INC., DLI HACKSELL and STEPHEN Defendants.securities.stanford.edu/filings-documents/1053/API... · 20 INC., DLI HACKSELL and STEPHEN R. DAVIS, 21 Defendants. 22 23 24 (captions continue

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David E. Bower SBN 119546 Email: dbower?tfamqilaw. com FARUOI & FARUQTI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: 424-256-2884 Facsimile: 424-256-2885

Lubna Famcij (admitted pro hac vice) (NYS Bar 2183770) Richard W. (ionnello (admittedpro hac vice) (NYS Bar 3067303) MeganM. Sullivan (admitted pro hac vice) (NYS Bar 5053103) Katherine M. Lenahan (admitted pro hac vice) (NYS Bar 5102116) FARUQI & FARUQI, LLP 369 Lexington Avenue, 10th Floor New York, NY 10017 Telephone: 212-983-9330 Facsimile: 212-983-9331 Email: lfamqifamqilaw. com

rgonneiofamqilaw. com

msullivaitartiqlWaw.comfamlaw. com

klenahan

Attorneys for Lead Plaintiffs Paul and Sharyn Levine

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

16 11 JEFF RIHIN, Individually and on Behalf of All Others Similarly Situated,

17 Plaintiff,

18 vs.

19 ACADIA PHARMACEUTICALS 20 INC., DLI HACKSELL and STEPHEN

R. DAVIS, 21

Defendants. 22

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Case No. 3:15-cv-00575-BTM-DHB

CONSOLIDATED CLASS ACTION COMPLAINT

CLASS ACTION

Judge: Hon. Barry Ted Moskowitz

DEMAND FOR JURY TRIAL

CONSOLIDATED CLASS ACTION COMPLAINT 3:15-cv-00575-BTM-DHB

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1

2 STEVE A. WRIGHT AND VICKI G. WRIGHT, Individually and on Behalf of

4 All Others Similarly Situated,

5 Plaintiffs,

6 vs.

7 ACADIA PHARMACEUTICALS INC., DLI HACKSELL and STEPHEN

8 R.DAVIS,

9 Defendants.

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Case No. 3:15-cv-00593-BTM-DHB


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'S


TABLE OF CONTENTS

INATURE OF THE ACTION ....................................................................................1

I PARTIES .................................................................................................................. 10

A. Background Of The Company, PDP, And NUPLAZID .....................13

B. The FDA Approval Process and Current Good Manufacturing Requirements.......................................................................................16

C. ACADIA Focuses on Remaining NDA-Preparation Activities..........21

D. The First Delay ....................................................................................21

E. The Second Delay ...............................................................................24

RELEVANT PRE-CLASS PERIOD STATEMENTS ............................................26

CLASS PERIOD STATEMENTS...........................................................................29

POST CLASS PERIOD EVENTS ..........................................................................36

ADDITIONAL SCIENTER ALLEGATIONS........................................................47

A. Core Operations...................................................................................47

B. Education, Experience, and Training of the Individual Defendants.. .48

C. Bonuses and Other Incentive Compensation ......................................50

ACADIA' s Incentive Bonus Plan Caused the Individual Defendants To Be Aware of the Challenges Facing Filing the NDA..........................................................................................54

ACADIA' s Stock Options Plan Incentivized the Individual Defendants to Misrepresent the Timing of the NDA Filing .....54

D. InsiderTrading ....................................................................................55

E. Hacksell's Resignation ........................................................................58

F. Failure to Disclose Contracts with Third-Party Manufacturers ..........59

G. Rolling NDA Review ..........................................................................61

H. In-House Experts Hired To "Bolster" the Company's "Internal Capabilities' Were Already "on board ................................................ 63

CLASS ACTION ALLEGATIONS ........................................................................63

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2.

i CONSOLIDATED CLASS ACTION COMPLAINT

3:15-cv-00575-BTM-DHB

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1

LOSS CAUSATION ................................................................................................ 66

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CONTROL PERSON LIABILITY .......................................................................... 67

3 THE FRAUD ON THE MARKET PRESUMPTION ............................................. 68

4 THE AFFILIATED UTE PRESUMPTION ............................................................ 70

5 NO STATUTORY SAFE HARBOR ...................................................................... 70

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CAUSES OF ACTION ............................................................................................ 71

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PRAYER FOR RELIEF .......................................................................................... 77

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JURY TRIAL DEMANDED ................................................................................... 78

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Terms A C A DI A

API

BASF

Biuv au

BTD

CEO

CEO

CGMIPs or cGMIPs

Cliss

Class Period

TABLE OF DEFINED TERMS AND ABBREVIATIONS

Definitions ACA] )IA itharniacenticals Inc.

Active I huriuuceuticul I nwedient

I iASF Flmrnia (.1 ViOflhiI/) SA

I 1O\LI1l I LIb01LItOlieS I ntelnLItiOnLIl SItU

I realdhrouh 1 herup\ I )esimution

Chier I \ecuti\e ( icel

Chier I:inUnciUl Officer

Current Good Manufacturing Practices

All persons or entiue thut purchased or ohcn iso acquired the publicl\ traded common stock and/or cal options of A('AI )i A in the I Jnited States or on the NASDAQ Global Select Market ut arti!iciallv influted prices bek\ ecu November 1 14 and as or We close or the NAS])AQ Ulobal Select Mai ce on March II 20! i iflClflSi\C and \\1li) sulicied damages as a rUsLUL scekin to pLirs LIC remedies LEIKICI Sccions I b) and 20u 0! the Sec nfl Ucs I \CIYIUOC Act or I 34 and 5]U Rule I ()b-5 prom Lr]Ltted t1lerel inder

November 10, 2014 through March 11, 2015, inclusive

C MC C hem i sU\ - N/Jun Lilac t Lrrin aiRI Col thol 111

3:15-cv-00575-BTM-DHB 28 CONSOLIDATED CLASS ACTION COMPLAINT


1 Company

2 coo

4 CMO

5 Mna is

6

7

8

9 IDDI

10

11 Defendants

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13 Exchange Act

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15 Expedited Guidance

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18 First Delay 19

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21 FDA

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23 FDCA

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25 GIVIP

ACADIA Pharmaceuticals Inc.

(hi of ( )pc ni U ug ()flic or

Contract Manufacturing (Jrgamzation

I )avis, d il ector and I \CCUti\e Vice ]PicsidenL (hic! 1IIIIHC1LII ()fficer dUd Chic r I LFSiUCSS Officer oI ACA] )IA and sd sequen lv Chief I \CCLFti\C Officer

I )nri-I )iwj I Ut01LIctioU studies

/\C/\I )IA Pliumiaccuticuk Inc.: I T]j

I lacksell: te\e I )a\ is and Roger Mdls

ecwities I \ChIU°C Act oF I

FDA- U LEI3UHUC 101 JikIuSt1v I \pedited 1 rogiiiin s lot Sclious Conditions - I )rngs and I io1ogics FDA, G nuance br I1uILrtr\ (Mu\ 2() 14)

ACADIA s first delay in its submission of its NUPLAZID NDA announced on November 10, 2014

T)n i wd S tLttes I ood and D ILIU \din inisiration

Federal Food, Drug, and Cosmetic Act of 1938

Uood MLtnLr!iicflrrin I rLictices

1-lacksell IJli Hacksell, director and Chief 27

iv 28 CONSOLIDATED CLASS ACTION COMPLAINT

3:15-cv-00575-BTM-DHB


1 2 Kaplan

3 Lead Plaintiffs

4

Levines

6 Mills

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8

9 DA

ii Patheon

12 PDP

13 P1W Fact Sheet

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15 Plaintiffs

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17 Q

18 SEC 19

20 Second Delay

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23 SOPs

24 SOX

25 26 020 Stu (IV

Executive Officer of ACADIA during the Class Period lorliler I oard member I ester Kaplan

Paul and Sharyn Levine

I eud 1 la mU us 1 ki ul and Hllhr\ U I eine

Roger Mills, F 'cecutive Vice President, Development and Chief Medical Officer of ACADIA during the Class Period

Ne\\ I )rr Application

Padieon Pharmaceuticals Inc.

PLIIlcinsons Disease Psychosis

Parkinson's Disease Psychosis Fact Sheet

I eud 1 la mi ITs 1 ki ul and Slllhr\ U I eine

)uulit\ Assuiunce

)nned stLltc ,, Sec LIII [1C aIRI I \Clliifl{LC

('oimuission

ACADIA s second delay in its submission of its NUPLAZID NDA, announced on March 11, 2015

Standard Opera hug ioce(I ures

I he Sarbanes-Oxley Act of 2uu2

AC,\])J/\s sLiceesslid pivotal Phase III study of the e!l1cuc\ - tolerabilit\ and

v 28 CONSOLIDATED CLASS ACTION COMPLAINT

3:15-cv-00575-BTM-DHB

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021 Stud

2014 Form 10-K

a bk of

\(AI )I A s COflbllllliItOl\ I III trial

ALAI )I A S UUHUUI IC1)O1t lot 2014 11cd on I onn 1()-K filed \\ i ifi We SI C on lcbnLIn 2(. 2015

vi CONSOLIDATED CLASS ACTION COMPLAINT

3:15-cv-00575-BTM-DHB


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The allegations in this Consolidated Class Action Complaint are based on

the personal knowledge of Lead Plaintiffs Paul and Sharyn Levine (the "Levines"

or "Lead Plaintiffs" or "Plaintiffs") as to Plaintiffs' own acts, and are based upon

information and belief as to all other matters alleged herein. Plaintiffs' information

and belief is based upon the investigation by Plaintiffs' counsel into the facts and

circumstances alleged herein, including, the following: (i) review and analysis of

those public filings ACADIA Pharmaceuticals Inc. ("ACADIA" or the

"Company") made with the United States Securities and Exchange Commission

("SEC") that are referenced herein; (ii) review and analysis of those press releases,

analyst reports, public statements, news articles, and other publications

disseminated by or concerning ACADIA that are referenced herein; (iii) review

and analysis of those Company conference calls, press conferences, and related

statements and materials that are referenced herein; and (iv) review and analysis of

those documents made publicly available by the United States Food and Drug

Administration ("FDA") that are referenced herein. Many additional facts

supporting the allegations herein are known only to Defendants (defined below)

and/or are within their exclusive custody or control of the FDA. Plaintiffs believe

that additional evidentiary support for the allegations herein will emerge after a

reasonable opportunity to conduct discovery.

NATURE OF THE ACTION

1. This is a federal class action on behalf of all persons or entities that

purchased or otherwise acquired the publicly traded common stock and/or call

options of ACADIA in the United States or on the NASDAQ Global Select Market

at artificially inflated prices between November 10, 2014 and as of the close of the

NASDAQ Global Select Market on March 11, 2015, inclusive (the "Class

Period"), and who suffered damages as a result, seeking to pursue remedies under

1 3:15-cv-00575-BTM-DHB 28 CONSOLIDATED CLASS ACTION COMPLAINT

Case 3:15-cv-00575-BTM-DHB Document 43 FUeci 11/16/15 Page 10 of 87

Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange

Act") and SEC Rule lob-S promulgated thereunder (the "Class"). These claims

are asserted against ACADIA and certain of its officers and directors who made

materially false and/or misleading statements and/or omissions during the Class

Period in, inter a/ia, press releases, analyst conference calls, and filings with the

SEC.

2. ACADIA is a biopharmaceutical company focused on the

I development and commercialization of medicines to address unmet medical needs

in neurological and related central nervous system disorders. ACADIA has a

pipeline of product candidates led by NIIPLAZIDTM (pimavanserin), for which the

Company has reported positive Phase III pivotal trial results in Parkinson's Disease

Psychosis ("PDP").

3. In April 2013, ACADIA announced that the FDA agreed that the data

from the Company's pivotal Phase III -020 study evaluating the efficacy,

tolerability, and safety of pimavanserin in patients with PDP (the "020 Study"),

together with supportive data from other studies with pimavanserin, were sufficient

to support the filing of a New Drug Application ("NDA") to the FDA for the

treatment of PDP. On this news, the Company announced that it was "currently

targeting an NDA submission near the end of 2014."

4. On November 10, 2014, the first day of the Class Period, ACADIA

I unexpectedly announced that it was delaying its submission of its New Drug

Application ("NDA") to the FDA for NUPLAZID to the first quarter of 2015, i.e.,

by March 31, 2015 (the "First Delay").

5. That same day, then-Chief Executive Officer ("CEO") Uli Hacksell

I ("Hacksell") told investors during a conference call that "the decision to move

back the planned submission was based on additional time required to complete

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preparations needed to support the FDA's review of NUPLAZID."' Hacksell

emphasized that the First Delay "was related to the fact that we have the decent

preparations that are required to support the FDA's review of NUFLAZID, and

that is not really related to any kind of major hurdles." He also confirmed that the

Company completed its "drug-drug interaction program" and has "stability as

required in [its] registration program," and that the Company has "not [had] any

kind of interactions with the FDA that pushes this."

6. In order for a new drug to be approved by the FDA, "[flhe methods to

be used in, and the facilities and controls used for, the manufacture, processing,

packing, or holding of the drug substance or the drug product" must "comply with

the current good manufacturing practice regulations in parts 210 and 211." 21

C.F.R. § 314.125(b)(13).

7. The current good manufacturing practice regulations, "cGMIPs" or

"CGMIPs," set forth in 21 C.F.R. §§ 210, 211 are extensive, requiring drug

manufacturers "to establish and follow scientifically sound and appropriate written

controls for specifications, plans and procedures that direct operational and quality

system activities and to ensure that these directives are accurate, appropriately

reviewed and approved, and available for use (see the CGMPs at § 211.22 (c) and

(d))." Ex. A at 14, FDA, Quality Systems Approach to Pharmaceutical CGMP

Regulations (Sept. 2006).

8. According to ACADIA's public filings at that time, ACADIA

disclosed that it contracted with third-party manufacturers to produce NUPLAZID

for its clinical trials, but had not yet entered into any "long-term agreements" with

these manufacturers for the purposes of commercial production of NUPLAZID.

