3 Chances with Pimavanserin - Analyst Blog

Biovail (BVF) and Acadia Pharmaceuticals (ACAD) are moving forward with a 3-pronged strategy for pimavanserin. Acadia plans a phase III trial in Parkinson’s disease psychosis (PDP) and a phase II feasibility study in Alzheimer’s disease psychosis (ADP). Biovail plans a phase III trial with pimavanserin as an adjunctive therapy for schizophrenia. All three programs should be up and running by the third quarter 2010.

Management has made a number of changes to the planned third phase III program with pimavanserin PDP that we believe will aid in the success of the trial.

Firstly, the trial will test only 40mg pimavanserin vs. placebo in a 1:1 randomization. We remind investors that the previous program had 3 arms at a 2:1 randomization (10mg and 40m vs. placebo). Reducing the randomization to 1:1 should help reduce the perception that patients believe they are on drug and reduce the statistic hurdle that is required to meet significance (to p<0.05).

Second, management will conduct fewer patient visits during the active dosing portion of the trial.  This will limit the interaction between the Parkinson’s patient and the clinician, which may have resulted in improved perception in disease psychosis during the first phase III trial. For example, the patients in the first trial received a significant step-up in quality of care relative to non-participating patients.

The additional visits and monitoring of these patients seem to lead to a lower frequency of psychotic episodes. Management will look to reduce the planned visits in the next program to better assess the efficacy of pimavanserin in a more traditional setting for the patient.

And finally, the third trial will enroll a more homogeneous patient population. The first phase III program enrolled patients in seven different countries (The U.S., U.K., France, Bulgaria, India, Russia and the Ukraine).

Standards of care and patient characteristics differed from the U.S. and, for example, India or Russia. Management noted that results in the U.S. were more predictable and consistent with what was expected versus Eastern Europe or India. The third phase III study will enroll patients in North America only.

Phase II Feasibility in ADP

Besides progressing in a phase III program for PDP, Acadia will conduct a phase II feasibility program in Alzheimer’s disease psychosis (ADP) to begin in the third quarter of 2010. We expect that the program will employ a commonly used and well validated assessment scale for Alzheimer's patients, and will be large enough to define the parameters around success for an eventual registration program in 2011.

There are an estimated 5.3 million Alzheimer’s disease patients in the U.S., about 4-times that of the Parkinson’s market. Management notes roughly 25–50% of these patients will go on to develop psychosis associated with the disease. These include hallucination and delusion, often at a higher frequency and severity then the Parkinson’s patient. They are often given anti-psychotic drugs to treat the psychosis. However, these drugs carry significant side-effects and a black box warning for use in the elderly due to increased morbidity and mortality risk.

This opens the door for a potential treatment options such as pimavanserin. We believe the market for ADP plays out in a similar fashion to PDP, only about 4-5-times the size.

Injuctive Therapy for Schizophrenia

Finally, Biovail should be in position to initiate a phase III program around the middle of the year testing pimavanserin as an injunctive therapy in patients with schizophrenia. The trial will last six weeks and enroll 600 patients in four arms: 2mg (low-dose) risperidone, 6mg (therapeutic level) risperidone, 20mg pimavanserin, and 2mg risperidone + 20mg pimavanserin. The study also would include the long-term safety extension components. We expect that the entire study, including the long-term safety component, will take about 24 months to complete.

This phase III program is designed to build on the positive results from the phase II adjunctive therapy program that offered results in March 2007. Data from this phase IIb trial demonstrated that the addition of pimavanserin (20mg) to low-dose Risperdal (2mg) had several positive outcomes, including both faster onset and improved antipsychotic efficacy, along with greater patient response, and a trend toward improved tolerability with signs of less weight gain and no serious adverse events vs. the standard dose of Risperdal (6mg).

We believe that pimavanserin has the potential to amplify the efficacy of 2mg risperidone similar to a full therapeutic dose of 6mg while providing significant tolerability and onset advantages.

Stock Looks Undervalued

Acadia is currently trading with a market capitalization of only $50 million. The company exited 2009 with $47 million on the books. This leaves a technology value for pimavanserin at only $3 million, and this excludes the collaboration with both Allergan and Meiji Seika.

Biovail is funding the bulk of the pimavanserin work in 2010. Burn for 2010 should be roughly $20 million, although the net loss will be significantly higher on delayed recognition of the Biovail reimbursement payments.

Nevertheless, Acadia should still have over $25 million on hand at the end of 2010. Above, we outlined the company’s three-pronged strategy with pimavanserin. Clearly with a market capitalization of only $50 million, the Street’s expectations are low.

Acadia May Be Attractive Acquisition for Biovail

We believe Acadia represents an attractive acquisition target for Biovail should pimavanserin offer positive data in any one of the three indications. Biovail could owe $205 million in developmental and $160 million in sales-related milestones to Acadia, plus a 15 – 20% royalty on U.S./Canadian sales.

With a market value of only $50 million, and probably still $25 million in cash at the end of 2010, it would be significantly cheaper for Biovail to acquire all of Acadia if they can get pimavanserin back on track. In the meantime, the name remains squarely on our radar for small-cap under-valued ideas in the biotechnology industry.

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