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

Thank you, everybody, for joining us again today. My name is Greg Renza, one of the RBC Capital Market's technology equity research analyst. And we are joined now by ACADIA Pharmaceuticals. Very excited to have the team here today. And with us is Steve Davis; Chief Executive Officer; Dr. Serge Stankovic, President; and Elena Ridloff, Executive Vice President and Chief Financial Officer. Team, thank you very much, and we look forward to talking about the ACADIA story.

Thank you, Greg.

Steve, maybe the best way for us -- great. Maybe the best way for us to start is just to allow you the opportunity to give a brief introduction of the company, what your latest thinking is on the key 3 strategic pillars of ACADIA and how that has essentially evolved over time?

Great. Thanks much for the opportunity today, Greg, and I'll try to make this quick so we can get right to the Q&A. I do need to just start with a brief reminder that the business of pharmaceutical development and commercialization has certain inherent risks. So I like to invite everyone to please see a copy of our most recent SEC filings for a description of how those risks relate to our business. Our mission is to treat very serious CNS disorders and improve the lives of patients, of caregivers and families. We remain focused on our mission because patients are waiting, and we continue to move forward to deliver on a multiyear cadence of potential product approvals over the next 3 years. I'm very proud of what the team has accomplished so far this year, and we expect 2020 to be a transformational year, as we're focused on the 3 strategic pillars that you mentioned. Those pillars are: one, to drive NUPLAZID growth in PDP. Last week, we announced first quarter net sales of $90.1 million, representing a 43% year-over-year growth. We've quickly pivoted to best-in-class virtual education and engagement. Given the current environment, we expect 2020 net sales to be between $420 million and $450 million. This would represent a 28% year-over-year growth at the midpoint of the range. Longer term, we have significant opportunity to continue to grow NUPLAZID, which as we've said all along, we believe could be a very big drug in PDP alone. Second pillar is to deliver the DRP opportunity to the market. As we discussed on our earnings call, we held our pre-sNDA meeting with the FDA in the first quarter and remain on track to submit sNDA for DRP this summer. We have breakthrough therapy designation. Therefore, we would expect a 6-month priority review with a potential PDUFA date around the end of the year. As a reminder, the DRP opportunity is about 10x the size of the PDP opportunity. Second pillar is to develop innovative -- or excuse me, third pillar, is to develop innovative treatments for unmet needs. First, just like to say, we're very excited about the opportunity for pimavanserin in adjunctive major depressive disorder. As I think everyone is aware, we're currently in an ongoing Phase III program. And on our earnings call, we provided an update on that program. And I'd just like to quickly summarize that here, as a reminder. First reminder is that we have 1 positive pivotal study CLARITY-1 under our belt. So we just need 1 additional pivotal study to submit our sNDA. For MDD, given that our 2 ongoing Phase III studies, CLARITY-2 and CLARITY-3 are identically designed and are just over 50% enrolled. We are pursuing a strategy to not enroll any additional patients and instead combine these studies into 1 Phase III study with potential results in the third quarter. Quickly for the negative symptoms of schizophrenia program. We -- here too, we have 1 positive pivotal study. We're preparing to initiate a second pivotal study in the second half of this year. In addition, we initiated a Phase III program in the fourth quarter of last year evaluating trofinetide as a treatment for Rett syndrome, we continue to expect results in that study in 2021. And then lastly, just really quickly on the BD front. Last week, we announced a licensing agreement with Vanderbilt University, adding an early-stage clinical muscarinic receptor program to our pipeline. This is an M1 PAM program. It -- this program, one of the things that was key to us is it's a portfolio of early-stage clinical candidates. So they have some albino chemical matter that is -- that we're now mining with them that looks very promising. It's very complementary to our development pipeline. We can feed these right into our development machinery. And they have one lead compound that's in already Phase I testing with several additional preclinical compounds along that. So you can see, we're really looking forward to our pipeline delivering on the multiyear cadence of pivotal trial readouts and potential approvals. And with that, I'll turn it back over to you, Greg, for Q&A.

