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

Good afternoon. Thanks for joining us. We're pleased to have the ACADIA team with us where we have Steve Davis, CEO; and Elena Ridloff, CFO. With that, Steve, I'm going to turn it over to you for any opening comments, and then I'll get into questions.

Yes, that sounds great, Salveen. Thanks much, and I'll just start with a few level-setting brief comments, and we'll get right to the Q&A. So I'll start just by highlighting the 3 pillars of our business. First pillar is we're driving NUPLAZID growth in Parkinson's disease psychosis. In the first quarter of 2021, we achieved net sales of $106.6 million. This represents an 18% year-over-year growth. We continue to add new prescribers and new patients and continue to also see very high adherence among our continuing PD psychosis patients. And although we experienced some COVID-related headwinds in the beginning of the year, as did, I think, the entire sector, March and April have shown improvements in several key leading indicators. On our earnings call in May, we reiterated our 2021 sales guidance of $510 million to $550 million. And we said then, I'll just repeat now that where we land in this range will largely be a function of the timing, pace for recovery related to the conditions of pandemic. And as we've said before, many times beyond 2021, the long-term opportunity for NUPLAZID in PD psychosis is significant and growing. Second pillar of our business is delivering on the DRP opportunity. We remain committed to bringing pimavanserin to the DRP patient community. In April, we announced that the FDA issued a complete response letter or CRL regarding our supplemental new drug application for dementia-related psychosis. And we look forward to a constructive dialogue with FDA at our Type A meeting, which we plan to discuss the CRL and potential approval path for pimavanserin in that indication. I just want to remind you that there are no approved treatments for DRP today, and there are very serious consequences associated with the symptoms of psychosis in dementia patients. These include repeated hospital admissions, nursing home placement, and increased risk of morbidity and mortality. So without an FDA-approved treatment, the burden of DRP remains very significant on this patient population. The third pillar of our business is to develop the next wave of breakthrough therapies in CNS. This year, we are advancing our pipeline with clinical trials across multiple therapeutic areas. We have 2 ongoing Phase III programs. We initiated ADVANCE-2 to a Phase III study for pimavanserin for the negative symptoms of schizophrenia in the third quarter of last year in 2020. And in our second Phase III program, we expect results by the end of this year, 2021, from LAVENDER, our pivotal Phase III study for trofinetide in Rett syndrome. Last year, we further expanded our pipeline with some critical strategic business development deals, including the acquisition of CerSci Therapeutics for first-in-class non-opioid pain program highlighted by the lead molecule there, ACP-044. Also, through our collaboration with Vanderbilt University, we brought in a novel muscarinic receptor program. And in the first quarter of this year, we initiated a Phase II study evaluating ACP-044 for postoperative pain following bunionectomy surgery. And on the cusp of initiating a Phase II study evaluating ACP-044 for osteoarthritic pain or chronic pain. And I'll just close by saying that business development remains a critical pillar of our strategy. We'll continue to execute high science deals that expand our pipeline. And with that, I'll turn it back over to you, Salveen.

Thanks, Steve. So maybe to start, if you could just talk about your strategic goals and initiatives in place with progressing the internal pipeline and where your confidence lies on that front, not just with NUPLAZID, but the other indications as well? And then also how you're thinking about the BD side of the business?

