal study in the second half of this year. And we initiated a Phase III program in the fourth quarter of 2019, evaluating trofinetide as a treatment for Rett syndrome, where we expect results in 2021. Just very briefly on the BD front, last week, we announced a licensing and collaboration agreement with Vanderbilt University, adding an early clinical stage muscarinic receptor program to our pipeline. This M1 PAM program is a portfolio of early-stage clinical candidates that are complementary to our development pipeline on new potential therapies for CNS disorders. The lead compound is in the early Phase I testing with several additional preclinical compounds. So as you can see, we're really looking forward to our pipeline delivering on a multiyear cadence of pivotal trial readouts and potential approvals. And with that, I'll now turn it back over to Tazeen to begin the Q&A.

Great. That was a very full description, and there's clearly a lot going on at ACADIA. Maybe I will start off though with a general question about the environment that we're in. As we keep getting questions from our investors about this. And Steve, I'm just wondering what your thoughts are about the current pandemic environment. Is there anything that you're changing in the way that you're doing business or in the way that people are accessing your system that you think could persist even after things return to some level of normalcy? Hello?

I'm sorry, Tazeen, I was on mute.

I was just making sure I didn't drop off the call.

Yes, I think we're both still on. I don't know if anyone else is, but I think you and I are on. Good. No, thanks much for the question. I think one of the implications of the COVID-19 situation, which, of course, is a very -- it's impossible to overstate how much of a tragic situation this is for us globally and societally. But one of the impacts of COVID-19 is that we think we'll have lingering effects is with the swift adoption expansion of telemedicine across health care professionals in the industry. It's been truly remarkable and something that we were quick to leverage. We've been active in the telemedicine space even prior to the pandemic, and we've levered those -- that presence up. I think another impact of the pandemic is it makes medicines like NUPLAZID -- the need for these kinds of medications, even greater. Obviously, during the course of pandemic, anxieties will exacerbate depression. They'll exacerbate psychosis, hallucinations and delusions. And so there's an even greater need for therapies that are effective to treat these symptoms. Of course, these simply symptoms don't go away in a pandemic. If anything, they get exacerbated. And to do it with a drug that's well tolerated. I think just while I'm on that topic, I would just quickly add that I think it's also important to think about a few things that won't change during the pandemic is just the symptoms that these patients experience won't change. And the way that we deliver our drug will not change and the needs that these patients have and our ability to address those needs won't change.

Okay. And then to keep on a positive topic, just joking, what happens if the COVID pandemic lead to a potential recession? How do you think about the ability of ACADIA to navigate through that? And any thoughts about any cost offsets that would be needed in that environment?

I'm going to ask Elena to address the cost offsets, but I'll just start with saying that, as I've mentioned, the pandemic will exacerbate the frequency and severity of symptoms that patients that we treat and seek to treat, have. So there will be some rippling effects from that. Elena, you want to address the cost offset side of the question?

Sure. So Tazeen, we did talk last week in our earnings call that we slightly reduced our 2020 revenue guidance by approximately 5% to include the impact of the pandemic. The flip side is that we also are experiencing lower cost included in our SG&A guidance as a result of the naturally lower spend in the current virtual engagement environment. So we do have cost offsets as well. And I also underscore that we are in a very strong cash position. We ended the first quarter with over $650 million in cash as well.

Tazeen, are you still on?

I think I was on mute. Okay. Thanks for calling that out. So maybe we can talk a little bit about DRP, Steve, as one of your next indications. Can you review what you discussed with the FDA perhaps at the pre-sNDA meeting? Can you provide a little bit of expectations on timelines for submission and approval? I know you've talked about this in general and whether or not you still expect to have an AdCom, if you believe that there will be any kind of modifications of the current box warning?

Yes, absolutely. So as I mentioned, we had our pre-sNDA meeting in the first quarter. The feedback there was very consistent with what we heard with our -- in the Phase II meeting. The FDA confirmed that the studies conducted can support an sNDA submission with HARMONY as the pivotal study, and our Phase II Alzheimer's disease study and Phase III Parkinson's. The psychosis study has supportive efficacy studies. As previously noted for our sNDA submission, we'll need to collect safety data from all the eventual studies and have all that data collected, and we discussed that as well with the FDA.

