ACADIA PHARMACEUTICALS INC

Previous wording

Our commercial portfolio includes two products. In April 2016, the FDA approved NUPLAZID for the treatment of hallucinations and delusions associated with PDP, which is the first and only drug approved in the United States for this condition. In September 2023, we announced that the FDA made two changes to the NUPLAZID label clarifying its use in patients with Parkinson’s disease-related hallucinations and delusions, with or without dementia, which is consistent with the current indication. In March 2023, the FDA approved DAYBUE for the treatment of Rett syndrome, which is the first and only drug approved for this condition. DAYBUE became available for prescription in the United States in April 2023.

Current wording

Our commercial portfolio includes two products. In April 2016, the FDA approved NUPLAZID for the treatment of hallucinations and delusions associated with PDP, which is the first and only drug approved in the United States for this condition. In September 2023, we announced that the FDA made two changes to the NUPLAZID label clarifying its use in patients with Parkinson’s disease-related hallucinations and delusions, with or without dementia, which is consistent with the current indication. In March 2023, the FDA approved DAYBUE for the treatment of Rett syndrome, which is the first and only drug approved for this condition. DAYBUE became available by prescription in the United States in April 2023.

Previous wording

Looking beyond the U.S., we are making significant progress toward making DAYBUE available in additional markets. Our pediatric investigation plan (PIP) has been agreed with the pediatric committee of the European Medicines Agency (EMA), paving the way for an anticipated filing in the first quarter of 2025. In Japan, we have a formal meeting scheduled with the Pharmaceuticals and Medical Devices Agency (PMDA) in the second quarter of 2024 to discuss our proposed clinical plan. And in Canada, we recently announced that our New Drug Submission was accepted for filing and granted priority review by Health Canada, potentially leading to an approval in that market around the end of this year.

Current wording

Looking beyond the U.S., we are advancing efforts to make trofinetide available in additional markets. Our pediatric investigation plan (PIP) has been agreed to with the pediatric committee of the European Medicines Agency (EMA), paving the way for an anticipated filing in the first quarter of 2025. In Japan, we held our first formal meeting with the Pharmaceuticals and Medical Devices Agency (PMDA) in the second quarter of 2024 to discuss our proposed clinical plan. And in Canada, we announced in April 2024 that our New Drug Submission was accepted for filing and granted priority review by Health Canada, potentially leading to an approval in that market around the end of this year.

Previous wording

Cost of sales for a newly launched product does not include the full cost of manufacturing until the initial pre-launch inventory is depleted, and additional inventory is manufactured and sold. Thus the cost of sales as a percentage of net sales of DAYBUE for the three months ended March 31, 2024 was affected by use of the initial pre-launch inventory, which was previously expensed as research and development expense, and is referred to as zero cost inventories. However, we do not expect that the cost of sales as a percentage of net sales of DAYBUE will increase significantly once we commence the sales of full cost inventories.

Current wording

Cost of sales for a newly launched product does not include the full cost of manufacturing until the initial pre-launch inventory is depleted, and additional inventory is manufactured and sold. Thus, the cost of sales as a percentage of net sales of DAYBUE for the three and six months ended June 30, 2024 was affected by use of the initial pre-launch inventory, which was previously expensed as research and development expense, and is referred to as zero cost inventories. However, we do not expect that the cost of sales as a percentage of net sales of DAYBUE will increase significantly once we commence the sales of full cost inventories.

Previous wording

We use external service providers to manufacture our product candidates and for the majority of the services performed in connection with the preclinical and clinical development of pimavanserin, trofinetide, and our early-stage programs. Historically, we have used our internal research and development resources, including our employees and discovery infrastructure, across several projects and many of our costs have not been attributable to a specific project. Accordingly, we have not reported our internal research and development costs on a project-by-project basis. To the extent that external expenses are not attributable to a specific project, they are included in other early-stage programs. The following table summarizes our research and development expenses for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

We use external service providers to manufacture our product candidates and for the majority of the services performed in connection with the preclinical and clinical development of pimavanserin, trofinetide, and our early-stage programs. Historically, we have used our internal research and development resources, including our employees and discovery infrastructure, across several projects and many of our costs have not been attributable to a specific project. Accordingly, we have not reported our internal research and development costs on a project-by-project basis. To the extent that external expenses are not attributable to a specific project, they are allocated proportionally to each of the projects.