Yes. Salveen, let me take a little bit of a running start at it. So of course, with NUPLAZID, we have first-in-class, first drug approved for the treatment of Parkinson's disease psychosis. And as we've said many times, and I think there's probably everyone on this call recognizes, NUPLAZID is a very stark departure from all of the other antipsychotics. Those drugs all work primarily by blocking dopamine and in particular, dopamine D2. And it's just a whole host of tolerability and side effects that come along with that. NUPLAZID works entirely -- we don't touch dopamine. It works entirely through serotonin. And with that different biochemical profile, we also see a very different safety and tolerability profile in the work that we've done. So in short, pimavanserin or NUPLAZID, known by its trade name, represents a very significant advancement in the way we think about treating psychosis. And it's particularly beneficial in those more fragile populations that have an even more difficult time tolerating the dopaminergic antipsychotics. So as we've described, we're also pursuing dementia-related psychosis with pimavanserin. And as I mentioned a second ago, negative symptoms of schizophrenia. So that's a lot just with that molecule to continue exploring. In addition, we have a Phase III program in Rett syndrome that -- the commentary you're going to hear here is twofold. One, unmet need, significant unmet need in everything that we're pursuing and then also high science. And with Rett syndrome, we're pursuing what we hope to be the first drug approved for the treatment of Rett syndrome. And again, taking a very high science approach to a rare disease that has really highly debilitating and devastating consequences for those patients. Through the acquisition of CerSci Therapeutics, we're taking a very novel non-opioid approach in treating pain, both acutely and chronically. And as I mentioned through the collaboration with Vanderbilt University, we're pursuing an M1 PAM program that, again, is a very unique approach to potentially treating psychosis and cognition. So all -- everything that we have in our portfolio today is, again, treating high unmet need and with a very high science approach. And that's the theme that we take -- that we carry through to business development. The starting place when we think about business development is the franchise that we have, both in neurology and psychiatry and further exploiting the capabilities that we have there. And we're doing that through 2 kinds of programs, both symptomatic relief for chronic disorders with high, high unmet need for larger populations, I'll say, as well as represented by our Rett syndrome program -- programs that are pursuing orphan diseases or more rare disorders. And so as we go forward, you'll continue to see us through business development with a foot in both camps, both in terms of psychiatry, including symptomatic relief for chronic conditions as well as what tend to be more neurology-focused rare diseases. But you'll see that the mix of that shift over time. And that's really a consequence of where we're seeing the science is taking us. So if you look at where research dollars have been invested in our industry over the course of the last decade, you see a much greater proportion of those dollars going into the neuro space and rare disease. And so as a consequence, that's where many of the opportunities are from a business development perspective. I want to be really clear, we'll continue to have a very strong foot in psychiatry as well. There are some very interesting opportunities in that field as well. But as I mentioned, the mix that you'll see from us will shift. And you will see more deals from us.

Thanks, Steve. Elena, could you just remind us on cash runway here and how you're thinking about capital resource allocation as you look to kind of prioritize the rest of the portfolio?

Sure. So we ended Q1 with a very strong balance sheet, approximately $578 million in cash. We could be cash flow positive by the end of next year. And there's certain elements that will drive that. For example, if we're positive in our trofinetide Phase III program and preparing for a launch that would likely delay that as we invest in the launch. And if we are successful with additional business development, that could change that timing as well. But we're in a really strong cash position today. And as Steve mentioned and articulated, we have good capital to consider and do additional business development.

Great. So moving to NUPLAZID and DRP. Could you provide us an update on the status here of your Type A meeting? And just to level set, what are your goals headed into that meeting? What type of package are you putting together? And remind us why you believe DRP as a broad indication is the appropriate way to kind of segment this population?