1 All internal citations are omitted and all emphases are added unless otherwise noted.

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Case 3:15-cv-00575-BTM-DHB Document43 FUeci 11/16/15 Page 12 of 87

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9. Indeed, ACADIA was aware of the importance of its manufacturers'

I compliance with CGMPs for NDA approval, acknowledging in the risk factors in

its Form 10-Q for the second quarter of 2013:

The manufacturers of our product candidates are obliged to operate in accordance with FDA-mandated current good manufacturing practices, or cGIVIPs. In addition, the facilities used by our contract manufacturers or other third party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we request regulatory approval from the FDA : A failure by any of our contract manufacturers to establish and follow c&IVIPs or to document their adherence to such practices may lead to significant delays in clinical trials or in obtaining regulatory approval of product candidates or the ultimate launch of products based on our product candidates into the market.

10. Throughout the Class Period, the Company assured the market that it

remained "on track" to submit its NDA by its revised deadline of March 31, 2015.

Defendants knew or recklessly disregarded, but failed to inform investors, that the

Company had not completed the preparation of systems required by the CGMPs to

support the commercial manufacturing and supply systems needed to support the

FDA's review of the NUPLAZID NDA, and consequently ACADIA would not

submit its NDA on time.

11. Nevertheless, throughout the Class Period, Defendants violated the

federal securities laws by disseminating false and misleading statements and/or

omissions to the investing public concerning the timing of the Company's planned

submission of the NDA for NUPLAZID to the FDA. As a result of these false

and/or misleading statements and/or omissions, ACADIA's stock and call options

traded at artificially inflated prices during the Class Period.

12. Indeed, on February 26, 2015, just thirty-three days before the

Company's revised NDA submission deadline of March 31, 2015, Hacksell and

Roger G. Mills ("Mills"), Executive Vice President, Development and Chief



Medical Officer, again told investors that ACADIA "remainFedi on track" to

Isubmit its NDA by March 31, 2015.

13. Soon thereafter, the Company cancelled at the last minute its March 3,

2015 appearance at the Cowen and Company 35th Annual Health Care

Conference, and did the same a week later for the Company's March 10, 2015

appearance at the 27th Annual ROTH Conference. These cancellations fueled

speculation that ACADIA would be acquired, causing ACADIA' s stock price to

surge 18% to $45.88 per share on March 10, 2015. At no time during the Class

Period did the Company inform the market that it did not have the requisite

systems in place and thus was not "on track" to submit its NDA by March 31,

2015.

14. On March 11, 2015, less than two weeks after Hacksell and Mills

stated that ACADIA remained "on track" to meet that deadline, ACADIA issued a

press release announcing a second delay (the "Second Delay") in the timing of its

planned NDA submission to the FDA. The Company now planned to submit its

NDA for the treatment of PDP in the second half of 2015 (i.e., by December 31,

2015).

15. In a separate press release that same day, ACADIA announced the

shocking resignation of Hacksell, who had been with the ACADIA since 1999 and

served as the Company's CEO since September 2000. The Company also

announced the appointment of Steve Davis ("Davis"), who was then sewing as

Executive Vice President, Chief Financial Officer ("CFO") and Chief Business

Officer, as ACADIA's interim CEO.

16. The Company explained that the Second Delay in the submission of

the NDA was "based on additional time required to complete the preparation of

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systems to support commercial manufacturing and supply and, in turn, to support

the [FDA's] review of NUPLAZID."

17. That same day, the Company hosted a conference call during which

defendant Davis commented on the reasons for the Second Delay, explaining that

the Company "completed an assessment" of its "manufacturing, quality systems

and procedures," and "determined that we need to do additional work to prepare

our systems to support commercial-scale manufacturing and supply" to be ready

for the FDA's review of those systems. The systems to which Davis was referring

"include things such as robust quality assurance systems, documentation and

record-keeping systems, commercial-oriented Standard Operating Procedures or

SOPs, systems to monitor activities of third-party suppliers, and simply the

management of materials through the supply chain." These "manufacturing and

supply systems," Davis explained, "are subject to inspection as part of the NDA

review process."

18. Indeed, establishing the systems that Davis described is an integral

part of ensuring that the Company's commercial manufacture of NUPLAZID met

the CGMP requirements necessary for approval of the NDA.

19. The FDA recommends that any contractor hired to help manufacture a

drug be "evaluate[d] . . . for CGMP compliance" which includes "auditing the

contractor's facilities." Ex. B at 38, FDA, Draft Guidance for Industry, Contract

Manufacturing Arrangements for Drugs: Quality Agreements (May

2013). Moreover, "control and review of any outsourced activities is ultimately

the responsibility of the pharmaceutical company." Id. Hence, the pharmaceutical

company's quality unit is "ultimately responsible for approving and rejecting drug

product manufactured by the contract manufacturer." Id. at 39. A contractor's

CGIVIP failures may negatively impact the pharmaceutical company. See id. at 45.

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The FDA further recommends that pharmaceutical companies "evaluate and audit

I [contractors] to ensure GIVIP compliance for specific operations occurring at

contract sites . . . routine[ly] as well as for-cause audits." Id. at 41-42.

20. As Davis thither described on the March 11, 2015 conference call,

establishing these systems requires "close coordination" between the Company's

"internal manufacturing resources, external third-party suppliers and the quality

assurance functions within each organization." Davis further explained that to be

ready for the FDA's review of those systems, the Company needed to test and

evaluate them, which "requires coordination of our schedule with the schedules

and availability of others and the logistics, quite frankly, can be challenging."

21. As a result of this news, ACADIA common stock plummeted $9.94

per share to close at $34.82 per share on March 12, 2015, a one-day decline of 22%

on higher than usual volume of 15 million shares.

22. Since announcing the Second Delay of the NDA submission, the

Company has provided limited additional details about the reasons for the Second

Delay. For example, on March 26, 2015, Cowen & Company published an analyst

report in which it discussed its "takeaways" from a lunch it hosted the day before

with ACADIA management. 2 The report stated that some of the "deficiencies

involve SOPs for various functions, supply chain, training documentation,

protocols for product release etc." in reference to "the outstanding quality

assurance issues that ACAD intends to rectify/complete before NDA submission."

23. Davis further commented on the issues leading to the delay during a

conference on April 14, 2015, noting that after miming a "mock inspection" the

Company determined that it "had more work to do" on the manufacturing

2 No information about this meeting other than the analyst report itself has been made publicly available.

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component of the NDA. Surprisingly, on a September 29, 2015 conference call,

Davis acknowledged that the Company "recognized" this in March or February,

stating that the Company did not "start soon enough in building out the Quality

Assurance system or making that transition to a commercial-grade QA system on

the GIVIIP 4 front."

24. Davis's initial assessment on March 11, 2015 of the reasons for the

delay—"the Company should have been better prepared"—was an understatement,

to say the least. In fact, the magnitude of the manufacturing and quality issues that

the Company claimed contributed to the delay were so great that the Company did

not file its NDA until September 3, 2015, afull five months after the Company's

revised March 31, 2015 submission deadline.

25. The true facts, which were known and/or recklessly disregarded by

Defendants but concealed from the investing public during the Class Period, were

as follows:

(a) The Company was not on track to submit its NDA for

NUPLAZID by March 31, 2015;

(b) The Company did not have robust quality assurance systems,

documentation and record-keeping systems, commercial-

oriented standard operating procedures ("SOPs"), or systems in

place to monitor the activities of third-party suppliers and

manage materials through the supply chain, and therefore

lacked the systems necessary to support the commercial

manufacturing and supply of NUPLAZID and approval of the

Company's NUPLAZID NDA; and

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"QA" refers to quality assurance.

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"GMIP" refers to good manufacturing practices. 8

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(c) The Company had not yet conducted a mock inspection of its

commercial manufacturing and supply systems to determine

whether they were sufficient to support approval of the

Company's NUPLAZID NDA.

26. As a result of Defendants' wrongful acts, statements, and omissions,

I and the resulting precipitous decline in the market value of the Company's

common stock and call options when the wrongdoing was revealed, Plaintiffs and

other Class members have suffered significant damages.

JURISDICTION AND VENUE

27. This action arises under Sections 10(b) and 20(a) of the Exchange

lAct, as amended, 15 U.S.C. §§ 78j(b) and 78t, and SEC Rule lOb-5, 17 C.F.R.

§ 240.1 Ob-5, promulgated thereunder.

28. This Court has jurisdiction over the action pursuant to 28 U.S.C.

I § 1331 and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

29. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and

Section 27 of the Exchange Act, 15 U.S.C. § 78aa. During the Class Period,

ACADIA maintained its principal place of business in this District. Certain of the

acts and conduct complained of herein, including dissemination of materially false

and misleading information to the investing public, occurred in this District.

30. In connection with the acts and statements alleged in this Complaint,

Defendants, directly or indirectly, used the means and instrumentalities of

interstate commerce, including, but not limited to, the mails, interstate telephone

communications, and the facilities of the national securities markets.



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PARTIES

Lead Plaintiffs

31. Plaintiffs, Paul and Sharyn Levine, as set forth in their shareholder

certification and incorporated by reference herein (ECF No. 15-8), purchased

ACADIA common stock at artificially inflated prices during the Class Period and

have been damaged thereby.

ACADIA Pharmaceuticals, Inc.

32. Defendant ACADIA is a Delaware corporation with its principal

executive offices located at 3611 Valley Centre Drive, Suite 300, San Diego,

California, 92130.

The Individual Defendants

33. Defendant Hacksell was, until his abrupt resignation on March 11,

2015, the CEO and a director of ACADIA. Hacksell continues to serve the

Company as a consultant. In 2014, Hacksell received a salary of $580,000, a

bonus of $208,800, and an options award worth $5,074,725 for his various roles at

the Company. Because of his positions with the Company, Hacksell had access to

undisclosed information concerning the timing of the submission of NUPLAZID's

NDA to the FDA, including the manufacturing, supply, and quality assurance

issues that resulted in the Second Delay. Hacksell directly participated in and

controlled the management of the Company, including, without limitation, day-to-

day decisions concerning the submission of the NUPLAZID NDA to the FDA,

publication of statements made to the investing public, the SEC, and the FDA

concerning the submission of the NUPLAZID NDA to the FDA and publication of

statements by and on behalf of ACADIA concerning NUPLAZID in the

Company's press releases, SEC filings, and other public statements.



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34. Defendant Davis became a director and the CFO, Executive Vice

President, and Chief Business Officer of ACADIA in July 2014. Davis currently

remains in those positions and was appointed interim CEO on March 11, 2015 and

CEO on September 3, 2015. In 2014, Davis received a salary of $191,805, a bonus

of $53,802, and an options award worth $4,963,008 for his various roles at the

Company. In 2015, Davis received a salary of $436,178. Because of his positions

with the Company, Davis had access to undisclosed information concerning the

timing of the submission of NUPLAZID' s NDA to the FDA, including the

manufacturing, supply, and quality assurance issues that resulted in the Second

Delay. Davis directly participated in and controlled the management of the

Company, including, without limitation, day-to-day decisions concerning the

submission of the NUPLAZID NDA to the FDA, publication of statements made

to the investing public, the SEC, and the FDA concerning the submission of the

NUPLAZID NDA to the FDA and publication of statements by and on behalf of

ACADIA concerning the submission of the NUPLAZID NDA to the FDA in the

Company's press releases, SEC filings, and other public statements.

35. Defendant Mills was, until his sudden resignation on November 4,

2015, the Executive Vice President, Development and Chief Medical Officer of

ACADIA. In 2014, Mills received a salary of $425,000, a bonus of $119,000, and

an options award worth $3,146,330. In 2015, Mills received a salary of $440,725.

Because of his positions with the Company, Mills had access to undisclosed

information concerning the timing of the submission of NUPLAZID's NDA to the

FDA, including the manufacturing, supply, and quality assurance issues that

resulted in the Second Delay. Mills directly participated in and controlled the

management of the Company, including, without limitation, day-to-day decisions

concerning the development of NUPLAZID, submission of the NDA to the FDA,



publication of statements made to the investing public, the SEC, and the FDA

concerning the manufacture of NUPLAZID and publication of statements by and

on behalf of ACADIA concerning NUPLAZID in the Company's press releases,

SEC filings, and other public statements.

36. Defendants Hacksell, Davis, and Mills are referred to herein as the

"Individual Defendants" (collectively, with ACADIA, "Defendants").

37. The Individual Defendants, because of their positions with the

Company, had the authority to control, correct, and/or update the contents of their

and ACADIA' s public disclosures to the market. Each of the Individual

Defendants had the duty to exercise due care and diligence and the duty of full and

candid disclosure of all material facts relating to the timing of the submission of

the NDA. The Individual Defendants further had the duty to correct prior

misstatements and/or update any previously issued statements that became

materially misleading or untrue, so that the market price of the Company's publicly

traded common stock and call options would be based upon truthful, complete, and

accurate information. To discharge their duties, the Individual Defendants were

required to exercise reasonable and prudent supervision over the dissemination of

information concerning the Company's NUPLAZID NDA. By virtue of such

duties, these officers and directors were required, inter a/ia, to:

a) conduct and supervise the business of ACADIA in accordance

with federal laws;

b) supervise the preparation of the Company's SEC filings and

approve any reports concerning ACADIA' s financial reporting

and results; and

C)

ensure that ACADIA established and followed adequate

internal and disclosure controls.

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38. As officers, directors, and/or controlling persons of a publicly-held

company, which is registered with the SEC under the federal securities laws and

the securities of which were traded on the NASDAQ Global Select Market during

the Class Period and governed by the provisions of the federal securities laws, the

Individual Defendants each had a duty to do the following: (i) promptly

disseminate accurate, complete, and truthful information with respect to the status

and timing of the submission of ACADIA's NDA for NUPLAZID; (ii) correct any

previously issued statements that were materially misleading or untrue so that the

market could accurately price the Company's publicly traded common stock and

call options based upon truthful, accurate, and complete information; and (iii)

update any previously issued statements that became materially misleading or

untrue so that the market could accurately price the Company's publicly traded

common stock and call options based upon truthful, accurate, and complete

information.