Great. And certainly, a great deal going on. And maybe shifting back to the commercial front and with respect to NUPLAZID and PDP. And as you look back on the first part of 2020, and you've certainly set some expectations going forward with respect to new guidance. How are you thinking about some of those uptake trends for the balance of 2020 and even perhaps into '21, just given the disruption in the marketplace given the pandemic? And how have those expectations perhaps evolve from those observations that you've seen both early on and as this transitions to perhaps more clarity, over the last few weeks to months?

Yes. Yes. Well, first, let me just underscore that we expect the impact of this very tragic pandemic that we're in the middle of to be temporal as it relates to our revenues. We've taken numerous corrective steps to adapt our business, what we believe is best-in-class virtual education and engagement with physicians. And that's going very well. So a temporal impact on new patient starts. As we mentioned on the earnings call, our April was looking better than March, and we're continuing to see those trends in getting back to not only just stabilizing, but getting to see already indicators of returning to some more kind of normal growth on new patient starts. As we think longer -- more intermediate to long term, 2021 and beyond, in other words. We believe that the current situation is not likely to have a longer-term impact, of course, it's a little bit of a fluid situation. So we just have to see. But the main thing I'd like to underscore is that when we think about this pandemic and the rippling of -- many, many rippling effects of it, as it relates to our business, the anxieties associated with the pandemic will exacerbate psychosis. It will exacerbate depression. It will underscore the utility of a drug like NUPLAZID as families think about what can I do to keep my loved one out of a nursing home. Can we control their symptoms in a way that will allow us to extend their time at home in long-term care settings as staffs, which are completely overwhelmed right now, get more accustomed to kind of a new normal and they're not as focused on how do I just get a meal to a patient, but they have an opportunity to think more about what can I do to reduce the burden of caring for these patients and also improve their lives, drugs like NUPLAZID, I think, will be of ever more importance. So as I mentioned, we're encouraged with what we see so far as we think about the remainder of this year, and have high confidence in the revised range that we gave on our earnings call. And when we think longer term, I think the undercurrents of this pandemic or maybe the rippling effects is a better metaphor of this, but this pandemic will probably would be supportive of our business.

That's very helpful, especially around understanding the potential for growth of NUPLAZID in existing markets. Just shifting to -- with respect to ex UX (sic) [ U.S. ] potential and expansion there, what are the latest developments? And how should investors be thinking about the exploration ex U.S. and how that would fit into a medium or longer term strategy?

So as it relates to ex U.S., so as we've mentioned before, we frameshifted our strategy there. And the underpinning of that is that for drugs like this, these neuropsychiatric drugs, when you look at the price in the U.S. versus the price ex U.S., there's a vast difference in terms of how these drugs get priced. In short, we basically subsidize the rest of the world for these kinds of drugs. And so we frameshifted our strategy in order to allow us a better opportunity to make it -- to support the infrastructure that's required to do these things out of the U.S. and what I mean by that is we want to try to put as many indications into the same time frame as we can in order to support the approval and the launch of this drug outside of the U.S. So right now, we're still in the process of getting these indications through the development process and then ultimately through the approval process. And so we'll get back to you about that strategy as those -- as we make that progress.

That's helpful and a good segue perhaps into pimavanserin in DRP and alluding to the near-term steps with respect to the filing there for the summer. Just curious if you could elaborate on what potentially is left that you've shared thus far on the filing front. And then secondly, your level of commercial preparations for the potential launch and how this current environment and the new dynamics there as you establish new physician tools to build awareness, but also to deliver medications to patients and to physicians, how that has evolved your current thinking as well?

Yes. Yes, you bet. Well, Serge is on. So I'll let Serge answer the first question, I'll take the second one.

Right. Thanks, Greg. First, as we reported, we completed pre-sNDA meeting with the FDA. And the feedback from that meeting was very consistent with what we heard at our end of Phase II meeting. In other words, FDA confirmed that the studies conducted can support supplemental NDA submission with HARMONY, our randomized withdrawal trial being a pivotal study, and our Phase II Alzheimer's disease study and Phase III Parkinson's disease psychosis study, would be considered as supportive efficacy studies. And in addition, as we previously noted, for our sNDA submission, we are collecting -- collected safety data from all of the pimavanserin study, and we are in the process of doing that and assembling this supplemental NDA. We remain firmly on track for a submission this summer. And since we have breakthrough therapy designation, we expect priority review to 6-month clock with a potential approval for DRP around year-end. I'll turn it over to Steve for...