Previous wording

Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and DAYBUE and the extent to which we generate revenue from product sales, our further development of our early-stage pipeline programs and the progress and timing of expenditures related to studies of DAYBUE pursuant to our post-marketing requirements. Further, we expect our sales allowances to vary from quarter to quarter due to fluctuations in our Medicare Part D Coverage Gap liability and the volume of purchases eligible for government mandated discounts and rebates, as well as changes in discount percentages that may be impacted by potential future price increases and other factors. We cannot predict with certainty what the full impact that geopolitical and macroeconomic developments, including the ongoing military conflict between Ukraine and Russia and the ongoing conflict in Israel and surrounding areas may have on our business, results of operations, financial condition and prospects. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

Current wording

Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and DAYBUE and the extent to which we generate revenue from product sales, our further development of our early-stage pipeline programs and the progress and timing of expenditures related to studies of DAYBUE pursuant to our post-marketing requirements. Further, we expect our sales allowances to vary from quarter to quarter due to fluctuations in our Medicare Part D Coverage Gap liability and the volume of purchases eligible for government mandated discounts and rebates, as well as changes in discount percentages that may be impacted by potential future price increases and other factors. We cannot predict with certainty what the full impact that geopolitical and macroeconomic developments may have on our business, results of operations, financial condition and prospects. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

Previous wording

Net product sales, comprised of NUPLAZID and DAYBUE, were $205.8 million and $118.5 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Net product sales, comprised of NUPLAZID and DAYBUE, were $242.0 million and $165.2 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Net product sales of NUPLAZID were $129.9 million and $118.5 million for the three months ended March 31, 2024 and 2023, respectively. The increase in net product sales of NUPLAZID of $11.4 million was due to the growth in NUPLAZID unit sales as well as a higher average net selling price of NUPLAZID in 2024 compared to 2023. Net product sales of DAYBUE were $75.9 million for the three months ended March 31, 2024. There were no net product sales of DAYBUE during the three months ended March 31, 2023.

Current wording

Net product sales of NUPLAZID were $157.4 million and $142.0 million for the three months ended June 30, 2024 and 2023, respectively. The increase in net product sales of NUPLAZID of $15.4 million was due to the growth in NUPLAZID unit sales as well as a higher average net selling price of NUPLAZID in 2024 compared to 2023. Net product sales of DAYBUE were $84.6 million and $23.2 million for the three months ended June 30, 2024 and 2023, respectively. The increase in net product sales of DAYBUE of $61.4 million was due to the growth in DAYBUE unit sales.

Previous wording

Selling, general and administrative expenses increased to $108.0 million for the three months ended March 31, 2024, including $10.5 million in stock-based compensation expense, from $101.2 million for the three months ended March 31, 2023, including $10.6 million in stock-based compensation expense. The increase in selling, general and administrative expenses was primarily driven by annualization of DAYBUE expenses as well as foundational investments to commercialize trofinetide outside the U.S.

Current wording

Selling, general and administrative expenses increased to $117.1 million for the three months ended June 30, 2024, including $11.6 million in stock-based compensation expense, from $96.0 million for the six months ended June 30, 2023, including $11.3 million in stock-based compensation expense. The increase in selling, general and administrative expenses was primarily driven by upfront costs related to a new consumer activation program to support the NUPLAZID franchise, increased marketing costs in the U.S. to support DAYBUE, and investments to support commercialization of trofinetide outside the U.S.

Previous wording

The following table provides a summary of activity with respect to our sales allowances and accruals for the three months ended March 31, 2024 (in thousands):

Current wording

The following table provides a summary of activity with respect to our sales allowances and accruals for the six months ended June 30, 2024 (in thousands):

Previous wording

Cost of product sales was $23.0 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively, or approximately 11% and 1% of net product sales, respectively. Cost of product sales as a percentage of net product sales for NUPLAZID remained relatively flat during the three months ended March 31, 2024 as compared to the same period of 2023. The increase in cost of product sales was primarily due to the $12.9 million in license fees and royalties expensed during the three months ended March 31, 2024 for DAYBUE, including royalties due to Neuren based on net sales of DAYBUE and the amortization of the milestone payments capitalized under our 2018 license agreement with Neuren. There were no license fees and royalties in the same period of 2023 for either product. Our cost of sales expense increased as a result of the capitalization and amortization of the $50.0 million sales milestone to be paid to Neuren, which included a one-time cumulative catch-up of $3.9 million of expense. Currently, we are required to pay 10% of royalties to Neuren based on the annual net sales of DAYBUE in North America. If our annual net sales of DAYBUE in North America exceed $250.0 million, we will be required to pay 12% of royalties to Neuren on net sales that exceed $250.0 million.

Current wording

Cost of product sales was $41.2 million and $9.1 million for the six months ended June 30, 2024 and 2023, respectively, or approximately 9% and 3% of net product sales, respectively. Cost of product sales as a percentage of net product sales for NUPLAZID remained relatively flat during the six months ended June 30, 2024 as compared to the same period of 2023. The increase in cost of product sales was primarily due to the increase in license fees and royalties expensed for DAYBUE, including royalties due to Neuren based on net sales of DAYBUE and the amortization of the milestone payments capitalized under our 2018 license agreement with Neuren. The license fees and royalties expensed during the six months ended June 30, 2024 were $23.7 million as compared to $3.7 million in the same period of 2023. Currently, we are required to pay 10% of royalties to Neuren based on the annual net sales of DAYBUE in North America. If our annual net sales of DAYBUE in North America exceed $250.0 million, we will be required to pay 12% of royalties to Neuren on net sales that exceed $250.0 million.