And as far as your commercial efforts, maybe this is a question for Michael, you will be doubling your sales team potentially up to 500 for the DRP launch from your current 200 or so people. How are you thinking about the positioning of that larger team? Can you give us any color on the target position profile? Any geography that you'd want to go for initially? Think of any kind of directional help would be helpful.

Yes. Michael, do you want to take that?

Yes, sure. Thanks for the question, Tazeen. As Steve mentioned, the DRP opportunity is 10x larger than our current PDP opportunity and represents a very important and significant opportunity for us. But I think it's important to note that DRP can be viewed as a label expansion, where we can build on the significant brand awareness for deposit and PDP that we've already generated and leverage that experience and our motivated and engaged team on the ground already as we plan the outline for the potential launch of a second indication around year-end. So in regards to the question around physicians and geographies, I think that the thing to note is that the dynamics for both the payers and, frankly, the health care practitioner audiences are very similar for DRP and PDP. And as such, in regards to the physicians, we're already calling on neurology, psychiatry and long-term care. As we prepare for DRP, we'll leverage that infrastructure that I mentioned and we'll continue to expand deeper into psychiatry and long-term care than we are today and also pick up what we're calling the CNS-focused pseudo specialists that are like in primary care, treating a lot of neuropsychiatric conditions. So that will be our approach, and we're not going to have separate teams. One team selling all -- selling NUPLAZID for both indications.

Okay. And I guess, what's the cadence that you're thinking, just to spend one more second on it, the cadence of how you're thinking about DRP? Any differences versus PDP?

You mean -- I'm not sure I understood the question, what do you mean cadence?

Maybe like the launch trajectory that you might expect with a much bigger indication, of course, relative to PDP. Do you think you'll have to educate the market a little bit less on DRP relative to how you had to educate the market for PDP, just general things like that?

Right, right. Well, I think one of the advantages of DRP, if you step back and say dementia-related psychosis, dementia and psychosis are very related to the mental condition of the patient. The physicians are focused on that area, and they're more of a Venn diagram, a live Venn diagram. When we launched into PDP, as we've mentioned in the past, the neurologists are highly focused on motor and movement. And the benefit of NUPLAZID in the treatment of psychosis is it didn't impact motor. However, motor and psychosis are kind of different ends of the spectrum for that target audience and such -- as such, we had to educate quite a bit. I think that for DRP, we'll still have to do a lot of education. There's still a -- there's been a very long time between physicians having an opportunity to treat a patient safely. Our research shows that they're ready and willing and wanting a solution, but there is a lot of pent-up doubt about products that have come out or off-label products, and there's an impact that -- a price to pay that physicians use those products. And so the benefit-risk ratio is slanted against the physician in that area. So our opportunity is to present a balanced and much more favorable benefit-risk profile for a physician to consider on their patients. So I would expect a trajectory just like every other kind of neuropsychiatric condition where it's going to be a launch trajectory that is slow and steady. I would not expect this to be a rocket ship on the front end because of the educational needs and the presentation symptoms. But as I mentioned, the opportunity is 10x larger. The audiences are more varied, and we'll have a broader opportunity to make a bigger impact, a wider base of patients.

Okay. Moving on to another indication, MDD and maybe back to Steve, you have announced a pretty interesting potential strategy for your adjunctive MDD Phase III CLARITY program. Can you just remind everyone that's on the call why you think that this particular approach makes sense and what do you think are the pluses and minuses of combining 2 studies? And do you think there's going to be any changes to the powering assumption?