Yes. Thanks, Serge. So just in terms of DRP commercial preparations. First, let me just say we're very excited about this opportunity. There's no drug approved for the treatment of DRP. There's a dramatic unmet need here. As I mentioned earlier, DRP is about 10x larger than PDP. So our launch rating plans are currently focused on today, on market research, disease awareness and education in the medical community on just the high burden of the disease. Most of these efforts have temporarily pivoted to virtual programs for obvious reasons. For instance, all of our advisory boards and payer engagements are virtual at this juncture. In addition, we're seeing strong health care provider interest in learning more about DRP. For example, on our disease education website morethancognition.com, we continue to gain more and more unique visitors every month and over 20,000 people have visited that site since we launched it late last year. Just important context, the DRP launch will be a label expansion for us. Obviously, we've already proved in PDP and that's drastically different than launching a new product for a new indication without an established brand. Since our launch in PDP, we've built significant brand awareness and expect that now to extend into DRP. And we can leverage our brand awareness in offices and facilities that are already familiar with NUPLAZID. I've said this before, today, a nursing home might have 2 to 3 PDP patients, but they might also have 20 to 30 DRP patients. So we already have relationship with those facilities and with people that are involved in the treatment decisions there. So our launch plan includes -- for DRP includes a total expansion from approximately 200 field force today to approximately 450 to 500. And of course, it's -- this expansion is stage-gated towards the end of the year when we'll be prepared for various launch scenarios, should the virtual environment be more sustained.

That's very helpful. Maybe just a quick follow-up on the spend and the guidance that you've supplied to maybe looping in Elena here. If you could just talk a little bit about the -- to what extent this launch would be comprehended and not just that spend guidance, but also the adjustment of that slightly from your recent earnings call and how to think about the potential trajectory of the investments that you're making, certainly from a field force perspective?

Yes. Thanks for the question. So our revised SG&A guidance does incorporate our continued investments and plans and preparations for the dementia-related psychosis launch, including our plan to expand the field team towards the end of this year. The realization for the reductions we're experiencing is a function of the current virtual environment. We're operating and again, the guidance range continues to reflect the important investments we're making today, and we'll continue to make throughout the remainder of the year in preparation for the DRP launch.

Great. And then, Steve, as you alluded to, just the multiplier effect of the potential market with DRP, how should we be thinking about the value proposition and potentially even the reimbursement for pimavanserin as it relates to what's in the market now with NUPLAZID in PDP, but as far as capturing that larger DRP patient population?

Great. Let me take just a little bit of a running start at that question. So there's clearly a significant value proposition for NUPLAZID in DRP. No, currently at the approved treatment options, the symptoms of dementia-related psychosis are associated with significant distress to families, significant distress to caregivers, progression to more severe dementia, overall greater caregiver burden that repeated hospital admissions and just increased likelihood to nursing home placement. So we think the case is very strong for the value potential for NUPLAZID. Today, we enjoy very good access with payers for NUPLAZID in PDP. And the payer dynamics that I just described in DRP are very similar to PDP. For example, many times in PDP, we've made the point that use of the previous generation dopaminergic antipsychotics off-label in PDP, they're not approved for that use requires a compromise that they can interfere with the motor therapies. In DRP, those same drugs are often used off-label, they're not approved for DRP, used in this patient population. And they -- it's been demonstrated in multiple studies that they have the potential to accelerate cognitive decline when used in those patients. So in both cases, you can undermine the -- maybe the primary symptom that patients are experiencing. So payers get that. And so while it's a little bit premature to comment precisely on pricing for NUPLAZID in DRP because many times you want to get the final wording of your label and make sure that you can make your strongest case to payers. And of course, we're not at that juncture yet. I think based on everything we know today, we've got a situation that we feel like the dynamics are very similar between PDP and DRP.

Maybe just one last one on DRP and perhaps for Serge. Certainly, discussions around the prospect for AdCom with respect to the filings of that as they progress. Just interested in perhaps providing additional color on the context for that prospect and how it perhaps potentially represents just your proactive preparations and risk management of the filing versus any other signaling that would be suggestive that, that would be perhaps a present reality for the filing as it goes forward for the rest of this year?