Sure. Sure. So there were a couple of questions in there. If I don't hit everything, please remind me. So just first, just to level set on the status of our Type A meeting. So we've submitted the Type A meeting request together with our briefing document. The way the system works is the meeting should be about 30 days after the request, and then about 30 days after the meeting, we'll have minutes from the meeting. And so what we previously guided to, and I'll just repeat today is, we'll be able to update the Street once we receive minutes from the meeting. So just to reduce it to kind of a more precise time frame, we should -- you should expect us to provide an update by the time of our second quarter earnings call in early August. So in terms of what we want to accomplish at the Type A meeting, again, I'll just do a little bit of level setting here. So Type A meeting after you're entitled to one after the CRL. The agenda for that meeting is focused solely on what should it take now to get an approval and the indication that where an approval wasn't granted. And so that will be the discussion. I think a large part of that discussion may turn on a discussion around what is the right way to treat this population. We believe that the right way to -- or I should say, study this population. We believe the right way to study this population is the way we studied it in our Phase III program. And that's also the way that we agreed with FDA at the time of our end of Phase II meeting 4 years ago. So we studied in Phase III consistent with that agreement, DRP as a single group. So there are various underlying etiologies that can cause dementia. And sometimes, we try to -- we in the industry try to compartmentalize those patients into various subgroups based upon that underlying etiology. And just to sum it up, if we were pursuing development of a disease-modifying therapy to treat dementia, then that underlying etiology would be really important. It'd be important to try. I'll come back to that in a second when I say try. But to try to find patients with common etiology in order to determine whether you can interrupt that disease process or not. That's not what we're pursuing with NUPLAZID. What we're pursuing is symptomatic relief of a symptom that is very similar, irrespective of the underlying etiology. So the psychosis or the hallucinations and delusions present in a very similar way irrespective of the etiology, and they respond in a very similar way. So that's the primary reason that we feel like studying this group as a whole is the best way to study this population. In addition, if you were trying to study based upon individual subtypes or assess effective drug based upon individual subgroups that are associated with these underlying etiologies, it's very complicated. In fact, about 40% of patients with dementia that are diagnosed with dementia never receive an underlying etiology subtype diagnosis. So they're not just described as dementia patients, not described as Alzheimer's patients or vascular dementia patients. And the reason that 40% of them don't receive is because they're very difficult to diagnose. It's really hard to distinguish what the underlying etiology or underlying cause may be of the dementia that these patients are experiencing. We also know that when they are diagnosed, the diagnoses are frequently wrong. The only way to truly diagnose these patients is on autopsy after death. And when those -- when autopsies are done, the diagnoses are frequently wrong. And we also know that many patients have mixed etiology. So they may have Alzheimer's disease and vascular dementia. And so it's very problematic when you try to isolate these dementia patients into subgroups and even more complicated to try to draw -- try to discern impact of the drug based upon these purported subtypes, which may be incorrect and maybe a consequence of mixed etiology. So those reasons just add to our belief that the right way to study this population is as a group. So getting to -- I think I remember the third question but if -- getting to -- so what do we expect going forward? So the position that we'll be taking at this Type A meeting is we need to understand why the FDA appears to have changed their position from the position we agreed to at our end of Phase II meeting that we -- that this -- the best way to study this population is as a whole versus the position that they appear to be taking in the CRL letter that we received that calls out the fact that we didn't have statistical significance on individual subtypes or that in some subtypes, there just weren't enough patients in there to draw statistical inferences. Both of those things we knew going in, the study was not designed or powered to show effects on individual, again, purported subtypes. So that's the probably core of the discussion that we need to have with FDA at the Type A meeting.

And how much, I guess -- and you probably don't have a full sense of this year, but how much of it is driven by what happened in the Alzheimer's population just given it's kind of the majority of the group?

Well, again, with the caveat that all the hazards I discussed about trying to look at individual purported subtypes in place. What we saw in the study that we ran, the HARMONY study we ran is a very highly statistically significant result on the primary endpoint of the study. And the primary endpoint of study, as I mentioned, was looking at the dementia-related psychosis population as one group. When you start trying to break things down based upon purported subtypes, again with all of the caveats that I've previously described, we didn't expect to see statistical significance on any groups. We did see on the -- what would be the reported psychosis -- excuse me, Parkinson's dementia psychosis grew, we didn't see statistical significance on any others. However, if you look at the Alzheimer's, again, I'm going to say purported subgroup, that subgroup, while we didn't reach statistical significance, we did see what would be a very clinically meaningful effect. We saw about a 40% reduction in risk. In the Lewy body dementia, again, purported subtype, very few patients because it's just a very small population, but we saw very strong evidence of efficacy there as well. In the vascular dementia subgroup, we didn't see -- again, if you try to reduce it on a post hoc basis still looking at just those patients that have that label, we didn't see a separation there. But again, if we look at the entirety of the population, we saw this very strong statistically significant signal. And -- but even -- in our view, even when you look at the -- look, again, on a post hoc basis at these individual subgroups, we see strong evidence of efficacy there. So we don't see things going in the opposite direction. We see very consistent results. So our view is that data looking at the individual subtypes is consistent with and supportive of the primary endpoint of the study.

