This morning, Acadia Pharmaceuticals (ACAD) announced that it has entered into an agreement with Biovail Labs (BLS), a wholly owned subsidiary of Valeant Pharmaceuticals International, to conclude the previously established collaboration to develop and commercialize pimavanserin in the U.S. and Canada.
Acadia has now reclaimed global rights to the drug. As part of the transaction, Biovail will pay Acadia a one-time payment of $8.75 million to terminate the agreement. No future payments between Acadia and BLS are expected.
Acadia will push forward with the phase III-020 program testing pimavanserin as a treatment for Parkinson’s Disease Psychosis (PDP), a program that BLS was previously responsible for funding. Acadia initiated the trial in July 2010 with a target enrollment of 200 patients. Previously management estimated the costs of the program would be $10 to $12 million.
The $8.75 million payment from BLS to Acadia equates to the estimated remaining expenses to complete the trial. Based on current enrollment, Acadia believes top-line results should be available around the middle of 2012.
Acadia and BLS will also pursue two additional indications for pimavanserin prior to terminating the collaboration agreement. Acadia was positioned to begin a phase II feasibility program in Alzheimer’s Disease Psychosis (ADP) by the end of the year. This program was to be funded by Acadia, but was 50% reimbursable by BLS if successful.
Instead of pushing forward with this phase II program in ADP, management at Acadia will turn all its focus to the phase III program in PDP. Management may seek to resume plan for the ADP program in 2011 or 2012.
The third indication was as a combination therapy with low-dose risperidone as a treatment for schizophrenia. BLS met with the U.S. FDA earlier this year to outline plans for a phase III registration program in schizophrenia, and expected to begin the trial late 2010 / early 2011.
As far as what has been disclosed, no final agreement on the trial design between the FDA and BLS/Acadia has been reached. Therefore, management at Acadia will delay starting this phase III program until they can secure another U.S. or global development partnership.
Acadia exited the second quarter 2010 with $34 million in cash and investments. We estimate burn for the third quarter was around $4 million. Therefore, adding in the $8.75 million just received and subtracting another $4-5 million for burn in the fourth quarter, the cash balance at the end of the year should be around $33-35 million.
Management plans to update financial guidance on the Q3 conference call on November 9th. However, we estimate this is enough cash to fund operations — and the ongoing phase III PDP trial — into the middle of 2012. We have updated our financial model to reflect recognition of the $8.75 million payment and the outstanding deferred revenue from the original $30 million upfront payment in the fourth quarter.
This is the second major collaboration agreement on our coverage list that BLS has terminated. Earlier in the month, Valeant / BLS walked away from a North American commercialization agreement with Alexza Pharmaceuticals for AZ-004 (Staccato loxapine), an inhaled treatment for acute agitation in patients with schizophrenia and bipolar disorder. Valeant has decided to focus on integration of BLS and on acquiring commercialized products.
We do not believe this is any way reflects negatively on the commercialization potential of pimavanserin. As with AZ-004, it is simply not something Valeant management was interested in retaining from Biovail’s development portfolio.
We view the news this morning as good and bad. Good in a sense that Acadia gets $8.75 million and the PDP program continues on schedule. Also good because now Acadia can go out and sign another partner for more money. However, we are disappointed that the ADP and schizophrenia programs have been placed on hold until a new partnership is secured.
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