UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-50768
ACADIA PHARMACEUTICALS INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 06-1376651 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 3911 Sorrento Valley Boulevard San Diego, California |
92121 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(858) 558-2871
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Total shares of common stock outstanding as of the close of business on April 29, 2005:
| Class |
Number of Shares Outstanding | |
| Common Stock, $0.0001 par value | 23,350,818 |
ACADIA PHARMACEUTICALS INC.
FORM 10-Q
| PAGE NO. | ||||
| TABLE OF CONTENTS |
i | |||
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
Condensed Consolidated Financial Statements (Unaudited) |
|||
| Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004 |
1 | |||
| Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004 |
2 | |||
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | ||
| Item 3. |
28 | |||
| Item 4. |
28 | |||
| PART II. OTHER INFORMATION |
||||
| Item 2. |
29 | |||
| Item 6. |
30 | |||
| 31 | ||||
i
PART I. FINANCIAL INFORMATION
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2005 |
December 31, 2004(1) |
|||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 11,235,900 | $ | 8,301,700 | ||||
| Investment securities, available-for-sale |
30,410,200 | 27,625,700 | ||||||
| Prepaid expenses and other current assets |
2,006,500 | 1,890,700 | ||||||
| Total current assets |
43,652,600 | 37,818,100 | ||||||
| Property and equipment, net |
2,271,700 | 2,546,900 | ||||||
| $ | 45,924,300 | $ | 40,365,000 | |||||
| Liabilities and Stockholders’ Equity |
||||||||
| Accounts payable |
$ | 1,356,500 | $ | 2,152,800 | ||||
| Accrued expenses |
3,656,600 | 3,681,100 | ||||||
| Current portion of deferred revenue |
5,834,600 | 1,320,300 | ||||||
| Current portion of long-term debt |
844,800 | 1,486,400 | ||||||
| Total current liabilities |
11,692,500 | 8,640,600 | ||||||
| Long-term debt, less current portion |
854,000 | 1,044,000 | ||||||
| Deferred revenue, less current portion |
1,007,200 | — | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Preferred stock, $0.0001 par value; 5,000,000 shares authorized at March 31, 2005 and December 31, 2004; no shares issued and outstanding at March 31, 2005 and December 31, 2004 |
— | — | ||||||
| Common stock, $0.0001 par value; 75,000,000 shares authorized at March 31, 2005 and December 31, 2004; 18,055,047 shares and 16,922,850 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively |
1,800 | 1,700 | ||||||
| Additional paid-in capital |
133,685,700 | 126,755,100 | ||||||
| Accumulated deficit |
(99,872,200 | ) | (94,283,000 | ) | ||||
| Unearned stock-based compensation |
(1,711,400 | ) | (2,107,800 | ) | ||||
| Accumulated other comprehensive income |
266,700 | 314,400 | ||||||
| Total stockholders’ equity |
32,370,600 | 30,680,400 | ||||||
| $ | 45,924,300 | $ | 40,365,000 | |||||
| (1) | The condensed consolidated balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Revenues |
||||||||
| Collaborative revenues |
$ | 2,325,200 | $ | 923,900 | ||||
| Operating expenses |
||||||||
| Research and development(1) |
6,115,600 | 5,749,300 | ||||||
| General and administrative(1) |
1,638,600 | 911,400 | ||||||
| Stock-based compensation |
371,200 | 695,200 | ||||||
| Total operating expenses |
8,125,400 | 7,355,900 | ||||||
| Loss from operations |
(5,800,200 | ) | (6,432,000 | ) | ||||
| Interest income |
261,300 | 87,100 | ||||||
| Interest expense |
(50,300 | ) | (136,300 | ) | ||||
| Net loss |
$ | (5,589,200 | ) | $ | (6,481,200 | ) | ||
| Participation of preferred stock |
— | (5,615,900 | ) | |||||
| Net loss available to common stockholders |
(5,589,200 | ) | (865,300 | ) | ||||
| Net loss per common share, basic and diluted |
$ | (0.31 | ) | $ | (0.58 | ) | ||
| Weighted average common shares outstanding, basic and diluted |
17,903,209 | 1,495,056 | ||||||
| Net loss available to participating preferred stockholders |
$ | — | $ | (5,615,900 | ) | |||
| Net loss per participating preferred share, basic and diluted |
$ | — | $ | (0.57 | ) | |||
| Weighted average participating preferred shares outstanding, basic and diluted |
— | 9,900,913 | ||||||
| (1) Excludes stock-based compensation as follows: |
||||||||
| Research and development |
$ | 211,100 | $ | 406,800 | ||||
| General and administrative |
160,100 | 288,400 | ||||||
| $ | 371,200 | $ | 695,200 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | (5,589,200 | ) | $ | (6,481,200 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
| Depreciation and amortization |
306,000 | 334,600 | ||||||
| Stock-based compensation |
371,200 | 695,200 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Prepaid expenses and other current assets |
(140,000 | ) | (150,600 | ) | ||||
| Other assets |
— | (627,200 | ) | |||||
| Accounts payable |
(768,000 | ) | 1,017,100 | |||||
| Accrued expenses |
30,700 | 308,600 | ||||||
| Deferred revenue |
5,521,500 | 1,000,300 | ||||||
| Net cash used in operating activities |
(267,800 | ) | (3,903,200 | ) | ||||
| Cash flows from investing activities |
||||||||
| Purchases of investment securities |
(11,459,800 | ) | 242,100 | |||||
| Maturities of investment securities |
8,643,000 | 2,550,000 | ||||||
| Purchases of property and equipment |
(91,000 | ) | (41,800 | ) | ||||
| Net cash provided by (used in) investing activities |
(2,907,800 | ) | 2,750,300 | |||||
| Cash flows from financing activities |
||||||||
| Proceeds from issuance of common stock, net of issuance costs |
6,956,000 | 86,500 | ||||||
| Repayments of long-term debt |
(833,500 | ) | (844,600 | ) | ||||
| Net cash provided by (used in) financing activities |
6,122,500 | (758,100 | ) | |||||
| Effect of exchange rate changes on cash |
(12,700 | ) | (29,200 | ) | ||||
| Net increase (decrease) in cash and cash equivalents |
2,934,200 | (1,940,200 | ) | |||||
| Cash and cash equivalents |
||||||||
| Beginning of period |
8,301,700 | 6,308,100 | ||||||
| End of period |
$ | 11,235,900 | $ | 4,367,900 | ||||
| Supplemental schedule of noncash investing and financing activities |
||||||||
| Unrealized gain (loss) on investment securities |
$ | (32,300 | ) | $ | 12,400 | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of ACADIA Pharmaceuticals Inc. (together with its wholly owned subsidiary, ACADIA
Pharmaceuticals A/S, the “Company”) should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2004 included in the Company’s Annual Report on Form
10-K
(“Annual Report”) filed with the Securities and Exchange Commission (the “SEC”). The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of
the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair
statement of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.