39. The Individual Defendants are each primarily liable for the false and

misleading statements alleged herein, and are also liable as controlling persons of

ACADIA. The scheme deceived the investing public regarding the timing of

ACADIA' s submission of the NUPLAZID NDA to the FDA, which caused

Plaintiffs and other members of the Class to purchase ACADIA common stock

and/or call options at artificially inflated prices during the Class Period and suffer

damages as a result.

FACTUAL BACKGROUND

VA! Background Of The Company, PDP, And NUPLAZID

40. ACADIA is a biopharmaceutical company focused on the

I development and commercialization of innovative medicines to address unmet

medical needs in neurological and related central nervous system disorders.



ACADIA has a pipeline of product candidates led by NUPLAZID (pimavanserin),

for which the Company reported positive Phase III trial results as a treatment for

PDP and which has the potential to be the first drug approved in the United States

for this disorder. The Company is also developing pimavanserin for Alzheimer's

Disease Psychosis and schizophrenia. See About, http://www.acadia-

phanmcom/aboutl.

41. Parkinson's Disease is a central nervous system disorder that involves

the death of neurons in a region of the brain that controls movement, creating a

shortage of dopamine, an important neurotransmitter, which renders patients

unable to direct or control their movements in a normal manner. It is characterized

by a variety of motor symptoms, including rest tremor, rigidity, and disturbances of

balance and posture, and non-motor symptoms such as psychosis, depression, sleep

disturbances, compulsive behaviors, and dementia. See Parkinson's Disease

Psychosis Fact Sheet ("PDP Fact Sheet"), available at http://www.acadia-

phanm com/wp-content/uploads/20 14/1 2/Parkinsons-disease-psychosis-

backgrounder. pdf

42. As most symptoms of Parkinson's are caused by a dopamine shortage

in the brain, many drugs prescribed to treat the disease are "dopaminergenic,"

which means that they are designed to temporarily replenish dopamine or mimic

the action of dopamine, helping to reduce the motor symptoms of the disease. See

National Parkinson Foundation, Medications for Motor Symptoms, available at

http ://www.parkinson.org/understanding-parkinsons/treatment/Medications-for-

Motor-Symptoms (last visited November 8, 2015).

43. PDP is a debilitating disorder that, according to ACADIA, occurs in

about 40% of Parkinson's Disease patients and is characterized by hallucinations

land delusions. See ACADIA, NUPLAZIDTM - Parkinson's Disease Psychosis,

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http://www.acadia-pharm.com/pipeline/nuplazid-pdp/ . According to The Lancet,

the medical journal that published the results of ACADIA' s successful Phase III

trial in pimavanserin for PDP, in Parkinson's Disease the binding of 5-HT2A

receptors (one of the serotonin receptors) is increased in the neocortex, the part of

the brain concerned with sight and hearing. See Jeffrey Cummings et al.,

Pimavanserin for Patients with Parkinson's Disease Psychosis: A Randomized,

Placebo-Controlled Phase 3 Trial, The Lancet, 2 (Nov. 1, 2013),

http ://www. acadia-phann.com/wp-content/uploads/2015/0 I /The-Lancet-

Pimavanserin-Phase-III-020-Study.pdf Visual hallucinations are associated with

increased numbers of 5-HT2A receptors in visual processing areas. Id.

44. Currently, there is no FDA-approved therapy for PDP. Id.

Accordingly, physicians frequently resort to off-label use of atypical antipsychotic

medications to treat this condition. Id. Although atypical antipsychotics target the

5-HT2A pathway, they do so at varying levels and also affect other receptor

families, such as dopamine. Id. Due to their dopamine-blocking properties, such

medications may counteract the anti-Parkinson's therapy, worsening motor

symptoms. Id. Even more troubling, antipsychotic medications have black box

warnings for use in elderly patients with dementia due to increased morbidity and

mortality. See PDP Fact Sheet.

45. According to ACADIA, pimavanserin is a selective serotonin inverse

agonist, which preferentially targets 5-HT2A receptors. Through this novel

mechanism, pimavanserin has demonstrated significant efficacy in the treatment of

PDP and "has the potential to provide a safe and effective treatment of psychosis

without compromising motor control." PDP Fact Sheet.

46. On April 11, 2013, ACADIA announced in a press release that the

I FDA agreed that the data from its 020 Study, together with supportive data from

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the Company's other studies with NTJPLAZID, were sufficient to support the filing

of an NDA for the treatment of PDP. As a result, ACADIA no longer needed to

conduct the second Phase III -021 study (the "-021 Study") which was planned as

a confirmatory trial and scheduled to be initiated that month. As Hacksell

explained during a conference call held that day, without the need for the -021

Study, the Company "saved a considerable amount of time, perhaps up to a year,

by having this expedited path to the NDA."

The FDA Approval Process and Current Good Manufacturing Requirements

The FDA regulates drugs under the Federal Food, Drug, and

Cosmetics Act ("FDCA"), 21 U.S.C. § 301, etseq. No drug may be marketed in

the United States until it receives FDA approval. FDCA §§ 301(d), 505(a), 21

U.S.C. §§ 331(d), 355(a).

48. An NDA "is the vehicle through which drug sponsors formally

propose that the FDA approve a new pharmaceutical for sale and marketing in the

U.S." See FDA, New Drug Application, available at http://www.fda.gov/Drugs/

DevelopmentApprovalProcess/HowDmgsareDevelopedandApprovedlApprovalAp

plications/NewDrugApplicationNDAl.

49. After an NDA is submitted to the FDA, the FDA has 60 days to

decide whether to file it so that the application can be reviewed. See FDA's Drug

Review Process: Continued, available at http ://www. fda.gov/Drugs/

ResourcesForYotVConstnuers/ucm289601.htm.

50. Pursuant to 21 C.F.R. § 314. 101(d)(3), the FDA may refuse to file an

application if it "is incomplete because it does not on its face contain information

required under section 505(b), section 5050), or section 507 of the act and

§ 314.50 or § 314.94."

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51. The requirements for the content and format of an NDA are set forth

in 21 C FR. § 314.50. Pursuant to the regulation, each NDA must contain several

technical sections, each of which "is required to contain data and information in

sufficient detail to permit the agency to make a knowledgeable judgment about

whether to approve the application or whether grounds exist under section 505(d)

of the FFDCAI to refuse to approve the application." 21 C.F.R. § 314.50.

52. The required technical sections of an NDA include, among others, the

(a) chemistry, manufacturing, and controls ("CMC") section; (b) the nonclinical

pharmacology and toxicology section, including in vitro and animal studies (21

CFR § 314.50(d)(2)) -, (c) the human pharmacokinetics and bioavailability section

(21 CFR §314.50(d)(3)) -, and (d) the clinical data section, including controlled

human studies (21 C.F.R. § 314.50(d)).

53. The CMC section of an NDA describes "the composition,

manufacture, and specification of the drug substance and the drug product." 21

C.F.R. § 314.50(d)(1). This section must include analytical test methods for the

drug product, specifications of the drug product and drug components, and a

description of the product's manufacturing and control procedures. See Ex. C at

54, FDA, Compliance Program Guidance Manual 7346.832, Chapter 46-New Drug

Evaluation (2012).

54. As part of the NDA approval process for NTJPLAZID, the Company

was required to demonstrate that its manufacturing and quality assurance systems,

or those of its third-party contract manufacturers and suppliers, complied with

CGMPs, which are set forth in 21 C.F.R. §§ 210,211.

55. The CGIVIP regulations require drug manufacturers "to establish and

follow scientifically sound and appropriate written controls for specifications,

plans and procedures that direct operational and quality system activities and to



ensure that these directives are accurate, appropriately reviewed and approved, and

available for use (see the CGIVIP[s] at § 211.22 (c) and (d))." See Ex. A at 14. Per

21 CFR §211.22(a)-(d), the manufacturer's quality control unit must follow

"responsibilities and procedures . . . . [which] shall be in writing."

56. The applicable regulations provide that the "FDA may refuse to

approve an application" if "[flhe methods to be used in, and the facilities and

controls used for, the manufacture, processing, packing, or holding of the drug

substance or the drug product do not comply with the current good manufacturing

practice regulations in parts 210 and 211." 21 C.F.R. § 314. 125(b)(I 3).

57. According to FDA guidance, "[implementing a robust quality system

can help ensure compliance with CGIVIP regulations related to drug safety, identity,

strength, quality, and purity." Ex. A at 13. The FDA notes "that implementing an

effective quality system in a manufacturing organization will require a significant

investment of time and resources." Id. at 12. "Under a quality system, written

procedures are followed and deviations from them are justified and documented

(CGIVIP requires this; see § 211.100(b)) to ensure that the manufacturer can trace

the history of the product, as appropriate, concerning personnel, materials,

equipment and chronology and that processes for product release are complete and

recorded." Id. at 22.

58. These "written procedures" are required under the CGIVIPs. As the

I FDA has noted:

Writtenprocedures (standard operating procedures - SOPs), are required for many Part 211 records. The current SOP requirements were initially provided in a final rule published in the Federal Register of September 29, 1978 (43 FR 45014), and are now an integral and familiar part of the drug manufacturing process.

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FDA, Notice Announcing Proposed Collection of Information Submitted to

Ithe Office of Mgmt. & Budget, 76 Fed. Reg. 60052 (Sept. 28, 2011).

I According to the FDA, there are 25 SOP provisions under Part 211. Id.

59. To determine whether an applicant's manufacturing facilities comply

with CGMPs, the FDA typically conducts a pre-approval inspection. See Ex. C at

165.

60. A pre-approval inspection "is performed to contribute to FDA's

assurance that a manufacturing establishment named in a drug application is

capable of manufacturing a drug, and that submitted data are accurate and

complete." Id. at 54.

61. The primary objectives of a pre-approval inspection are readiness of

commercial manufacturing, conformance to application, and data integrity audit.

Id. at 64. These objectives, respectively, require the FDA investigator to (i)

"[dJetermine whether the establishment(s) has a quality system that is designed

to achieve sufficient control over the facility and commercial manufacturing

operations;" (ii) "[verify that the formulation, manufacturing or processing

methods, and analytical (or examination) methods are consistent with descriptions

contained in the CMC section of the application of the biobatch (and other pivotal

clinical batches, when applicable), the proposed commercial scale batch, and the

API(s); and (iii) "[a]udit the raw data. . . to authenticate the data submitted in the

CMC section of the application. . . [and verify that all relevant data (e.g.,

stability, biobatch data) were submitted in the CMC section. . . ." Id.

62. Planning and scheduling are an important component of the NDA

I process. For example, Item 29 of Form FDA 356h, which an applicant submits

with its NDA, asks if the drug's manufacturing site is ready for inspection. If it is

not, the applicant must indicate the date by which the facility will be ready. See

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FDA, Instructions for Filling out Form FDA 356h - Application to Market a New

Or Abbreviated new Drug or Biologic for Human Use, available at

http://www.fda.gov/downloads/

AboutFDAfReportsManualsForms/Forms/UCM3 21897 .pdf

63. If the manufacturing facilities are not ready for inspection, the FDA

I may refuse to file the application. See FDA, Center for Drug Evaluation and

Research, Office of New Drugs, MAPP 6025.4, Policies and Procedures: Good

Review Practice: Refuse to File (2013), at 18.

64. Thus, even before the FDA accepts an NDA for review, the failure of

an applicant to ensure that its manufacturing facilities are prepared for inspection

can cause significant delays in the NDA approval process.

65. Furthermore, FDA guidance on quality systems, which is "intended to

help manufacturers implementing modem quality systems and risk management

approaches to meet the requirements of the Agency's current good manufacturing

practice (CGIVIP) regulations (21 CFR parts 210 and 211)," "calls for [internal]

audits" of a manufacturer's operations to "be conducted at planned intervals to

evaluate effective implementation and maintenance of the quality system and to

determine if processes and products meet established parameters and

specifications." Ex. A at 5, 25.

66. The FDA emphasizes that "audit procedures should be developed and

I documented to ensure that the planned audit schedule takes into account the

relevant risks of the various quality system activities, the results of previous audits

and corrective actions, and the need to audit the complete system." Id. at 25-26.

67. The FDA recommends that any contractor hired to help manufacture a

drug be "evaluate [d] . . . for CGMP compliance" which includes "auditing the

contractor's facilities." Ex. B at 38. The FDA further recommends that

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I pharmaceutical companies "evaluate and audit [contractors] to ensure GMP

I compliance for specific operations occurring at contract sites . . . routine[ly] ] as

Iwell as for-cause audits." Id. at 41-42.

68. The industry standard for a pharmaceutical company's audit of its

I third-party manufacturers is one audit per year conducted over the course of two

I days by two auditors.

C. ACADIA Focuses on Remaining NDA -Preparation Activities

69

On a conference call held on April 11, 2013, the Company

summarized what was left to be done before it could file its NDA. As Chief

Medical Officer Mills explained on the call, before the Company could file the

NDA, the Company needed to complete "drug-drug interaction studies and final

aspects of CMC development, including stability testing of pimavanserin

registration batches."

70. Information concerning "drug-drug interaction studies" are part of the

I non-manufacturing sections of the NDA, while stability testing ,5 is part of the

CMC section, see 21 C.F.R. 314.50(d)(1)(i), (ii).

The First Delay

71

On November 10, 2014, the Company announced in a press release

that it would not be submitting its NDA by December 31, 2014, as it previously

stated, and instead planned to submit the NDA by March 31, 2014. The Company

cryptically explained that the decision to move back the submission was "based on

The purpose of stability testing "is to provide evidence on how the quality of a drug substance or drug product varies with time under the influence of a variety of environmental factors, such as temperature, humidity, and light, to establish a retest period for the drug substance or a shelf life for the drug product and recommended storage conditions." See FDA, Center for Drug Evaluation and Research, Guidance for Industry: Q1A (R2) Stability Testing of New Drug Substances and Products (Nov. 2003).

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additional time required to complete preparations needed to support the [FDA's]

review of NUPLAZID." After months of describing the drug-drug interaction

studies and stability testing of registration batches as the barrier to submitting the

NUPLAZID NDA, Hacksell explained on a conference call that day that the

Company had "completed the drug-drug interaction program," and had the

"stability as required in our registration program" but "need[s] some more time to

complete the preparations."