Great, Stephen. And can you just remind us of the various scenarios or outcomes from this meeting?

Well, yes, I -- of course, we've done a lot of scenario planning. I'm tempted to but I think the prudent thing to do at this point is we need to get to the meeting. We need to have the meeting, have the discussion with the FDA. And frankly, just trying to better understand their perspective and their -- what's underlying the view that they have today. I think once we've done that, we'll be in a position to then narrow the scenarios that we're focused on and describe that to the Street as well.

Makes sense. Maybe moving forward to NUPLAZID in Parkinson's disease psychosis. Could you just talk about the impact that you're seeing right now from COVID-19, particularly with respect to the new patient starts in the specialty pharmacy channel and long-term care facilities? And are you still seeing that improvement you noted on your first quarter call?

Yes, we are. And I'm going to ask Elena to answer this, and I'll maybe add some additional color.

Sure. So thanks for the question. So as Steve mentioned in his opening remarks, we did see an impact in Q1 as a result of the spike in COVID we saw following the holidays, and that was similar to what we've seen across the sector. The 2 key sort of leading indicators that we're focused on are new patient starts in the outpatient setting and our face-to-face interactions that will help drive those. And on that front, we are seeing an improvement in our face-to-face interactions. We're at about 50% right now. So we're still meaningfully below pre-pandemic levels, but that has improved versus earlier in the pandemic. And so there'll be a lag effect there. So a key driver to new patient starts is our interacting face-to-face in the field. And then that will then have a lagging benefit to new patient starts. And then in the long-term care setting, we did see a meaningful decline in census at facilities, and that decline was about 20%. And in the last few months, we've seen that improve about 1% a month. So we're seeing a slow pace of improvement there, but we're still meaningfully below pre-pandemic levels. So just to sort of wrap it up with regards to our outlook for the year and the guidance range, I did mention on the earnings call that based on the pace of recovery, that will really impact -- pace recovery due to the pandemic that will really impact where we fall in that range. And given the impact we saw in new patient starts early in the year, we think we could be at the lower end of that range.

When do you think you might return to pre-COVID levels?

I think it's a little hard to predict exactly when that will be at this point. As I said, we're seeing these improvement -- improving leading indicators, but we still have ways to go. I think given the fact that we're seeing improved vaccination rates, which are, in particular in long-term care, the ability for families to be able to visit is very important to drive improvements in census, and we're now starting to see that open up. So we could see an acceleration, but it's just hard to predict at this point exactly when that might be.

And then with the digital push that's been implemented here, what has feedback of physicians been? And how many are taking advantage of this online prescription system?

Sure. I'll take that one. So when the pandemic started in March of 2020, we pivoted very quickly. I think probably faster than most in our industry, certainly in our sector, to doing more digital detailing. And so there were 3 key components to that. One is we, within about a week, had all of our promotional materials in, I believe, our all systems, so that our reps and health care providers that they're calling on remotely could be looking at the same promotional materials at the same time. We also quickly moved to enable physicians to be able to prescribe the drug from home, so they could do everything electronically with key strokes, didn't need to fill out paper documents. And then we also moved our speakers bureau to a virtual speakers bureau right away. Those really paid some significant dividends as we were able to, at least in the office-based channel, blunt a lot of the effects of the pandemic in those early days. In the long-term care channel, of course, we saw benefits from that in that sector as well or that channel. But we -- what we saw were the first few months of the pandemic has a significant drop-off in the census numbers, the number of patients going into long-term care facilities. And so what we've seen through the course of the pandemic, I think we and others have seen that over time, digital detailing has become less and less effective with health care providers. And it's really a consequence of as they've moved to do more in-person patient visits as opposed to telemedicine, they're doing less tele detailing with us and everyone else in the industry. And so as Elena mentioned, it's very important for us to get back to more and more in-person detailing, which will parallel the in-person patient visits that physicians are doing. So both those metrics are very important in terms of the pace of recovery. I don't have any doubt that we'll get there. The precise timing of it is a little bit hard to predict when it comes down to the individual months or quarters, but we're certainly seeing things moving in the right direction. Still got ways to go, but they're moving in right direction.

