Staff Writer

Acadia Pharmaceuticals Inc. surprised investors Monday morning by unveiling a potential $395 million partnership on lead drug pimavanserin with Biovail Corp.

Analysts had predicted such a deal wouldn't close until after the drug proves its worth in two ongoing Phase III trials for Parkinson's disease psychosis. Some also had doubted Acadia's ability to land a lucrative deal due to mixed Phase II results and a limited market opportunity.

Yet Piper Jaffray and Co. analyst Edward Tenthoff acknowledged in a research note that the terms in the surprise partnership were "favorable" to Acadia. Investors seemed to approve as well, pushing the San Diego-based company's stock (NASDAQ:ACAD) up $1.34, or 134 percent, to close at $2.34 on Monday.

The deal calls for Biovail to pay Acadia $30 million in cash up front and up to $365 million in milestone payments, of which $160 million are tied to clinical and regulatory events in Parkinson's disease psychosis (PDP) and Alzheimer's disease psychosis (ADP). Of the remaining milestone payments, $45 million are associated with potential development of pimavanserin for a third indication, and $160 million are triggered by sales achievements.

Acadia also gets a 15 percent royalty on annual net sales up to $100 million and a 20 percent royalty on additional sales.

In exchange, Biovail gets U.S. and Canadian rights to pimavanserin, a selective 5-HT2A inverse agonist, in neurological and psychiatric indications. Acadia will continue to manage the ongoing PDP trials, but Biovail will lead and fund all other development, manufacturing and commercialization in North America.

Acadia retains an option to co-promote pimavanserin in the U.S. CEO Uli Hacksell said that gives the company an opportunity to "forward integrate" and establish a specialty sales force, although he declined to provide details on how the co-promotion would be structured.

Thomas Aasen, Acadia's vice president, CFO, secretary and treasurer, added that the partnership strengthens the biotech's balance sheet "in a meaningful way," extending its cash runway "beyond 2010."

Acadia ended 2008 with $60.1 million in its coffers after posting a net loss of $14 million for the quarter. The company projected a lower burn rate in 2009 as the effects of its mid-2008 restructuring bear out, and last month it signed a potential $25 million deal granting Asian rights for its preclinical procognitive antipsychotics to Tokyo-based Meiji Seika Kaisha Ltd. (See BioWorld Today, Aug. 6, 2008, and March 26, 2009.)

Despite the better-than-expected terms of the Biovail deal, analysts remained cautious about the pimavanserin Phase III PDP trials.

The Phase II trial, although it met its primary endpoint of motoric tolerability as measured by the Uniform Parkinson's Disease Rating Scale, failed to significantly improve antipsychotic efficacy according to the Scale for the Assessment of Positive Symptoms (SAPS) - the primary endpoint for the two Phase III trials. (See BioWorld Today, March, 27, 2006, and June 12, 2007.)

Acadia maintained that the Phase II trial hadn't been powered to show antipsychotic efficacy according to SAPS. Even so, Needham & Co. LLC analyst Alan Carr wrote in a research note that "there is meaningful risk to the outcome of the two ongoing Phase III trials."

Data from the first trial are expected in the third quarter, and Hacksell said the second trial is "about a year behind" the first. During a conference call, analysts grilled Acadia as to whether Biovail had previewed any of the data. Hacksell emphasized that Biovail "hasn't seen any efficacy data that has not been released to the public."

Even if the Phase III trials are successful, Tenthoff said he remains "uninspired" by the commercial potential of pimavanserin.

As of now, there are no FDA-approved treatments for PDP or ADP. PDP affects up to 40 percent of Parkinson's patients, and ADP affects up to 50 percent of Alzheimer's patients. The conditions often are treated with atypical antipsychotics, but those can have significant side effects due to off-target activity, while pimavanserin is selective for the 5-HT2A receptor.

Hacksell said ADP has "blockbuster potential." Acadia has not yet conducted any clinical trials in that indication, but the company has completed proof-of-concept studies in schizophrenia and insomnia.

Hacksell said Acadia had discussions with multiple parties before selecting Biovail as its pimavanserin partner. In addition to the financial incentives, Hacksell said the "chemistry between the two teams is very good," and he noted that Biovail has expertise formulation, manufacturing and commercialization that complements Acadia's drug discovery and development focus.

Shares of Toronto-based Biovail (NYSE:BVF) gained 35 cents to close at $11.49 on Monday. CEO Bill Wells said in a press release that the Acadia deal is "directly on target" with Biovail's specialty central nervous system focus.

That focus emerged last year as Biovail struggled to move beyond the shenanigans of former chairman and CEO Eugene Melnyk. Yet the company's troubled past has proven a difficult mantle to shake - Biovail has settled six lawsuits in the past 15 months, and Melnyk is pushing two board nominees and eight resolutions at the company's upcoming shareholder meeting.