72. Several analysts covering the Company noted their confusion with the

I abrupt change in timing. For example, in an analyst report published on November

11, 2014, JIVIIP Securities noted:

However, given the time available to prepare for the NDA filing during the generation of commercial manufacturmg stability data we are somewhat confounded by management's error in estimating t1ie submission timing and that it was not able to foresee and disclose that additional time would be needed earlier than within —8 weeks of the anticipated milestone.

73. Similarly, in a November 13, 2014 analyst report, Ladenburg

I Thalmann observed:

Stability and drug interaction studies have been the rate limiting work remaining for the NDA, but the company now states it will need until 2015 in order to "complete the preparation" of the NDA, a slight delay from the prior 4Q14 target. We do not read too much into the delay, but at the same time wrestle with its cause (not disclosed), wonderiRg what thither characterization may be being asked (perhaps trial endmts, concomitant drug use, etc). Nevertheless, we contmue

trd priority review, estimating Nuplazid's US approval m

74. Shortly after announcing the First Delay, the Company assured the

market that it was "on track" to submit its NDA by March 31, 2015. For example,

in response to a question from an analyst about the timing of the NDA at the

December 2, 2014 Piper Jaffray Healthcare Conference, CFO Davis stated that

"what we've guided is the first quarter of 2015, and we remain on track for that."

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75. A little over a month later, Hacksell confirmed that the Company was

"comfortable" with this timeline at the January 13, 2015 IPMorgan Healthcare

Conference. During that conference, an audience member noted that the Company

reiterated its guidance about submitting the NDA by March 31, 2015 and asked,

"considering we are in the first quarter, is it safe to assume no more obstacles with

whatever the issue was that pushed it off? And do you feel comfortable it has been

addressed?" Hacksell responded, "[t]he question is if we feel comfortable with

submitting the NDA this quarter and the answer is yes, we do."

76. Shortly thereafter, on February 24, 2015, ACADIA announced in a

press release that it would be presenting at two upcoming investor conferences in

March, the Cowen and Company 35th Annual Health Care Conference on March

3, 2015 and the 27th Annual ROTH Conference on March 10, 2015.

77. Two days later, on February 26, 2015, the Company issued a press

release in which Hacksell stated that ACADIA "remain[s] on track to submit our

New Drug Application to the FDA in the first quarter of 2015."

78. Hacksell stated the same on a conference call held that day, telling

investors that "we remain on track to submit our NDA this quarter" and noting

again that the Company had "successfully completed" its "drug-drug interaction

program and our stability program for registration batches," and that it has "held

successful pre-NDA meetings with the FDA." Mills echoed Hacksell's statements

later on in the same call: "As Uli mentioned at the beginning of the call, we are

diligently completing preparations to support the FDA review of NUPLAZID and

remain on track to submit our NDA this quarter." Hacksell also noted during the

call that the Company is "expanding its infrastructure to support the planned

launch and commercialization of NUPLAZID, including adding to our commercial



structure, commercial level manufacturing, medical affairs, quality control and

I compliance."

79. Despite this positive update in the Company's February 26, 2015

public statements, less than a week later the Company cancelled its March 3, 2015

appearance at the last minute for the Cowen and Company 35th Annual Health

Care Conference. The Company then cancelled its scheduled appearance at the

27th Annual ROTH Conference on March 10, 2015, also at the last minute.

80. These cancellations fueled rumors that ACADIA would be acquired,

causing ACADIA' s stock price to surge 18% to $45.88 per share on March 10,

2015. See Stock Markets Daily, ACADIA Pharmaceuticals an Acquisition Target

(Mar. 10, 2015). At this time, the Company did not inform the market of the

problems with the NDA.

E. The Second Delay

81

The Company issued no explanation for cancelling the conferences

and did not issue any further public statements about the timing of its NDA

submission until March 11, 2015. That day, ACADIA announced that it was

delaying its NDA submission yet again, this time to the second half of 2015 (i.e.,

by December 31, 2015), and that Hacksell was resigning. The Company also

announced the appointment of CFO Davis as Interim CEO. ACADIA explained in

the press release that the decision to delay the NDA submission this time was

"based on additional time required to complete the preparation of systems to

support commercial manufacturing and supply and, in turn, to support the U.S.

Food and Drug Administration's (FDA) review of NUPLAZID." Davis

commented in the release that "[w]e have concluded that additional time is needed

to complete the readiness of our commercial manufacturing systems."

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82. On a conference call that day, Davis further explained the reasons for

the delay, stating that ACADIA "completed an assessment" of its "manufacturing,

quality systems and procedures," which "is a customary, but important step in

preparing for an NDA review and the inspections that are part of that review":

In preparation for submission of the NDA, we completed an assessment of our manufacturing, quality systems and procedures. This is a customary, but important step in preparing for an NDA review and the inspections that are part of that review. Based upon this assessment, we've determined that we need to do additional work toprepare our systems to support commercial-scale manufacturing and supply.

I'm going to pause here and just take a second to provide some context around the system that I'm describing. Moving from a clinical-stage company to a commercial-stage company, as we are doing, requires buildmg infrastructure to accommodate commercial-scale operations. These systems include things such as robust quality assurance systems, documentation and record-keeping systems, commercial-oriented Standard Operating Procedures or SOPs, systems to monitor activities of third-party suppliers, and simply the management of materials through the supply chain.

Many of these systems exist when you're a clinical-stage coipany, but have to be significantly expanded and much more robust for commercial-scale production. Establishing the infrastructure I've described requires close coordination between our internal manufacturing resources, external third-party suppliers and the quality assurance functions within each organization. Because these manufacturing and supply systems are subject to inspection as part of the NDA review process, it is an important that our systems be robust and ready for FDA review and of course for commercial launch.

To be ready for that review, the systems need to be established, they have to be tested and evaluated, and frequently, they need to be tested in connection with actual production runs completed by your third-party suppliers, in other words, it's not just a paper exercise. You sometimes need to test them in real production runs.

So, this requires coordination of our schedule with the schedules and availability of others and the logistics, quite frankly, can be challenging. With that context, the assessment we've recently concluded indicates that the network of systems needed to support commercial manufacturing and supply, and again importantly, the review of our NUPLAZID NDA, requires further implementation and additional testing, work that was not part of the company's original plan. As a result of information from this assessment, we've decided to move back the planned NDA submission of NUPLAZID to the second half of 2015.



83. As a result of this news, ACADIA common stock dropped $9.94 per

2 share to close at $34.82 per share on March 12, 2015, a one-day decline of 22% on

unusually high volume of 15 million shares.

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RELEVANT PRE-CLASS PERIOD STATEMENTS

84. On April 11, 2013, ACADIA held a conference call with investors

6 and analysts, announcing that the FDA agreed that data from ACADIA' s pivotal

7 Phase III -020 study, with supportive data from other pimavanserin studies, was

sufficient to support the filing of an NDA for the treatment of PDP. During the

conference call Defendants stated in relevant part:

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12 just seems like the end of 2014 is a long way out. I'm wondering if

there is a chance or any potential for the filmg to happen sooner.

gating items are that need to be completed before NDA submission. It [Analyst: Just wondering if you could talk about what the time-

EHacksel]]: Yes, we have a number of things remaining that needs to 13 e done, which are standard studies. We need to do additional NDA-

enabling studies, including drug-drug interactions studies, and we also

14 need to do CMC studies that are required for approval. These things take time. We still save a lot of time compared to the previous

15 scenario, where we would have had to conduct the 021 study as well. So we are very excited about this expedited path to NDA submission.

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17 [Analyst: Thanks. Just a couple of follow-up items on the last

18 question. So drug-drug interaction studies are relatively quick to complete, so is it the manufacturing stuff that is now the rate-limiting

19 step?

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[Hacksel]]: Yes, clearly what we have to do is additional stability testing of regulatory batches, and that takes some time.

21 [Analyst: And so it sounds like -- have you actually completed the

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three validation batches on commercial manufacturing, and you are just waiting for stability now?

23 [Mills]: I think what it is reasonable to say is that we are well

24 underway in the preparations to run the stability studies.

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[Analyst: So that actually sounds like you have the material in hand, and it is really the stability study that needs to be started and

26 completed.

27 26

CONSOLIDATED CLASS ACTION COMPLAINT

28 3:15-cv-00575-BTM-DHB


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[Mills]: There are a number of preparatory studies -- small studies in setting these batches up, and the program is well underway.

[Analyst: I guess what I am confused about is that if you are talking about a filmg in late 2014, you know, a good 21 months from now, I thought that these stability studies lasted for a much shorter period of time than that, that because you are also testing at accelerated conditions, that those things are usually less than like 12 months. What am I missing about the timeline?

[Hackselfl : I think, first of all, there are a number of things that you need to do in order to conduct the stability testing of these batches properly, both in preparation of the batches and the analytical testing of the batches. In addition to that, you know, it takes a while to put the NDA together.

I think the important thing for us is that we are well ahead on putting everything together that is needed for the NDA submission. And again, the fact that we saved a considerable amount of time, perhaps up to a year, by having this expedited path to the NDA.

[Mills]: I think it is also fair to say that we have had extended experience with not only the drug for its effects, but also importantly in manufacturing multiple lots of the drug for our clinical trials. We are very comfortable with the chemical characteristics of the drug. We have made many batches in the past, and we know that this -- that the drug is very stable in multiple conditions. We are not anticipating any problems in the program, but we want to ensure that it is done smoothly and we don't run into problems at the NDA from the CMC program.

[Analyst : Maybe just in a slightly different tweak of the question, what is the kind of standard minimum amount of stability testing typically desired or required by the Agency to approve a drug with a decent shelf life? Is it six months at accelerated conditions, nine months, 12 months? Maybe that would be helpful to give us a sense.

[Mills]: Between six to 12 months.

[Analyst]: . . . [Jjust a couple of quick Questions regarding the study, the CML and the drug-drug interactions. Because you were going to run the 021 trial starting fairly soon, were you going to mn those in parallel anyway or you are accelerating the timeline for those studies?

[Mills]: So our drug-drug interactions studies have been planned and are actually underway, and that was part of the orjginal planning. Those aren't influenced by the 021 timing or efforts. I think it is also fair to say that in terms of those, they are very standard studies, they are what we expected to do planned to do and will do. And it is worthwhile bearing in mind that all our patients in the PDP program are on multiple other therapeutics, managing their Parkinson's



disease, and obviously many of the other aspects of the lives of elderly people with multiple issues ongoing.

2 [Hacksel]]: And when it comes to the CMC program, that was started clearly before we knew of the outcome of the FDA meeting.

4 [Analyst] Okay, so that was all already in the works.

[Mills]:

Absolutely.

[Analyst]: With regard to manufacturing, do have redundancy built into that? Do you have multiple manufacturers? Is the batch and the CMC going to be solely to one manufacturer? And I imagine these are all contracted out.

[Hacksel]]: It is all contracted out to one manufacturer, correct.

[MillsI: I think it is -- just to note that obviously we have made multiple batches of this drug through our clinical program, and we have worked with our manufacturers throughout in a very consistent and good manner.

85. On April 30, 2013, ACADIA presented at the Needham Healthcare

Conference, during which defendant Hacksell stated, in relevant part:

So, with this outcome of our FDA discussion, we can now move aggressively forward towards assembling the NDA. We hope to be able to submit the NDA near the end of 2014. What remains to be done for us is CMC activities, including assessment of stability of regulatory batches. I should mention to you that the CMC area, we have thmgs remaining to do, but we don't see any risks in the remaining activities, because we have already done a lot of stability work.

When it comes to a submission of an NDA, you need to do certain things, and to check the boxes and that's what we're doing here. We also need to do some standard drug-drug interaction studies. Those are also essentially checking the remaining boxes. So we feel very confident about the remaining develqpment program of

n pimavansen. But it will take some time. The good thing for us is that we can move forward much quicker than we would have done otherwise, if we had been required to do an additional clinical study --an additional pivotal study, I should say.

[Audience Member]: Can you talk about additional things that you have to do and the time line -

[Hacksel]]: Yes, what remains to be dope for us is basically completing the CMC program, and that includes stability testing of the regulatory batches. Just to make sure that you understand, there is

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a lot of formality that you do, complete the CMC program. And so that's what we have as a critical timeline to NDA submission. To check all the boxes that are required for that.

86. On August 5, 2014, the Company hosted a second quarter earnings

call during which Defendants stated in relevant part:

[Mills]: During the second quarter, we held routine pre-NDA meetings with the FDA. These interactions are positive and enabled us to outline and discuss our planned submission and how the NDA would be organized. Based on these positive interactions, we remain on track for the planned NDA submission to the end of 2014.

Importantly, our team has remained focused on completing the remaining activities in our pimavanserin PDP development program that are needed for the submission of our NDA. This includes aspects of the CMC development, including stability testing of the pimavanserin registration batches and supported studies including drug-drug interaction studies.

I am pleased to report that our CMCprogram has continued to advance as planned. You may recall that our three required registration batches of pimavansenn were successfully manufactured at the commercial launch scale and registration of stability testing on these drug product batches was initiated last October.

During the second quarter, we completed an assessment on the first six months of stability data from these registration lots and, importantly, confirmed that these data are consistent with historical data observed with our clinical trials formulation. We are continuing to accumulate data in our registration stabilityprogram, which is designed to comply with the ICH guidelines of 12-month stability of regulatory batches and to meet the regulatory filing requirements for major markets worldwide.

[Analyst: So the only remaining gating event is finishing up the one year with the stability testing.

[Mills]: That has been the key -- sort of the key event through this program. So -- and obviously, 12-month stability takes 12 months.

CLASS PERIOD STATEMENTS

87. On the first day of the Class Period, November 10, 2014, ACADIA

issued a press release reporting its third quarter 2014 financial results and updating



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the timing of its submission of the NUPLAZID NDA. The press release stated in

relevant part:

ACADIA plans to submit its NUPLAZID NDA for Parkinson's disease psychosis in the first quarter of 2015. The company had previously planned to submit the NDA near the end of 2014. The decision to move back the planned submission is based on additional time required to complete preparations needed to support the U.S. Food and Drug Administration's (FDA) review of NIJPLAZID. The change in submission timing is not a result of any change to NUPLAZID's clinical or safety profile, nor is it a result of any interaction with or request for intormation from the FDA. Additionally, ACADIA reported that it has successfully completed its drug-drug interaction program and its registration stability program.