Yes. Thanks much for the question. I'm going to take a little bit of a running start at it. So just as a reminder, we already have 1 positive pivotal study, the CLARITY-1 study. And we have agreement with FDA that the robust results from this positive study can serve as 1 of the 2 pivotal studies that will be needed for an SDA. So this means we only need one more positive pivotal study to submit. So as you know, we're currently running 2 Phase III studies, CLARITY-2 and CLARITY-3. And given that both studies are slightly over 50% enrolled and they're identically designed, we're very well positioned to pursue this strategy to combine the studies into 1 study, with a prespecified statistical analysis plan. So what that means is if we execute this strategy, we will amend the statistical analysis plan prior to breaking ground so that the combined analysis is a prespecified primary endpoint. So as a result, potential top-line results of the combined study would be available in the third quarter of this year. If they're positive, we would prepare a supplemental NDA submission. If negative, we're prepared to initiate another pivotal Phase III MDD study in the second half of this year. And as I've mentioned earlier, we plan to discuss this proposal with the FDA in a meeting scheduled for the -- around the end of this month. So just to give a little bit of additional color on this. This is consistent with our 2 shots on goal strategy for an MDD Phase III program. The difference is instead of running the studies in parallel, as we initially set out, the 2 shots would be taken sequentially. An added benefit of doing it this way is if the first study were negative, the first shot on goal were negative, by combining these studies, we'll apply learnings from that to the next study design, if that is needed. Another benefit is the strategy would mitigate the risk of including both pre- and post pandemic patients in the data sets that cause unnecessary variability. So in other words, by doing this sequentially as opposed to in parallel, we kind of capture the vast majority of patients in the first shot on goal are pre-COVID. And of course, the patients and a second shot on goal, if that's needed, would be post COVID. And particularly, in a study for a disorder like depression, while you hope that randomization would take care of any variability. It's just the kind of change that you'd prefer to avoid. So there's a real advantage in kind of capturing those 2 data sets separately. And just to be clear on the powering assumptions, there would not be any changes to our powering assumptions. We'd still be looking at a 0.05 p-value where statistical significance in powering assumptions remain unchanged based upon the combining 2 studies.

Okay. And still on the topic of MDD, just can you remind us if patients will need to physically go to the doctor's office during the study? And have there been any impact to patient measurements thus far as a result of doctor office closures?

Yes. And in fact, let me just start with just a brief reminder as to what we're measuring in this study. So the primary end point of both studies is change from baseline in the 17-item Hamilton Depression Rating Scale. And by the way, this is the same efficacy measure that we used in the parallel design portion of our CLARITY study, CLARITY-1 study, where we observed an effect size of 0.63 p-value of 0.0003. So your question was what's the effect of COVID on patients being able to visit a doctor's office and the ability to -- for us to collect data and maintain integrity of the study? So during the pandemic, visiting the doctor's office for our patients is not always feasible. But our teams have been able to continue to collect data by conducting remote at home study related visits and implementing remote data monitoring. So when the pandemic shutdown began, we quickly pivoted to focusing on making sure that we could maintain the integrity of data for patients that have already enrolled, and that's gone really well. So as a consequence at this juncture other than pausing new patient enrollment, we haven't observed any meaningful impact on the MDD studies due to COVID-19.

I guess just due to everything that's going on, I'm assuming that FDA is being flexible, when you make these changes, do you let the agency know about this? Or is this something that you would assume should be acceptable?

Yes. So the agency has given some guidance, generally, regarding trials and process. So we've been, of course, working through that guidance. But as it relates to stopping enrolling new patients in the 2 MDD studies and combining that data, as I mentioned, that's something we want to make sure that we talk to FDA about. We've got a meeting scheduled for around the end of the month to do that.

Okay. Great. Maybe moving on to negative symptoms of schizophrenia. When is the next catalyst for this particular indication? You've got the ADVANCE-2 study. Can you talk about that trial design? And what are you looking for in terms of meaningful indicators of efficacy here?

Yes. Great. So just to level set, of course, as everyone's heard us say many times before, there's nothing approved for negative symptoms of schizophrenia. And this can be a very serious condition. It's been kind of viewed as probably the most significant unmet need in schizophrenia for a few decades. There have been many attempts to find an approved medication to treat the negative symptoms and nothing has been successful so far. Our ADVANCE-2 study, the study that will begin in the second half of this year. Will be very similar in design to our positive pivotal study, ADVANCE. We were extremely pleased to observe positive results on the primary endpoint of our ADVANCE study. That was improvement on the Negative Symptom Assessment-16 item scale, in this very difficult to treat population. Again, it's very rare to get a positive study in this population. Importantly, at the 34-milligram dose, we saw robust efficacy with a p-value of 0.0065. And I just want to remind everyone that 34 milligrams is the dose that we're using in the Phase II study. So as we think about negative symptoms of schizophrenia, we see this as a very ripe opportunity to pursue what we know about the venture today. What we see -- we didn't know this a few years ago when we started all these studies, what we see today, is a drug that has produced very robust antipsychotic effects and reducing hallucinations and delusions. And a drug that also has very significant efficacy on mood disorders, such as depression and the negative symptoms of schizophrenia.