When do you think you can get back fully to kind of in-person detailing in the U.S. kind of -- I guess, as you think about this push needed on that side?

Yes. What I can say is, I take these channels separately, is in the office-based channel, we're at about 50% in-person detailing now of all of our details. So -- and it's changing by the week and by the month. But particularly for Parkinson's disease, a lot of it depends on who we're dealing individual detailing with. So a lot -- the Parkinson's disease, a lot of patients are treated in centers of excellence or academic centers that tend to lag a little bit behind an individual practitioner, let's say, in terms of opening their offices up to in-person detailing. And so a lot of the larger accounts that we have or medical practices that we call on that are affiliated with centers of excellence or academic centers are still not open. And so it's not a matter of -- it's not only a matter of how many offices or what proportion are open, but which health care providers are open. In the long-term care channel, of course, elderly people, and particularly those in long-term care facilities, we're at the top of the list for receiving vaccinations. So we're seeing very high vaccination rates in those populations. The census numbers, though, are still lagging very far behind where they were pre-pandemic. And that's primarily a consequence of who can go into a long-term care facility. So for example, if loved ones still cannot go in and visit patient in a long-term care facility, they're more reluctant to put them in until they have better clarity around when they'll be able to see them. So that's changing now, and I think that will begin to move the census numbers. So I wish I could give you a precise timing regarding when those effects will take full effect or what -- exactly what the pace will be, it's really hard to say at this point, but what I can say is they're definitely moving in the right direction.

And can you give us an update on this, the negative symptoms of schizophrenia study, the ADVANCE-2 trial that's ongoing here? And where that is currently? And how you think about the read-through from the ADVANCE-1 study?

Sure. So we commenced our ADVANCE-2 study in the third quarter of last year. These studies usually take a couple of years to run. It's a 6-month treatment period. So as we progress and enroll, we'll be able to give a more precise timing as to exactly when we expect to complete the enrollment. But I just want to remind you that the tenet underlying this study is something that we rarely see with negative symptoms of schizophrenia. It's a positive study in this space. It's been a very difficult space to get positive results on. So we have 1 positive pivotal study under our belt, our ADVANCE-1 study, and we're now running our ADVANCE-2 study looking for a second pivotal study. The ADVANCE-2 study is almost identical to our ADVANCE-1 study with 1 key point of differentiation. In our ADVANCE-1 study, we allowed for flexible dosing. So not all patients were on -- in the study were on the same dose. And we did that in order to explore a little bit of a dose range, have a more precise view on what is the optimal dose, and we achieved that. And the optimal dose clearly from that flexible dosing is the 34-milligram dose that is the approved dose for treatment of Parkinson's disease psychosis as well as the dose that we used in our dementia-related psychosis Phase III program. So we know the dose now. And all of the patients in the ADVANCE-2 study will be on that 34-milligram dose. By the way, the results that we saw in ADVANCE-1, when we looked at the overall results of the study, which were statistically significant and positive, when we then focused in on the patients that were just on the 34-milligram dose, we saw a significant increase in the measured efficacy there. We saw an unadjusted p-value of 0.0065 for patients taking that 34-milligram dose. So we're very eager to advance enrollment in the study, get to a point where we can open the envelope and see if we've got a second positive pivotal study here.

Perfect. And then you also have a Phase III underway for Rett syndrome with data coming in the second half. Help us understand what is clinically meaningful here in this population? And how to think about the read-through from the Phase II program?