"While we had hoped to submit our NDA for NUPLAZID near the end of this year, we believe it is prudent to push back our planned submission to the first quarter of 2015," said Uli Hacksell, Ph.D., Chief Executive Officer of ACADIA. "We are confident in our safety and efficacy data package supporting the NUPLAZID NDA and are working diligently on completing preparations for the NDA submission and review."

88. On a conference call that day, defendants ACADIA and Hacksell

stated in relevant part:

[Hacksel]]: In summary, we are working diligently on moving the NUPLAZIDprogram toward registration, preparing for submission of the NDA in the first quarter of 2015, followed by a submission of an IVIAA in Europe six to nine months thereafter.

We continue to make important progress in building our commercial capabilities, and on the development side, we are actively pursuing a number of indications in which pimavanserin may represent a novel approach to treating certain disorders. We continue to make important additions to our team and are putting significant effort into hiring high quality and experienced leaders as we build out key areas of the organization to manage the planned launch and commercialization on NTITPLAZID.

[Analyst: Thanks for taking the questions. The first one I have for you is regarding NDA timing. And this is something that has been in the works with a similar timeline on it for quite a while now. So I guess I'm trying to get a little bit of a better understanding of why do you need this extra time at this point, even though it's still a relatively short amount of time. Are there additional analyses that you decided to do after meeting with the FDA or as part of the submission you sent them to get the breakthrough designation?



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[Hacksell]: So what we really can say is that the timing change is related to the fact that we have additional preparations that are required to support the FDA's review ofNUPLAZID, and that is not really related to any kind of major hurdles. We have completed the drug-drug intertion program. We have stability as required in our registratioipr

0iam. We have not any kind of interactions with the

FDA that ushthis. It's just that we need some more time to complete e preparations. It is just a timing issue, nothing else.

'Analyst]: . . . It doesn't appear to be a big deal in the grand scheme of thmgs, but I am wondering if the timing with regard to the NDA is related to any new observation with regard to that drug-drug interaction study or the sability work that you have been doing, or is this simply a Gantt chart thing whereon are preparing the submission for making the submission?

[Mills]: . . . So I think you probably hit it in the last bit there. With regard to the data, we have got no data that would suggest we have developed any problem with the clinical data with the dmg product. All those thin have gone according to plan, not just the dmg-dmg interactions, but the stability program, all have gone pretty smoothly.

Importantly, looking at the safety profile of the dmg, it really continues to be very consistent with everything we have seen in the past and, obviously, with the basis of that was really the submission that we made to FDA, and there is nothing changed in terms of the risk-benefit of the drug.

[Hackselfl: So I think you expressed it pretty well. It's just a matter of timing. You can call it a Gantt chart, if you wish.

89. On December 2, 2014, ACADIA presented at the Piper Jaffray

Healthcare Conference, during which defendants ACADIA and Davis stated in

relevant part:

[Analyst: . . . NDA filing is soon?

[Davis]: Yes. "at we've guided is the first quarter of 2015, and we remain on track for that

6 A Gantt chart is a "visual representation of a project schedule" that "show[sJ the start and finish dates of the different requirement elements of a project.' Investopedia. com , Gantt Chart, http://www.investopedia.com/terms /g/gantt-chart.asp.



90. On January 13, 2015, ACADIA presented at the IPMorgan Healthcare

2 Conference, during which defendants ACADIA and Hacksell stated in relevant

3 part:

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[Audience Member]: . . . You reiterate our guidance in your talk just now about filing the pimavanserin MA this first quarter. So considering we are in the first quarter, is it safe to assume no more obstacles with whatever the issue was that pushed it off? And do you feel comfortable it has been addressed?

[Hacksell]: Yes. The question is if we feel comfortable with submitting the NDA this quarter and the answer is yes, we do.

91. On February 26, 2015, ACADIA issued a press release announcing its

2014 fourth quarter and year-end financial results (for the year ended December

31, 2014). The Company reported anet loss of $28.4 million, or ($0.28) diluted

earnings per share and collaborative revenue of $47,000 for the fourth quarter of

2014. Additionally, the Company reported a net loss of $92.5 million, or ($0.95)

diluted EPS, and collaborative revenue of $120,000 for the year ended December

31, 2014. The release stated in pertinent part as follows:

"Our accomplishments in 2014, highlighted by NIIPLAZIDTM receiving Breakthrough Therapy designation from the FDA, our strengthened balance sheet, and our commercial prçparations, set the stage for a promismg 2015," said Uli Hacksell, Chief Executive Officer of ACADIA. "Importantly, we continue to advance our Parkinson's disease psychosis program towards registration and remain on track to submit our New Drug Application to the FDA in the first quarter of 201 5."

92. That same day, after releasing its financial results for its 2014

fourth quarter and year end, ACADIA hosted a conference call for analysts,

media representatives and investors during which defendants ACADIA,

Hacksell, and Mills stated in relevant part:

[Hacksel]]: Our performance in 2014 was highlighted by a number of important achievements. During 2014, we continued to advance our NUPLAZID program for the treatment of Parkinson's disease

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psychosis, or PDP, towards registration and we remain on track to submit our NDA this quarter.

We successfully completed our drug-drug interaction program and our stability program for registration batches. We also held successful pre-NDA meetings with the FDA.

[Mills] . ...As Uli mentioned at the beginning of the call, we are diligently completing preparations to support the FDA review of N IJPLALID and remain on track to submit our NDA this quarter.

EHacksel]]: Thank you Terry. The stage is set for what I believe will e a very exciting year at ACADIA and we're off to a strong start in

2015. Our priorities are clear. We plan to submit our NDA for NUPLAZID during the first quarter of 2015, continue to build out our commercial capabilities to prepare for the planned launch of NUPLAZID, and we will pursue the development of pimavanserin for other neurological and psychiatric disorders that are underserved by currently available antipsychotic drugs. We also will prepare a submission for NUPLAZID in Europe.

As far as our organization, we are expanding our existing infrastructure to support the planned launch and commercialization of NUPLAZID including adding to our commercial structure, commercial level manufacturing, medical affairs, quality control and compliance. We have brought in highly qualified individuals with extensive experience in their ftinctional domain and in CNS products. I am thrilled to see the high level of collaboration across functions.

93. That day, ACADIA filed its annual report on Form 10-K for the fiscal

year 2014 ("2014 Form 10-K"), signed by defendants Hacksell and Davis. In

regard to the timeline for submitting the NUPLAZID NDA and the Company's

manufacturers, the 2014 Form 10-K stated in relevant part:

We plan to submit the NDA to the FDA in the first quarter of 2015.

We currently outsource 2 and plan to continue to outsource, manufacturing responsibilities for our existing and future product candidates, including NUPLAZID, for development and commercial purposes. Until recently, NUPLAZID has been manufactured in small quantities for preclmical studies and clinical trials. If NUPLAZID is approved for commercial sale, we will need to manufacture the product in larger quantities. Significant scale-up of manufacturing requires additional process development and validation studies, which will be subject to FDA review as part of our NDA



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submission. Our active pharmaceutical ingredient, or API, has been manufactured in Switzerland for over ten years and we anticipate continuing to use this manufacturer as we transition to a commercial organization.

We plan to retain third-party service providers to perform a variety of functions related to the distribution of NUPLAZID, including warehousing, customer service, ,order-taking, invoicing, collections, and shipment and returns processing.

94. Moreover, the 2014 Form 10-K contained certifications pursuant to

the Sarbanes-Oxley Act of 2001 ("SOX") signed by CEO Hacksell and CFO Davis

stating that the 2014 Form 10-K "fully complies with the requirements of Section

13(a) or Section 15(d) of the Securities and Exchange Act of 1934" and "the

information contained in the Report fairly presents, in all material respects, the

financial condition of the Company at the end of the period covered by the Report

and results of operations of the Company for the period covered by the report.

Defendants Hacksell and Davis further signed a separate certification stating, in

relevant part:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2014 of ACADIA Pharmaceuticals, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined m Exchange Act Rules 1 3a- 15(e) and 1 Sd- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material mformation relating to the registrant, including its consolidated subsidiaries, is made



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known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

95. Defendants' statements in ¶ 87-94 above were materially false and

misleading when made because Defendants knowingly or recklessly failed to disclose

the following:

(a) The Company was not on track to submit its NDA for

NUPLAZID by March 31, 2015;

(b) The Company did not have robust quality assurance systems,

documentation and record-keeping systems, commercial-



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oriented SOPs, or systems in place to monitor the activities of

third-party suppliers and manage materials through the supply

chain, and therefore lacked the systems necessary to support the

commercial manufacturing and supply of NUPLAZID and

approval of the Company's NUPLAZID NDA; and

(c) The Company had not yet conducted a mock inspection of its

commercial manufacturing and supply systems to determine

whether they were sufficient to support approval of the

Company's NUPLAZID NDA.

96. At no point during the Class Period did Defendants correct or update

the aforementioned false or misleading statements listed in ¶87-94.

POST CLASS PERIOD EVENTS

97. Then, on March 11, 2015, ACADIA issued a press release announcing

a change in the timing of its planned NDA submission to the FDA for NUPLAZID.

After the First Delay, the Company planned to submit the NDA by March 31,

2015. Now, however, it planned to submit its NDA nine to ten months later, in the

second half of 2015. The release stated in part:

"We have concluded that additional time is needed to complete the readiness of our commercial manufacturing systems," said Steve Davis, Interim Chief Executive Officer at ACADIA. "While we are very disappointed with the change in timing, we believe that this is the prudent course of action to take. We are working expeditiously to ensure that our systems are robust and ready for 1iDA review and commercial launch. Importantly, we remain confident in the safety and efficacy package spportmg the NDA of NUPLAZID, which received Breakthrough I herapy designation from the FDA last year."

98. Later that day, ACADIA hosted a conference call for analysts,

investors, and media representatives during which Defendants stated in relevant

Ipart:

[Davis]: In preparation for submission of the NDA, we completed an assessment of our manufacturing and quality systems and



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procedures. This is a customary but important step in preparing for an NDA review and the inspections that are part of that review. Based uponthis assessment we determined that we needed to do additional work to prepare our systems to support commercial scale manufacturing and supply.

I'm going to pause here and just take a second to provide some context around the system that I am describing.

Moving from a clinical stage company to a commercial stage company as we are doing requires building infrastructure to accommodate commercial scale operations. These systems include things such as robust quality assurance systems, documentation and record-keeping systems, commercial oriented standard operating procedures or SOPs, systems to monitor activities of third-party suppliers and simply the management of materials through the supply chain.

Many of these systems exist when you are a clinical stage company but have to be significantly expanded and much more robust for commercial scale production. Establishing the infrastructure I have described requires close coordination between our internal manufacturing resources external third-party suppliers and the quality assurance functions within each organization. Because these manufacturing and supply systems are subject to inspection as part of the NDA review process, it is important that our systems be robust and ready for FDA review and of course for commercial launch.

To be ready for that review, the systems need to be established, they have to be tested and evaluated and frequently they need to be tested in connection with actual production runs completed by your third-party suppliers. In other words, it is not just a paper exercise; you sometimes need to test them in real production runs.

So this requires coordination of our schedule with the schedules and availability of others and the logistics quite frankly, can be challenging. With that context, the assessment we recently concluded indicates that the network of systems needed to support commercial manufacturing and supply and again importantly 2 the review of our NUPLAZID NDA, requires further implementation and additional testing, work that was not part of the Company's original plan.

As a result of information from this assessment, we have decided to move back the planned NDA submission of NUPLAZID to the second half of 2015.

[Davis]: . . . Now let me address the corporate release we issued today regarding the change in management. As you are aware, we announced today that Uli Hacksell has retired as Chief Executive Officer and as a member of the Board of Directors effective today. We thank Uli for his many contributions to ACADIA taking the



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Company from a small start-up to a significant biopharmaceutical company with significant growth potential. Uli's dedication, his tenacity, his deep knowledge of the CNS space and lifelong passion to deliver new dmgs that can improve the lives of patients with CNS disorders have benefited ACADIA greatly.

During this transition period, our Board of Directors has appointed me as interim Chief Executive Officer. As many of you on the call are aware, I recently joined ACADIA eight months ago as its Executive Vice President, Chief Financial Officer and Chief Business Officer. For those of you that I haven't connected with as much, by way of background I have an extensive operational experience with over 20 years at the executive level and have worked as CEO and COO at other biopharmaceutical companies. I also have over 20 years of collective experience sitting on the Boards of Directors of public biopharmaceutical companies including three companies in the last year that are at similar stages of commercial preparations as ACADIA.

T have an extensive network in the industry. I have seen these types of issues before and I am fully confident we will solve them. I look forward to working with our senior leadership team to put our full weight and resources behind advancing NUPLAZID towards registration and preparing the drug for its planned launch.

[Analyst: .. . Sol guess just wondering, your 4Q call was two weeks ag and obviously you were confident in the 1Q timeline then. Can you just help us understand what has happened between then and now and how can we be at all confident in the new timeline you guys have given?

[Davis]: It is fair question. I will just start by saying that preparing and filing an NDA is a huge amount of work across many functions of the Company and as we got closer to the final submission date and diverse functions of the Company became coordinated, the group of us sitting around this table became aware that we had more work to do to be prepared in the areas that I mentioned. And we collectively decided that the best approach to filing a successful NDA would be to take more time prior to the filing. Ultimately it is a judgment call when to file but we are confident that the right balance is to take some more time to best position the Company for a successful NDA review.

Look, I'm going to be honest. Obviously mistakes were made. The Company should have been better prepared but we have taken decisive steps to address those missteps and I am very confident in the team here.


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[Analysfl: Can you remind us again who your third-party manufacturers are?

[Davis]: We have not disclosed the identity of those companies. What F can tell you is they are name brand third-party manufacturers, CMOs, that are extensively used in the biopharmaceutical industry and perhaps more importantly used by the major pharmaceutical companies.