Okay. And so just as a reminder for everybody, can you just give us a sense of what the addressable patient population for negative symptoms is?

Yes. So it's -- just to put it in context, it's about 7x the size of PDP. So it's about 1 million patients -- a little over 1 million patients on the -- that have predominant negative symptoms of schizophrenia. Having said that, schizophrenia patients in general typically suffer from both negative and positive symptoms of schizophrenia. And as a reminder, our approach is to dose pimavanserin adjunctively on top of existing therapy. So we don't need to displace the current therapies that they're on. But if we're successful in getting an indication in negative symptoms of schizophrenia, NUPLAZID will would be dosed on top of our existing therapies.

Okay. Moving on to another indication, Rett syndrome. Can you talk a little bit about what that is, Steve? You've also announced recently that enrollment has paused temporarily in your study for trofinetide. How are you approaching the reinitiation of adding patients to the study? And can you also comment on when the ADVANCE-2 study is going to start?

Yes. Yes, happy to. So as it relates to Rett syndrome, Rett syndrome is a rare disorder that is very debilitating. And the symptoms typically begin to occur when -- it's almost entirely in females, on young girls, seem to typically begin to occur at about 6 month of age. And what you see is a neurodegenerative decline beginning at that point in time. And eventually, the girls develop difficulties with speech, with hand motions. They usually reach a point where they have a difficult time even feeding themselves, they have respiratory issues. So it's -- unfortunately, it's just a very debilitating disorder with no approved therapies today. The approach we're taking with trofinetide is to treat kind of the broad symptoms, more broadly speaking. And the primary endpoint of the study will measure that. And we're very encouraged from what we've seen in the Phase II data and eager to complete the Phase III study. We have paused enrollment in the LAVENDER study, our Phase III study for trofinetide. And we plan to reinitiate enrollment in the second quarter. It will be a phased approach to new patient enrollment. It will be both study-specific and site-specific, and it will incorporate what we hear from local health authorities and regulators. We're also doing qualification of study sites on an individual basis. And of course, there'll be appropriate safety and monitoring measures to ensure that we can safely and effectively collect patient data. And so we're eager to commence enrollment of new patients again, but of course, patient safety and the ability to protect the integrity of data of the study is paramount. So we're being very appropriately cautious.

Okay. Maybe we can talk in the next couple of minutes we have left about your new collaboration with Vanderbilt. Why does this make sense for ACADIA? Why should we expect more deals of this nature going forward? And in terms of what you're looking at with them, why is the M1 receptor modulator a particularly attractive opportunity for you?

Yes. Thanks much for the question. I'll try to cover it quickly. So this is an exciting deal for us. It's, I think, a nice example of an early-stage pipeline deal. And of course, our partnership with Neuren for trofinetide that we just discussed is an example of a late-stage deal. So we really like this program. I'm sure as you're aware and as many that are listening are aware, there's a lot of literature describing the potential of muscarinic modulators, both of the M1 and the M4 subtypes. M1, mostly -- the day's mostly supported of potential utility in schizophrenia and cognition. And the challenge in this -- in modulating the muscarinic system has always been how to mitigate the unwanted cholinergic side effects that are a consequence of stimulation of the system. So there's many approaches that have been tried. Nothing has been particularly successful yet, but other approaches include trying to block some of the side effects so that you can allow the strong signal that's been observed on efficacy to come through. So the first that Vanderbilt is taking, and we're collaborating with them on, is modulating the M1 receptor subtype to the positive -- doing this with positive allosteric modulators. We believe the PAM approach is -- has the potential to achieve a similar level of efficacy, but potentially without side effects due to the high selectivity of the PAMs and the fact that the system is being modulated with a positive allosteric approach. So in other words, what we see in-vitro and in animal models is evidence that you can get the kind of muscular efficacy that has long been very intriguing in this space, but avoid the cholinergic side effects. So as I mentioned, we're really excited about the program and eager to get it incorporated into our development pipeline.

Okay. I think with that, we're just about out of time. So Steve, thanks so much for participating. Sorry about the mute issue a few minutes ago, and we wish you the best of luck in upcoming catalysts, and we look forward to speaking with your team soon. Thanks, everyone.

Thanks so much, Tazeen. Good talking to you.

Okay. Take care. Bye-bye.

Thank you.