Yes. So thanks for asking. So I'll try to make this brief, but Rett syndrome, as I mentioned earlier, is a very, very debilitating disorder. It affects almost exclusively females. They develop normally for about the first 6 months of life. And then sometime around 6 months, they begin to deteriorate neurologically. They reach a point where they typically lose the ability to speak. They many times can't walk. They lose meaningful hand movements so they can't feed themselves. It's just a very, very debilitating disease. There's no drug approved for the treatment of Rett syndrome. There's some drugs being studied in Rett syndrome, looking at individual aspects of the disease. So in addition to the behavioral aspects that I've described, these girls often have respiratory issues or have seizure issues. And so some drugs are being studied to treat those types of symptoms, but not a lot in development today. There's some, but not a lot to treat the core symptoms. And I think we're in the lead in that regard. And so if we achieve, in our Phase III study, results that line up with the results that were achieved or observed in the Phase II study run in Rett syndrome, then I think we'll have a very strong basis for submitting for approval and hope then to be the first drug approved for treatment of Rett syndrome. So to your question regarding what do we hope to see? The primary endpoint of the Phase II study that was run prior to our acquiring this program was based on the primary endpoint of a question here, called the Rett Syndrome Behavioral Questionnaire. In other words, it's a subjective assessment done by the caregiver, which is almost always parents of the patient. And what was observed in the Phase II study is a statistically significant, clinically meaningful signal there. In the Phase III program, we have 2 co-primary endpoints, the Rett Syndrome Behavioral Questionnaire as well, so a subjective assessment by the caregiver as well as Clinical Global Impression scale, so a subjective assessment of improvement by the investigator. So again, if we hit on those in that study, then we'll be -- we'll hope to be the first drug approved to treat Rett syndrome. And I would just simply say that this is such a debilitating disorder that any movement of the needle at all, I think you have to look very carefully to assess clinical meaningfulness. But if we could do anything at all to help these patients, these girls, it would be very important.

Great. And then, Steve, just lastly, you have a collaboration with Vanderbilt focused on an M1 muscarinic receptor. And you also acquired CerSci, adding in a novel pain program. Where do those programs stand? And how are they kind of differentiated from what's out there in the landscape?

So let me take the CerSci program first. So we acquired CerSci Therapeutics last year. And through that acquisition, acquired a pain program that had completed Phase I. We've now commenced, as I mentioned in my opening remarks, a Phase II study in acute pain, postsurgical pain for patients receiving a bunionectomy. And we're also on the cusp of starting a chronic pain study for patients to assess the effects of the drug chronically. The fact that this mechanism has the potential, both in acute and chronic pain was one advantage that we saw to this program that we really liked. In addition and maybe more importantly, the mechanism of action of this non-opioid approach, the fact it's non-opioid, of course, is very important. But this precise mechanism is something we found very appealing as well. So with pain, through evolution, we have a lot of redundant pain mechanisms. And many times, when you put your finger in one hole in the dock, water comes out in another. This mechanism works upstream of several very important pain signaling pathways. So it may have the effect. We hope it will have the effect of putting your finger in multiple holes in the dock at once to get a more robust disruption in pain signaling. So we're very here to get results of these Phase II studies. We should have results from the bunionectomy study around year-end this year and the chronic pain study sometime next year. The M1 PAM program that we in-licensed through our collaboration with Vanderbilt University, again, it meets the same profile that I've described earlier, being a very high unmet need and very high science. There have been a lot of very intriguing data in the last several years in the muscarinic arena. One of the big challenges that we face in activating this system is the downstream cholinergic effects that you get, which can have very significant GI disturbances. So that's been a very difficult thing to navigate around. And the approach that Vanderbilt University is taking and now we're taking in collaboration with them is to advance molecules that are focused on the M1 subtype. And equally importantly, our allosteric modulators at that subtype. And what we see in preclinical animal models is we get the same kind of muscarinic benefits that have been observed in the literature, but without the downstream cholinergic side effects. So there's very difficult GI side effects. So we in-licensed this program at a time when it was in Phase I. We said at that time, we need to do some additional Phase I work. We want to be able to explore a wider dose range. And to do that, we need to do some additional preclinical work. So we're working through that. That's all on target in that program. But we're eager to get that program into proof-of-concept Phase II studies as well.

Great. Well, with that, thank you so much, Steve and Elena. I really appreciate the time today.

Thank you.

Thanks, Salveen.