[Analysts: And the particular plants of the third parties that you are using, are they currently all GMP certified and completely basically passed through inspection?

[Davis]: They are and without talking specifically about individual companies, they have all been inspected by multiple regulatory agencies in the recent past.

[Analyst]: And you mentioned just a breadth of things that are involved in these quality systems and procedures, things like standards, SOPs, raw material, supply chain. Is there one or two particular areas that are the focus of the ongomg activity? I can't imagine that every single one of these would need work.

[Davis]: No, quite frankly as I mentioned, you do a lot of these things at a clinical stage level and when you go to commercial stage, they frankly need to be more robust, there are some things that you do that are new but most of the things just have to be done at a much more industrial scale. And again speaking quite frankly, the Company didn't start the process early enough to really get those things in place. We have made very good progress I think m the last few months but this recent assessment we had indicates that we've got more work to do.

We have identified the areas that we think need most work. We have very clear plan to address them and again in this business, you always worry about the things you don't know and those things can always happen but based upon everything we know today, we are very confident in our projection of being ready to submit in the second half.

b [Analyst: . . . And then just last and this is maybe a bit subjective ut management -- occasionally programs do slip in terms of the filing

and management changes in conjunction with such timelines may seem appropriate but may to some also seem a bit Draconian. And I wrestle with that word. Can you comment a little more on why they were necessary or specific in this instance?

[Davisi: Well, let me start by saying Uli has discussed with the Board for some time retiring from the Company. So look, this is in the short term, this is a very painful process for the Company. We don't like missing timelines. In the long run, it has no bearing whatsoever



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on the ultimate potential of this drug. Again, I am quite confident that we will resolve these issues and I am very, very confident that as we move forward here, that we will continue to explore the full range of potential that the molecule has.

We really very much appreciate the significant contributions that Uli has made to the Company. He brought the Company from a very small and very challenged company to one that has tremendous promise today. Operationally, we know exactly what we need to do. We are dedicated to doing it and we have a very clear plan and I think a very cohesive management team executing that plan.

[Analyst: ... You also mentioned you would be bringing on additional in-house experts to bolster capabilities? Iguess are those people already on board or when are you planning to do that?

[Davis]

They are on board.

[Analyst] How long have they been on board?

[Davis]: As we have moved through the last year, we have continued to build our capabilities and so as we have advanced on a number of fronts, number of infrastructure fronts, we have continued to build out the capabilities and I would say that we are on track with where we need to be and expected to be.

[Analyst: . . . Just following on to Whitney's questions, the additional, the expert consults, the in-house experts and the management changes that you referred to, is this a function of new people being cycled into existingpositions, especially at the management level or will you be bolting on and creating new positions?

FDavisl: I am not sure I understood the question. Let me answer what I think you asked and if I don't get it exactly right please let me know.

So as we have progressed through the lastyear, we have continued to grow at a healthy rate. So we have mapped out over a year ago and then we have continued to refine this. The positions that we need, the functions that we need, the resources we need, so we have a very, very detailed plan that we are continuing to execute on in that regard.

I think in terms of changes in management from existing roles, obviously Uli has retired and as I mentioned, he has made great, great contributions to the Company. I think the team that we have here is --our responsibilities other than mine have all continued on the same track and same plan that we have been on for some period of time. The buildout of the organization at the thither senior level and middle management level is completely on track and going according to plan.



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And so I think from that perspective, the overall plan is moving forward as we would have expected. We have made some course corrections here. We have made some course corrections in terms of personnel, realigning responsibilities. One of the things that we have done for instance is we have moved our quality function under our regulatory function. We have a very highly seasoned professional overseeing that area that has deep knowledge m this area so we've made some of those kinds of changes to make certain that we have the very best people executing the plan.

[Analyst: Got it. Right now, who at the senior level is the ultimate report for manufacturing and CMC? Is that you?

[Davis]: Yes, at the moment that reports into me. We have an experienced manufacturing person that oversees the manufacturing portion. I mentioned that the quality function is reportmg into our head of regulatory and again, this entire system is complemented by a very extensive network of consultants that we have worked with for some time and I have coincidentally worked with them at other compames as well. We have also brought in additional resources on that front as well.

[Analyst]: And a couple of questions coming in from clients and then I will stop. Why did Uli have to come off the Board? I mean we know Uli has contributed in an executive capacity but that seems like a strategic shift or disagreement on a fundamental basis.

[Davis]: Yes, so let me address that. First, I would just say that When a CEO leaves the organization, it is very common for them to also step off of the Board. You mentioned strategic direction and maybe alluded to is there a change in strategic direction. Let me just be very clear, there is no change in strategy at all. Everything that we are focused on today is simply an operational set of issues that will resolve.

So the strategic direction of the Company, our intent to launch this drug independently in the United States, maintaining options to possi partner outside of the United States or possibly launch ourselves particularly in Europe remain the same. There is no change in strategy or direction of the Company.

[Analyst: And just last confirmatory question, can you just confirm that there was no issue with the actual drug product rather than quality assurance systems or supply?

'Davis' .There is no issue with the drug product itself. No issue

with drug substance, the drug product, the formulation, synthesis. There is no issues on that front at all.



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[Analyst]: Thanks for taking the follow-up. Again just another confirmatory question. Can you just confirm or I guess -- other then the manufacturing and quality control side of things, would you have been in a position to file the MA this month as previously expected?

[Davis]: Yes.

99. As a result of this news, ACADIA common stock dropped $9.94 per

share to close at $34.82 per share on March 12, 2015, a one-day decline of 22% on

volume of 15 million shares.

100. Since announcing the Second Delay of the NDA, the Company has

disclosed additional information about the delay. On March 17, 2015, Cowen &

Company published an analyst report titled, "Behind the 8 Ball, But Catching Up:

Highlights From Meeting With ACAD Mgmt," in which it described its meeting

with ACADIA's management the day before. The report stated in relevant part:

We met ACAD's mgmt team yesterday to thither discuss details of the pimavanserin NDA delay. We understand that non-ND A package in-house quality assurance protocols/documentation are not ready and will not be ready for up to 9 months, (but possibly sooner). We think pima's clmicial profile continues to be very positive, and have little to no doubt on its approvability.

We think ACAD is significantly behind in finalizing its manufacturing quality assurance protocols, having likely started developing the protocols too late in the NDA process. We think is especially true as, anecdotally, FDA inspections (both clinical and manufacturing) are now sometimes occurring very early in the NDA review process. Importantly, these protocols are not part of an NDA. AC AD believes the pima NDA is complete, and now only needs to be updated until time of submission. However, failure to have protocols ready for inspections could result in a Refuse-To-File letter or Complete Response Letter, delaying approval.

101. On March 26, 2015, Cowen & Company published another analyst

report titled, "Group Lunch Takeaways: Playing Catch-Up With Quality

Assurance," which provided additional details about the delay from another

meeting with ACADIA management. The report stated in relevant part:



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We hosted agroup lunch with ACAD yesterday where overall the major topic of discussion was the outstanding quality assurance issues that ACAD intends to rectify/complete before NDA submission. Most key points discussed were covered in the note detailing our previous note with takeaways from Cowen's meeting with ACAD on March 16th. Deficiencies involve SOPs for various functions, supply chain, training documentation, protocols for product release etc. Some of these issues require test manufacturing runs to evaluate, which require reserving manufacturing suites for test runs, which in turn, force ACAD to schedule around their CMOs schedule (costing time), reserving additional manufacturing line time slots (costing money), or both.

ACAD is reserving the right to start a rolling NDA, but believes initiating one may either trigger or start the clock on an inspection even before all modules (even CMC) are submitted.

The responsibilities previously handled by ACAD's head of quality assurance were recently assumed by the same consulting agency that was retained to assist ACAD in a supportive quality assurance role in Fall 2014. The engagement of this firm shortly preceded the recognition of preliminary deficiencies that resulted in the first NDA delay to 1Q15. ACAD is actively conducting a search for an internal head of quality assurance and will be hiring more members of that department. ACAD is also currently conducting a permanent CEO search, in which the acting CEO Steve Davis is a candidate.

102. On an April 14, 2015, ACADIA presented at the Needham Healthcare

Conference, during which Davis commented on the issues leading to the delay,

stating in relevant part:

So Alan has asked if I could elaborate a little bit more on NDA submission, CMC-related activities, etc.

I think, as everyone in the room is aware, we pushed the submission back to the second half. We were planning to submit at the end of the first quarter and determine that we have just more work that we need to do to be ready to submit.

We gave a fairly broad range of the second half of the year. That was conscious and intentional, and the reason for that is the work that we need to do really revolves around making certain that we are ready for preapproval inspections. In order to get to that state of readiness, there's a certain amount of work that needs to be done in collaboration with our third-party suppliers, and because we are relying on other people's schedules, it's important -- I felt like it was important to make certain that we had factored in a certain degree of uncertainty regarding just what their schedules will entail.



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Just to give the broader context, to get a drug approved you need to do three things, right? One is the NDA is the primary focus of the drug approval. Our NDA is ready to go, so we can check that box. We could push the button tomorrow and submit the NDA. It's about 700,000 pages, so as you can see it's a very substantial document. That's not atypical, by the way. The other two buckets that are required to get a drng approved are passing what's referred to as preapproval mspections, and they come in two forms. One is on the climcal side and we've done what most companies do. We did an extensive amount of preparation, getting ourselves ready for those inspections, and we did again what most compames do. We hired former FDA inspectors, had them come in and do a mock inspection and do the same kind of inspection that we expect FDA to do. The results of that were that we are ready to go on the clinical side.

We did the same thing on the third bucket and that is on your preapproval inspections associated with manufacturing. We determined then that we have more work to do and so that's the subject of the work that we're doing now. I have said many times, I am not aware of any company that has failed to get their drugapproved because they couldn't get a quality assurance system in place that passes a preapproval inspection.

So we will do that. It's a process that we need to get in place. I'm highly confident that we willget that in place. I think we've got the right team. We've got the right plan. It's an extensive plan and a very robust team working on this, and based on everything 17 know today, I'm confident that we will submit the NDA in the second half.

The remaining bucket that we need to address is getting the quality assurance system in place on the GIVIP side of the equation. Qnce we have that in place, which again every company does -- I'm highly confident we will -- the commercial group is ready to go.

103. ACADIA finally submitted its NDA on September 3, 2015, aboutflve

months after March 31, 2015. That day, the Company also announced the

appointment of Davis as CEO. Soon thereafter, on September 29, 2015, ACADIA

presented at the Ladenburg Thalmann Healthcare Conference, during which Davis

answered a question from an analyst about the "manufacturing issues" that

contributed to the delay in submitting the NDA. Davis disclosed that the Company

recognized in March or February 2015 that it was not prepared to submit the

NDA:



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[Analyst]: . . . I want to lead with a significant focus of investors over the past several quarters,

, uarters,just a manufacturing issue. I know it's

been something that's been a focus. How confident are you that you have that buttoned-up completely at this point?

[Davis]: . . . I would start by saying, the issue that we've addressed is not a manufacturing issue per se. It s a quality assurance issue. And quite simply, as you move from a clinical stage company into a commercial stage company, there are a number of systems that need to be enhanced and significantly built to make that transition. The quality assurance system is one of them.

And so, on - the company just didn't start soon enough in building out the Quality Assurance system or making that transition to a commercial-grade QA system on the GMP front. We recognized that in March of this year or February this year, and began the process of building that out. At the time that we made the transition, when I moved into the Interim CEO role, I indicated that we would - we plan to - we were going to do it right. We're going to finish the work there and we plan to submit the NDA in the second half of this year.

104. On August 6, 2015, ACADIA filed a quarterly report on Form 10-Q

for the second quarter of 2015 ("Q2 Form 10-Q"). The Q2 Form 10-Q provided

that the Company "licensed worldwide intellectual property rights related to

pimavanserin in certain indications to ACADIA Pharmaceuticals GmbH,"

ACADIA's "wholly-owned Swiss subsidiary," which "will manage the worldwide

supply chain of pimavanserin."

105. The Q2 Form 10-Q also disclosed that on August 3, 2015, ACADIA

entered into a master manufacturing services agreement and product agreement

with Patheon Pharmaceuticals Inc. ("Pathcon"). Pursuant to the agreement,

Patheon will manufacture and supply NUPLAZID for ACADIA's commercial use

in the United States, and ACADIA will purchase from Patheon a certain

percentage of its commercial requirements of NUPLAZID for the United States.

Patheon will manufacture the drug using the API supplied by another third-party

manufacturer. With respect to ACADIA's ability to inspect Patheon's facilities,

paragraph 7.5 of the agreement provides:

Patheon will give Client reasonable access at agreed times to procedures and documentation relevant to the Product, and to the



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areas of the Manufacturing Site in which the Products are manufactured, stored, handled, or shipped, to permit Client to verify that the Manufacturing Services are being performed in accordance with the Specifications, cGMPs, Applicable Laws and the Quality Agreement. But, with the exception of "For Cause" Audits, Client will be limited each Year to one c&MP type audit, lasting no more than F... ]days, and involving no more than [... ... auditors. Client may request additional cGMPtype audits, additional audit days, or the participation of additional auditors subject to payment to Patheon of a fee of $5,000 for each additional audit day and $1,000 per audit day for each additional auditor. The right of access set forth in this Section 7.5 will not include a right to access or inspect Patheon's financial records. In addition, upon the request of any Regulatory Authority havmgjunsdiction over the manufacture of Products hereunder, the Regulatory Authority will have access to observe, audit and inspect any Manufacturing Site and Patheon' s procedures used for the manufacture, release and stability testing, and/or warehousing of Products and to audit those facilities and procedures for compliance with cGMP and/or other regulatory requirements. Patheon specifically agrees to cooperate with any inspection by a Regulatory Authority, whether prior to or after Regulatory Approval of a Product, and to provide Client a copy of any inspection or audit report resulting from the inspection within three Bus' ess Days from receiving the report. Client may be present at the Facility for consultation during any such inspection.

106. Shortly thereafter, on August 21, 2015 ACADIA filed a Form 8-K

with the SEC announcing that its Swiss subsidiary entered into an agreement with

BASF Pharma (Evionnaz) SA ("BASF"), pursuant to which BASF will

manufacture and supply pimavanserin tartrate, the API of NUPLAZID, for the

Company's commercial use.