2. Net Income (Loss) Per Share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period increased to include potential dilutive common shares that were outstanding during the period. The dilutive effect of outstanding stock options and warrants is reflected, when dilutive, in diluted earnings (loss) per common share by application of the treasury stock method. The Company has excluded all outstanding stock options and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.
For the period prior to the closing of the Company’s initial public offering, the Company computed its net income (loss) per common share using the two class method; therefore, the Company’s net income (loss) was allocated between the common stockholders and the preferred stockholders based on their respective rights to share in dividends. For the three months ended March 31, 2004, the method by which the Company allocated net income (loss) to the preferred stock was based on the number of preferred shares outstanding compared to the total combined preferred and common shares outstanding as of March 31, 2004. The remaining net income (loss) was allocated to common stockholders. Upon the closing of the Company’s initial public offering on June 2, 2004, all outstanding preferred stock was reclassified or converted into common stock. As there were no preferred shares outstanding during the three months ended March 31, 2005, the Company allocated net income (loss) solely to common stock.
The basic and diluted net loss per common share amounts for the three months ended March 31, 2005 presented in the statements of operations include the effect of the 5.0 million shares of common stock issued in the Company’s initial public offering that closed on June 2, 2004 and the approximately 9.9 million shares of common stock issued upon reclassification or conversion of the Company’s preferred stock in conjunction with the closing of the initial public offering, as well as the effect, on a weighted average basis, of the approximately 1.1 million shares of common stock issued by the Company in connection with a collaboration agreement with Sepracor Inc. (“Sepracor”) on January 10, 2005.
4
Shares used in calculating basic and diluted net loss per common share exclude these potential common shares:
| Three Months Ended March 31, | ||||
| 2005 |
2004 | |||
| (unaudited) | ||||
| Antidilutive options to purchase common stock |
1,938,759 | 1,766,833 | ||
| Antidilutive warrants to purchase common stock |
74,073 | 74,073 | ||
| Restricted vesting common stock |
125,206 | 137,702 | ||
| 2,138,038 | 1,978,608 | |||
3. Stock-Based Compensation
The Company measures compensation expense for its employee stock-based compensation plans using the intrinsic value method and provides pro forma disclosures of net income (loss) as if a fair value method had been applied in measuring compensation expense. Accordingly, compensation cost for stock awards is measured as the excess, if any, of the fair value of the Company’s common stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation cost is amortized over the related vesting periods using an accelerated method. Accrued compensation costs for unvested awards that are forfeited are reversed against compensation expense or unearned stock-based compensation, as appropriate, in the period of forfeiture.
Stock-based awards issued to nonemployees are accounted for using a fair value method and are remeasured to fair value at each period end until the earlier of the date that performance by the nonemployee is complete or a performance commitment has been obtained. The fair value of each award is estimated using the Black-Scholes option pricing model.
Pro forma information regarding net income (loss) has been determined as if the Company had accounted for its employee stock options under the fair value methodology.
The value of each employee stock option granted is estimated on the grant date under the fair value method using the Black-Scholes option pricing model. Prior to the initial public trading of the Company’s stock on May 27, 2004, the value of each employee stock option grant was estimated on the date of grant using the minimum value method. Under the minimum value method, a volatility factor of 0.0 percent is assumed. The following assumptions were used for the employee stock purchase plan, which became effective as of May 26, 2004: dividend yield of 0.0 percent; volatility of 50.0 percent; risk-free interest rate of 3.0 percent; and expected life in years of 0.5. The following weighted average assumptions were used for employee stock options:
| Three Months Ended March 31, |
||||||
| 2005 |
2004 |
|||||
| (unaudited) | ||||||
| Dividend yield |
0.0 | % | 0.0 | % | ||
| Volatility |
70.0 | % | 0.0 | % | ||
| Risk-free interest rate |
4.0 | % | 3.0 | % | ||
| Expected life in years |
5 | 5 | ||||
5
Pro forma information follows for the periods:
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (unaudited) | ||||||||
| Net loss, as reported |
$ | (5,589,200 | ) | $ | (6,481,200 | ) | ||
| Add: Total stock-based employee compensation costs included in the determination of net loss |
360,200 | 630,100 | ||||||
| Deduct: Total stock-based employee compensation costs that would have been included in net loss if the fair value method had been applied |
(630,500 | ) | (669,900 | ) | ||||
| Pro forma net loss |
$ | (5,859,500 | ) | $ | (6,521,000 | |||