Yes. Let me just start by saying that AdCom are not typical for supplemental NDAs. However, as you mentioned, we think there is a good chance that we may have an AdCom based on this being a potentially first approval for the dementia-related psychosis, and considering all of the prior concerns expressed related to antipsychotic treatment in this patient population, FDA May opt to engage external advisers prior to approving the drug in this indication. So as you said, we are preparing in anticipation that we're going to have a relatively short review cycle of 6 months. We want to be fully prepared. Discussion around the AdComs did not occur in any of our interactions and appropriately so because that's not a topic for discussion at either end of Phase II meeting or pre-sNDA meeting or any interactions that would occur prior to filing. What we will learn about their FDA's decision related to AdCom probably once we are in the review process. And for that reason, and for shortness of the review period, we are preparing for AdCom so that in any case, we are ready, whatever decision FDA makes in that regard.

Great. And maybe spinning now to pimavanserin as adjunctive therapy in MDD. And certainly, interesting developments, Steve, as you've alluded to at the top of this fire side with respect to combining the CLARITY trials and potentially leading to a readout in the third quarter, so more near term than initially anticipated. Can you just talk about the rationale, again, about combining those trials and really breaking down for us, the benefits and the risks that this new strategy could potentially bring? Yes, you got it, Serge?

Yes, great question. As Steve mentioned, we already have 1 confirmatory trial under our belt in terms of our CLARITY-1 trial being 1 of the 2 trials for supplemental NDA. So which means that we only need 1 more positive pivotal study in order to submit the supplemental NDA. And as you know, we are currently running 2 Phase II studies, CLARITY-2 and CLARITY-3. And given that both studies are slightly over 50% enrolled and are absolutely identical design, both in terms of the trial design, patient populations including in the trial entry criteria, outcome measures, statistical analysis plan, we are very well positioned to pursue this strategy to combine these 2 studies into 1 study with prespecified statistical analysis planned. And as a result, potential top line results of the combined study would be available in the third quarter of this year. If positive, we would obviously prepare a supplemental NDA submission and if negative, we are prepared to initiate another pivotal Phase III study in the second half. And as we mentioned recently, we plan to discuss our proposal with the FDA in a meeting already scheduled for the end of this month. Now to your question of what are the potential risks and benefits of this, first of all, I want to say that this is very -- this strategy of pulling and combining the 2 trials is consistent with our 2-shots-on-goal strategy for the MDD Phase III program. As you know, we started 2 trials even though we need 1 positive for supplemental NDA. But in the area of depression and a high-risk for the trials, we decided to do 2 trials and manage that risk. What -- with a new strategy, what we are essentially doing instead of running these studies in parallel, they would be conducting sequentially. And an added benefit of that approach is also that if the first trial, if this combined trial is negative, we can apply learnings from that next study in the designing the -- in the design features that are necessary for the next trial. Another benefit is that this strategy would mitigate the risk of including both pre and post-pandemic patients in the data set in case that cause unnecessary -- and avoid unnecessary variability that, that entails. Not only variability, in terms of the manner in which we collect the data, as pre-COVID, we were collecting data in the face-to-face visit. Post-COVID, the world is going to look differently, and a lot of the data will be collected through remote, both efficacy and safety assessments, which obviously introduce additional variability. But also in terms of the type of patients that will be included in the trial would be included in the trial pre-COVID and post-COVID. And what I mean by that, particularly in psychiatry and especially in depression, the situational circumstances impact significantly, both plasticity, severity of symptoms as well as the type of volunteers that we would get in the trial, which all add additional risk if we were to continue the current trials in the post-COVID environment. So finally, sometimes combining the studies would increase the variability with the increased number of sites. Obviously, we are combining 2 studies, so we are doubling number of sites. However, at this time, we have not seen any indication of a significant increase in variability or substantial differences between the 2 CLARITY studies, which gives us a confidence that this is the right strategy for us.

That's great. We look forward to the third quarter and following the advancement here with pimavanserin as well as NUPLAZID. And I just want to thank you, Steve, Serge and Elena for your time today. That brings us to our time. And we wish everyone having a great day. Thank you again, and this disconnects the call.

Thanks so much, Greg.

Thank you.

Thanks, Greg.