107. The Company filed the manufacturing agreements with Patheon and

I BASF as exhibits to its quarterly report on Form 10-Q for the third quarter of 2015.

108. On September 3, 2015, the Company issued a Press Release

announcing that it had submitted its NDA for NUPLAZID.

109. On November 2, 2015, the Company issued a Press Release

announcing that its NDA for NUPLAZID was granted Priority Review. As the

Company explained in the release, Priority Review "accelerates the review

timeline from 10 months to six months from the date of acceptance of filing."



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110. Two days later, on November 6, 2015, the Company filed a Form 8-K

with the SEC announcing the resignations of Mills and Board member Lester

Kaplan ("Kaplan"). No further information was provided, and both resignations

were described as "effective immediately." According to ACADIA's website,

Mills had been with the Company as Executive Vice President, Development and

Chief Medical Officer since June 2006, while Kaplan has sewed as a director since

November 1997.

ADDITIONAL SCIENTER ALLEGATIONS

111. As alleged herein, Defendants acted with scienter because at the time

that they issued public documents and made other public statements in ACADIA's

name, they knew or recklessly disregarded the fact that such statements, when

made, were materially false and misleading and/or omitted material facts

concerning the manufacturing and quality assurance processes that would prevent

the Company from submitting its NDA by March 31, 2015. Defendants (a) knew

that such documents and statements would be issued or disseminated to the

investing public, (b) knew that persons were likely to rely upon those

misrepresentations and omissions, and (c) knowingly and/or recklessly participated

in the issuance and/or dissemination of such statements and/or documents as

primary violators of the federal securities laws. Defendants' materially false and

misleading statements and omissions of material fact artificially inflated

ACADIA's stock price during the Class Period.

A. Core Operations

112. Because the fraud alleged herein relates to the core business of

ACADIA, knowledge of the facts underlying the fraudulent scheme may be

imputed to the Individual Defendants. Indeed, ACADIA acknowledged in its 2014

Form 10-K that the Company was "highly dependent on the success of



pimavanserin, our most advanced product candidate" and therefore the Individual

Defendants, as senior level executives and/or directors were in such positions at the

Company to access all material, non-public information concerning the status of

the manufacturing and quality assurance systems and their impact on the timing of

ACADIA's submission of its NDA on a real-time basis. Notably, on a November

6, 2013 conference call, Hacksell stated that the company had only 48 employees.

That number increased to only 97 full-time employees by December 31, 2014. See

2014 Form 10-K). Thus, the Individual Defendants were aware, or recklessly

disregarded, that statements about the Company's readiness to submit the NDA by

March 31, 2015, made contemporaneously with knowledge of contradictory

information, were materially false and/or misleading when made.

113. In fact, in response to the question "[right now, who at the senior

level is the ultimate report for manufacturing and CMC? Is that you?" on the

March 11, 2015 conference call, Davis, who was sewing as CFO and interim CEO

at the time, stated, "[yes, at the moment that reports into me." Accordingly, it is

highly likely that the issues with manufacturing and quality assurance that plagued

the submission of the NUPLAZID NDA during the relevant period would have

been directly reported from the person responsible for manufacturing and CMC to

defendant Hacksell while he sewed as CEO.

RI

Education, Experience, and Training of the Individual Defendants

114 The Individual Defendants were highly educated, trained, and

experienced. For example, Defendant Hacksell was highly educated and had

extensive experience in the pharmaceutical industry. Hacksell received a Master

of Pharmacy and a Ph.D. in Medicinal Chemistry from Uppsala University. See

ACADIA, Definitive Proxy Statement (Form DEF 14A) (Apr. 24, 2014) at 8. He

joined ACADIA in February 1999 as Executive Vice President of Drug Discovery

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and was appointed CEO shortly thereafter in September 2000. See id. Prior to

joining ACADIA, Hacksell held senior executive positions at Astra, a

pharmaceutical company, including Vice President of Drug Discovery Technology

and President of Astra Draco, one of Astra's largest research and development

subsidiaries, and Vice President of CNS Preclinical R&D at Astra Arcus. See id.

Before his time at Astra, Hacksell was a professor of Organic Chemistry and

Department Chairman at Uppsala University and sewed as Chairman and Vice

Chairman of the European Federation of Medicinal Chemistry. See id.

115. Defendant Davis earned his Bachelor of Science degree in Accounting

from Southern Nazarene University and his J.D. from Vanderbilt University. See

ACADIA, Definitive Proxy Statement (Form DEF 14A) (Apr. 29, 2015) at 11.

Davis joined ACADIA in July 2014 as Executive Vice President, CFO, and Chief

Business Officer with over 20 years of executive-level experience in the

pharmaceutical industry. See id. at 10-11. In 2013, prior to joining ACADIA,

Davis sewed as Executive Vice President and Chief Operating Officer of Heron

Therapeutics, Inc., where he led core business and finance functions. See id. at 11.

Before joining Heron, Davis sewed as Executive Vice President and Chief

Operating Officer at Ardea Biosciences, Inc. from 2010 to 2013. See id. In that

capacity, he oversaw business functions, including finance, commercial planning,

and corporate development. See id. Earlier in his career, Davis sewed in

numerous executive roles at Neurogen Corporation from 1994 to 2010, including

CFO, Chief Operating Officer, and CEO, completing multiple collaborations and

product acquisitions with global pharmaceutical companies. See id.

116. Davis summarized his relevant experience on the March 11, 2015

I conference call:

I have an extensive operational experience with over 20 years at the executive level and have worked as CEO and COO at other

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biopharmaceutical companies. I also have over 20 years of collective experience sitting on the Boards of Directors of public S biopharmaceutical companies, including three companies in the last year that are at similar stages of commercial preparations as ACADIA.

I have an extensive network in the industry. I have seen these types of issues before and I am fully confident we will solve them. I look forward to working with our Senior Leadership Team to put our full weight and resources behind advancing NUPLAZID towards registration and preparing the drug for the planned - for its planned launch.

117. Defendant Mills received his medical degree at the Charing Cross

Hospital Medical School in London and his specialized training at the Royal

College of General Practitioners in London. See ACADIA, Definitive Proxy

Statement (Form DEF 14A) (Apr. 29, 2015) at 11. Mills joined ACADIA in June

2006 as Executive Vice President, Development and Chief Medical Officer. Prior

to joining the Company, Mills sewed as Vice President, Development at Pfizer

Global R&D, a division of Pfizer Inc. See id. At Pfizer, Mills was responsible for

the management and direction of drug development activities, playing a key role in

the development of Sutent®, a treatment for advanced renal cell carcinoma and

gastrointestinal stromal tumors. See id. Before coming to Pfizer, Mills held senior

clinical management positions at Gilead Sciences, where he sewed as project

leader in the development of Tamiflu®, and at Abbott Laboratories, where he

played an important role in the development of antiviral drugs. See id. Earlier in

his career, Mills held several senior positions at the Wellcome Foundation,

including Scientific Advisor for Group Marketing and Therapeutic Area Head,

Cardiovascular Marketing. See id.

C. Bonuses and Other Incentive Compensation

118. Although the Individual Defendants knew, or recklessly disregarded,

that the NDA was not on track for submission by March 31, 2015, they were

motivated to rush the NDA submission forward and represent its readiness to the



public to maximize the value of their lucrative performance-based executive

I compensation.

119. According to ACADIA's SEC filings, the Company's executive

compensation program included base salary, performance-based annual incentive

bonuses, and performance-based incentive stock options. See ACADIA, Definitive

Proxy Statement (Form DEF 14A) (Feb. 14, 2015) at 42-45. In making executive

compensation decisions the Compensation Committee of ACADIA' s Board of

Directors evaluates the performance of each executive in relation to a set of

corporate performance goals for the current year prepared by management. See id.

at 43. The details of the components of ACADIA' s executive compensation

program during the Class Period were as follows:

a) Base Salary: Base salaries were reviewed annually and adjustments

were made based upon an assessment of (i) the Company's

performance; (ii) the performance of each executive officer; (iii) the

impact of the performance on the Company's business results; and

(iv) the financial position of the Company, among other things. See

id. In 2014 the executive salaries were increased to be in line with the

50th percentile of salaries for similar positions. See id.

b) Incentive Bonuses: The Company believes that "performance-based

cash bonuses play an important role in providing incentives to our

executives to achieve defined annual corporate goals." Id. Each year,

the Compensation Committee reviews a detailed set of overall

corporate performance goals for the current year provided by

management. See id. Since the Company was "preparing to become a

commercial entity, with the first submission of an [NDA] for

pimavanserin[,]" during the Class Period, the corporate goals

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reviewed by the Compensation Committee were comprised "of annual

goals rather than specific financial measures." See id. In 2014, the

corporate performance goals reviewed by the Committee related to the

pimavanserin program, business development, financing and investor

relations, and administration and infrastructure. Id. at 44. The

pimavanserin program goals included the following: (i) conducting

pre-NDA meetings with the FDA; (ii) submitting the NDA for

pimavanserin; (iii) continuing progress with the pimavanserin

Alzheimer's disease study; (iv) managing the ongoing Phase III trial

for PDP; (v) evaluating other indications to be considered for

development; (vi) continuing other ongoing studies; and (vii)

conducting pre-commercialization planning and preparation. See id.

The Committee then based bonuses upon an average of (i) the

Company's overall performance in achieving the corporate goals; and

(ii) the overall performance of the executive's functional area,

including his individual contributions. See id. at 43. In 2014, the

target annual bonuses for the Individual Defendants were updated "to

reflect the growth and evolution of the Company" as follows: (i) 60%

of base salary for Hacksell; (ii) 40% of base salary for IVlills; and (iii)

40% of base salary for Davis. See id.

C)

Incentive Options Awards: According to the Company, the

objective of options awards is to "advance our longer-term interests

and those of our stockholders and to complement incentives tied to

annual performance by providing incentives for longevity with the

Company." Id. at 45. Indeed, since "[s]tock options produce value to

our executives only if the price of our stock appreciates, thereby



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directly linking the interests of executives with those of stockholders

• . they have been an invaluable piece of the executive compensation

program." Id. The number of stock options granted to each executive

is based upon the following: (1) the executive's position; (ii) the

executive's performance in the prior year; (iii) the Company's overall

performance; (iv) the executive's potential for continued contributions

to the Company's success; and (v) competitive market information.

See id.

120. The following chart shows the Individual Defendants' executive

I compensation for 2013 and 2014, which was largely dependent upon the

I development of pimavanserin:

Naiiic \car sa la r .N Bonus Options Other total

(oiiip.

Uli Hacksell 2013 $535,000 $400,000 $3,870,180 $13,689 $4,818,869

2014 $580,000 $208,800 $5,074,725 $13,977 $5,877,502

Roger Mills 2013 $405,000 $200,000 $2,257,605 $13,689 $2,876,294

2014 $425,000 $119,000 $3,146,330 $13,977 $3,704,307

Stephen Davis 2014 $191,805 $53,802 $4,963,008 $308 $5,208,923

See id. at 47.

121. Notably, since the Company did not achieve the goal of submitting the

I NDA to the FDA in 2014, the bonuses that were awarded "were generally below

the target bonus for each executive." Id. at 44. Thus, the bonuses actually

awarded to the Individual Defendants were calculated as follows: (i) 36% of base

The monetary value of the options awards was determined by multiplying the number of securities underlying the options granted by the exercise price for each option granted. The exercise price is set at the market closing price of Acadia common stock on the date of grant. See ACADIA, Definitive Proxy Statement (Form DEF 14A) (Feb. 14, 2015) at 48.



pay for Hacksell (60% of his target bonus); (ii) 28% of base pay for Mills (70% of

his target bonus); and (iii) 13.6% of base pay for Davis (70% of his target bonus).

15cc id.

1. ACADIA's Incentive Bonus Plan Caused the Individual Defendants To Be Aware of the Challenges Facing Filing the NDA

122. Given that the incentive bonuses constituted large percentages of the

Individual Defendants' cash compensation, and the value of the bonuses

themselves were closely tied to the submission of the NDA for pimavanserin, the

Individual Defendants were self-interested in the progress of the NDA submission.

The Individual Defendants' personal stake in the NDA submission certainly would

have caused them to monitor the progress of the application and to be aware of the

numerous issues that eventually caused an additional five-month delay, after the

First Delay, in the submission, putting their bonuses and personal compensation in

jeopardy. Indeed, this vigilance only would have increased after the First Delay in

the NDA submission caused the Individual Defendants to lose out on 30% to 40%

of their targeted bonuses in 2014.

2. ACADIA's Stock Options Plan Incentivized the Individual Defendants to Misrepresent the Timing of the NDA Filing

123. The stock options awards constituted a massive portion,

approximately 85%, of the Individual Defendants' annual compensation, causing

the Individual Defendants to be highly motivated to increase the value of the

Company's common stock during the Class Period. As the Company itself

admitted, the stock option awards were a valuable tool to motivate Company

executives to drive up the price of ACADIA' s stock because the awards are only

valuable to the executives when the stock price remains high. See id. at 45.

Therefore, Defendants artificially inflated the price of ACADIA stock during the

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Class Period by misrepresenting to the public that the NDA was on track for

submission by March 31, 2015, when in fact, the NDA was far behind schedule—

a second time! The Individual Defendants, along with numerous ACADIA

directors, then took advantage of this price inflation by selling millions of dollars

of ACADIA common stock, as set forth below.

D. Insider Trading

124. According to Forms 4 filed with the SEC by ACADIA insiders, the

I Individual Defendants and members of ACADIA' s Board of Directors took

advantage of their inside information regarding the Company's inability to file the

NDA by March 31, 2015 and made stock sales that were highly suspicious in both

timing and amount as follows:

a) Hacksell: On November 24, 2014, Hacksell sold 30,000 shares of

common stock at $29.28 per share for proceeds of $878,397 and a

profit of $818,397.8 On December 15, 2014, Hacksell sold 30,000

shares of common stock at $31.00 per share for proceeds of $929,916

and a profit of $869,916. On January 14, 2015, Hacksell sold 30,000

shares of common stock at $33.98 per share for proceeds of

$1,019,430 and a profit of $959,430. Finally, on February 17, 2015,

Hacksell sold 30,000 shares of common stock at $34.30 per share for

proceeds of $1,028,868 and a profit of $982,368. These Class Period

sales resulted in total proceeds of $3,856,611 and a total profit of

$3,630,111 in four short months.

b) Mills: On November 26, 2014, Mills sold 25,000 shares of common

stock at $30.09 per share for total proceeds and a profit of $752,265.