Previous wording

Certain manufacturing related expenses incurred prior to DAYBUE receiving FDA approval were classified as research and development expenses, resulting in zero cost inventory. Prior to receiving FDA approval for DAYBUE in March 2023, we manufactured inventory and recorded approximately $29.9 million related to the zero cost inventory as research and development expense. Utilizing the actual direct costs to manufacture DAYBUE prior to receiving FDA approval, had the previously expensed inventory been capitalized and recognized when sold, the total cost of sales with these manufacturing costs included for the three months ended March 31, 2024 would have increased by approximately $3.5 million. We do not expect our cost of product sales for DAYBUE to increase significantly as a percentage of net product sales in future periods as we continue to produce inventory for future sales. We expect to finish selling the zero cost inventories of DAYBUE in 2025.

Current wording

Certain manufacturing related expenses incurred prior to DAYBUE receiving FDA approval were classified as research and development expenses, resulting in zero cost inventory. Prior to receiving FDA approval for DAYBUE in March 2023, we manufactured inventory and recorded approximately $29.9 million related to the zero cost inventory as research and development expense. Utilizing the actual direct costs to manufacture DAYBUE prior to receiving FDA approval, had the previously expensed inventory been capitalized and recognized when sold, the total cost of sales with these manufacturing costs included for the six months ended June 30, 2024 would have increased by approximately $7.2 million. We do not expect our cost of product sales for DAYBUE to increase significantly as a percentage of net product sales in future periods as we continue to produce inventory for future sales. We expect to finish selling the zero cost inventories of DAYBUE in 2025.

Previous wording

Unless and until we can generate significant cash from our operations, we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, public or private sales of our securities, debt financings, or strategic collaborations. In the past, periods of turmoil and volatility in the financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain. For example, due to geopolitical and macroeconomic developments, including the Ukraine-Russia military conflict and related sanctions, and the ongoing conflict in Israel and surrounding areas, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. These events, coupled with other factors, may limit our access to additional financing in the future. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If adequate funds are not available when needed, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. We also may be required to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock.

Current wording

Unless and until we can generate significant cash from our operations, we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, public or private sales of our securities, debt financings, or strategic collaborations. In the past, periods of turmoil and volatility in the financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain. For example, due to geopolitical and macroeconomic developments, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. These events, coupled with other factors, may limit our access to additional financing in the future. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If adequate funds are not available when needed, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. We also may be required to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock.

Previous wording

At March 31, 2024, we had $470.5 million in cash, cash equivalents, and investment securities, compared to $438.9 million at December 31, 2023. This $31.6 million increase was primarily due to cash provided by operating activities. Net cash provided by operating activities increased to $29.1 million for the three months ended March 31, 2024 compared to $17.9 million of net cash used in operating activities for the three months ended March 31, 2023. This increase in cash provided by operations primarily resulted from an increase in our net revenues partially offset by the increase cost of product sales.

Current wording

At June 30, 2024, we had $500.9 million in cash, cash equivalents, and investment securities, compared to $438.9 million at December 31, 2023. This $62.0 million increase was primarily due to cash provided by operating activities. Net cash provided by operating activities increased to $54.1 million for the six months ended June 30, 2024 compared to $9.7 million of net cash used in operating activities for the six months ended June 30, 2023. This increase in cash provided by operations primarily resulted from an increase in our net revenues partially offset by the increase cost of product sales and selling, general and administrative cost.

Previous wording

Net cash used in investing activities totaled $14.0 million for the three months ended March 31, 2024 compared to $192.5 million of cash provided by investing activities for the three months ended March 31, 2023. The decrease in net cash provided by investing activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to decreased net sale and maturities of investment securities.

Current wording

Net cash used in investing activities totaled $70.2 million for the six months ended June 30, 2024 compared to $1.8 million for the six months ended June 30, 2023. The increase in net cash used in investing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to increased net purchases of investment securities.

Previous wording

Net cash provided by financing activities decreased to $1.0 million for the three months ended March 31, 2024 compared to $1.5 million for the three months ended March 31, 2023. This decrease in net cash provided by financing activities for the three months ended March 31, 2024 was attributable primarily to a decrease in proceeds resulting from the exercise of employee stock options.

Current wording

Net cash provided by financing activities decreased to $4.6 million for the six months ended June 30, 2024 compared to $6.9 million for the six months ended June 30, 2023. This decrease in net cash provided by financing activities for the six months ended June 30, 2024 was attributable primarily to a decrease in proceeds resulting from the exercise of employee stock options.