This sale was not conducted according to any pre-established pattern

8 For each sale, after Hacksell exercised his stock options, he gifted the shares to his family trust which in turn sold the shares.

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as Mills only sold common stock on two occasions in 2013 prior to

this sale. Mills has also not sold a single share of ACADIA common

stock since the Class Period ended.

C)

Director Michael Borer: On November 26, 2014, Borer sold 15,000


and a profit of $285,765. On January 15, 2015, Borer sold 27,973


and a profit of $593,174. These Class Period sales resulted in total

proceeds of $1,374,531 and a total profit of $878,939 in four months,

constituted 20% of Borer's holdings as of February 14, 2015, and

resulted in a profit 20 times greater than his annual director salary.

The sales were not conducted according to any pre-established pattern

as Borer had never sold a single share of ACADIA stock prior to the

Class Period. Borer has also not sold a single share of stock since the

Class Period ended.

d)

Director Torsten Rasmussen: On January 13, 2015, Rasmussen sold

11,905 shares of common stock at $35.00 per share for proceeds of

$416,676 and a profit of $285,009. On February 17, 2015, Rasmussen

sold 19,847 shares of common stock at $35.05 per share for proceeds

of $695,544 and a profit of $598,343. These Class Period sales

resulted in total proceeds of $1,112,220 and a total profit of $833,352

in four months, constituted 40% of Rasmussen's holdings as of

February 14, 2015, and resulted in a profit 16 times greater than his

annual director salary. These sales were also not conducted according

to any pre-established pattern and Rasmussen has not sold a single

share of ACADIA stock since the Class Period ended.



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e)

Director Mary Ann Gray: On December 15, 2014, Gray sold 12,250


and a profit of $273,035. On January 13, 2015, Gray sold 4,250


and a profit of $102,000. These Class Period sales resulted in total

proceeds of $537,565 and a total profit of $375,035 in four months.

These sales were not conducted according to any pre-established

pattern as Gray only sold shares of ACADIA stock on one other

occasion prior to the beginning of the Class Period. Gray has also not

sold a single share since the Class Period ended.

125. While Defendants were repeatedly insisting to the public that the

NDA was on track for submission by March 31, 2015, the Individual Defendants

and insiders Borer, Rasmussen, and Gray, were selling ACADIA stock in record

numbers for combined proceeds of $7,633,192 and a combined profit of

$6,519,702 in four short months. Indeed, defendants Hacksell's and Mills' trades

were out of line with prior trading, as were those of directors Michael Borer,

Torsten Rasmussen, and Mary Ann Gray, as demonstrated by the chart below, as

the Class Period sales far exceeded the value of the sales in the preceding four

months:


Four \1onth, Prior to ( Ia P U I Itid

S2333ft)6

$1,972,996

0

SC)

$0

0

SC)

$0

0

SO

$0

0

SO

$0

lass Period

120000

S3K5ft61 1

$3,630,111

25,000

S722(c

$752,265

42,973

S1J745fl

$878,939

31,752

si1 11220

$883,352

16,500

$375,035


1 Insider I .% In

2 Uli Hacksell Sliarcs

3 Irocccd

4 Profits

Roger Mills Shares

Iro2ccd 6

Profits 7

Michael Borer Shares 8

Procccd

Profits

10 Torsten Rasmussen Shares

11 Prcccd

12 Profits

13 Mary Ann Gray Shares

14 Procccd

15 Profits

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17 E. Hacksell's Resignation

18

19 126. Furthermore, the timing of Hacksell' s resignation suggests that the

20 problems plaguing the NDA had been in place for a while. According to the

21 Company's Form 8-K filed with the SEC on March 11, 2015, the day the second

22 NDA delay was announced, Hacksell entered into an "executive employment

23 transition agreement." Pursuant to the agreement, Hacksell would serve as a

24 consultant for the Company for the next 18 months, "collecting $580,000, payable

25 in equal monthly installments over the consulting term." These terms suggest that

26 9 The four-month period prior to the Class Period begins on July 11, 27 2014 and ends on November 9, 2014.

58 CONSOLIDATED CLASS ACTION COMPLAINT

3:15-cv-00575-BTM-DHB


this agreement required some negotiation, and would not have been drafted and

agreed upon overnight and suggest that Hacksell was terminated, and that the plan

had been in the works for some time—meaning the Defendants knew of the

manufacturing deficiencies sooner than they had announced. Indeed, Hacksell

came out of "retirement" only three months later to join Glionova Therapeutics as

Chairman of the Board. See, Press Release, Glionova Therapeutics, Uli Hacksell,

Ph.D., Joins Glionova as Chairman of the Board (June 1, 2015).

F

Failure to Disclose Contracts with Third-Party Manufacturers

127 The Company disclosed in its SEC filings during the Class Period and

prior thereto that it entered into contracts with third-party manufacturers to produce

NUPLAZID for its clinical trials. See 2014 Form 10-K. ACADIA, however,

never filed a Form 8-K with the SEC disclosing these contracts. This is strange for

two reasons.

128. First, it is a seemingly needless violation of the SEC's reporting

requirements for material definitive contracts. The SEC requires that "[any

material definitive agreement of the registrant not made in the ordinary course of

the registrant's business must be disclosed under this Item 1.01." Under Item 1.01,

a "material definitive agreement" is one "that provide [s] obligations that are

material to and enforceable against the Company, or rights that are material to the

Company and enforceable by the Company against one or more parties to the

agreement." As ACADIA has repeatedly stated in its public filings, the Company

is "highly dependent" on the success of pimavanserin. Thus, any agreement for the

manufacture of the finished drug product or its components, would appear to fit the

criteria for a "material definitive agreement" that requires disclosure with the SEC

on Form 8-K. Indeed, manufacturing was so important to NUPLAZID's success

that the Company admitted that the Second Delay in submitting its NDA was

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necessary "to complete the preparation of systems to support commercial

manufacturing and supply and, in turn, to support the [FDA's] review of

NUPLAZID." The SEC has made clear that a failure to properly file a Form 8-K

may be considered prima facie evidence of a lack of sufficient disclosure controls.

Morrison & Foerster LLP, Edward M. Welch, Frequently Asked Questions About

Form 8-K, at 5 (2015), available at http://media.mofo.com/files/Uploads/Images/

FAQ-Form-8-K.pdf; see also SEC, Final Rule: Additional Form 8-K Disclosure

Requirements and Acceleration of Filing Date, at II. C.1 (Aug. 23, 2004)

(discussing SOX's creation of new item 1.01), available athttps://www.sec.gov/

mles/final/33-8400.htmflsecii; SEC, Division of Corporate Finance, Current Report

on Form 8k Frequently Asked Questions (Nov. 23, 2004) ("Registrants. . . should

ensure that they have implemented appropriate disclosure controls and procedures

in order to ensure [Form 8-K information] ... is brought to the attention of

management" and timely disclosed.), available at http ://www. see.gov/divisions/

corpfinlf6rm8kfaq.htm.

129. Second, it is strange that ACADIA did not file the third-party

manufacturing contracts that were allegedly in place during the Class Period but

filed other such contracts it entered into with third-party manufacturers before and

after the Class Period. For example, in 2009, ACADIA disclosed on a Form 8-K

filed with the SEC that it entered into an agreement with Biovail Laboratories

International SRL ("Biovail") pursuant to which Biovail would be responsible for

manufacturing and supplying pimavanserin in the U.S. and Canada. See Current

Report (Form 8-K) (May 1, 2009). On October 28, 2010, ACADIA disclosed on a

Form 8-K filed with the SEC that it entered into an agreement with Biovail

pursuant to which the Company regained its rights to develop and commercialize

pimavanserin in the U. S. and Canada. See Current Report (Form 8-K) (Oct. 28,

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2009). In August 2015, the Company filed with the SEC on Forms 8-K that it had

entered into manufacturing agreements with Patheon and BASF. Between October

2010 and August 2015, however, the Company did not disclose the identity of its

third-party manufacturers, let alone disclose any of its contracts with them on a

Form 8-K. Indeed, in response to a direct question by an analyst on the March 11,

2015 conference call about who the Company's third-party manufacturers are,

Davis stated, "[w]e have not disclosed the identity of those companies."

G. Rolling NDA Review

130 On September 2, 2014, the FDA granted NTJPLAZID breakthrough

therapy designation for the treatment of PDP. See Press Release, ACADIA,

ACADIA Pharmaceuticals Receives FDA Breakthrough Therapy Designation for

NIIPLAZIDTM (Pimavanserin) for Parkinson's Disease Psychosis (Sept. 2, 2014).

"The Breakthrough Therapy designation was created by the FDA to expedite the

development and review of drugs that are intended to treat serious or life-

threatening conditions." Id. A feature of NUPLAZID's breakthrough therapy

designation, however, is that it allows the sponsor to obtain rolling review of the

NDA for the drug. See FDA, Guidance for Industry, Expedited Programs for

Serious Conditions - Drugs and Biologics ("Expedited Guidance") (May 2014),

at 35. Through rolling review, sponsors can submit portions of their NDA to the

FDA for review before all portions of the NDA are complete. See id. In general,

the FDA accepts only a complete section of an NDA for review, "such as the entire

CMC section, toxicology section, or clinical section." Id. As Davis stated in the

March 11, 2015 conference call, the reason for the Second Delay was "to do

additional work to prepare our systems to support commercial-scale manufacturing

and supply." As these issues appear to concern only the CMC section of the NDA,

it is strange that the Company chose to delay its NDA a second time rather than

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1

seek rolling review from the FDA and submit the completed non-CMC sections of

131. After meeting with ACADIA management, Cowen & Co. reported the

Company's explanation for choosing not to file its NDA on a rolling basis in its

March 26, 2015 analyst report as follows: "ACAD is reserving the right to start a

rolling NDA, but believes initiating one may either trigger or start the clock on

an inspection even before all modules (even CMC) are submitted." ACADIA's

explanation, however, is inconsistent with the FDA's guidance on the subject. The

FDA has 60 days from the sponsor's submission of an NDA to determine whether

the application is sufficiently complete to file and review. See White Paper

Prescription Drug User Fee Act (PDUFA): Adding Resources and Improving

Performance in FDA Review of New Drug Applications, available at

http :Ilwww. fda.gov/Forindustry/UserFees/PrescriptionDrugUserFee/ucm 119253 .ht

m. If a sponsor submits its NDA on a rolling basis, the 60-day review period will

not start to run until the sponsor informs the FDA that a complete application (i.e.,

all sections of the NDA) has been submitted. See id. Accordingly, by submitting

the complete non-manufacturing sections of the NDA, the Company would not be

risking an inspection of its manufacturing facilities.

132. By choosing not to seek rolling review of its NDA, ACADIA insiders

had a chance to cash out before submitting the non-manufacturing sections of its

NDA and giving the FDA a chance to evaluate the drug's safety and efficacy.

Indeed, before the successful 020 Study, in late 2009, pimavanserin failed to

produce clinically significant results to prove treatment efficacy in the first Phase

III trial for PDP. See Press Release, ACADIA, ACADIA Pharmaceuticals

Announces Results from Phase III Trial of Pimavanserin in Parkinson's Disease

Psychosis (Sept. 1, 2009).

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In-House Experts Hired To "Bolster" the Company's "Internal Capabilities' t Were Already "on board"

On the March 11, 2015 conference call, Davis stated that the

Company took certain steps, "to ensure" that it was "on the right track going

forward." Those steps included hiring "additional in-house experts to bolster our

internal capabilities." Davis also stated that "with the assistance of this team, we

are working expeditiously to ensure that our manufacturing systems are ready."

When asked on the conference call whether those "in-house experts" were already

on board, Davis responded that they were "already on board." When the analyst

asked Davis "how long have they been on board?" Davis responded:

As we have moved through the last year, we have continued to build our capabilities and so as we have advanced on a number offronts, number of infrastructure fronts, we have continued to build out the capabilities and I would say that we are on track with where we need to be and expected to be.

The fact that the "in-house experts" were with the Company at that

point and had been working with the Company to ready the manufacturing

systems suggests that they were likely in place before Hacksell and Mills

stated that the Company was "on track" to submit the NDA for NUPLAZID

by March 31, 2015 two weeks prior.

CLASS ACTION ALLEGATIONS

134. Lead Plaintiffs bring this action pursuant to Rule 23(a) and 23(b)(3) of

the Federal Rules of Civil Procedure on behalf of themselves and a putative class

consisting of all persons or entities that purchased or otherwise acquired the

publicly traded common stock and/or call options of ACADIA in the United States

or on the NASDAQ Global Select Market at artificially inflated prices during the

Class Period, and who suffered damages as a result, seeking to pursue remedies

under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule lob-S

promulgated thereunder. Excluded from the Class are the Defendants named

H.

133



herein, members of their immediate families, any firm, trust, partnership,

corporation, officer, director or other individual or entity in which a Defendant has

a controlling interests or which is related to or affiliated with any of the

Defendants, and the legal representatives, heirs, successors-in-interest or assigns of

such excluded persons. Also excluded are those investors who purchased stock

during the Class Period but sold the shares prior to the corrective disclosures and

disclosure events set forth herein.

135. The members of the Class are so numerous that joinder of all

members is impracticable. While the exact number of Class members is unknown

to Lead Plaintiffs at this time and can only be ascertained through appropriate

discovery, Lead Plaintiffs believe that there are thousands of members in the

proposed class. Throughout the Class Period, ACADIA common stock and call

options were actively traded on the NASDAQ Global Select Market. As of

December 31, 2014, ACADIA had 100,047,331 shares of common stock

outstanding. See ACADIA, Definitive Proxy Statement (Form DEF 14A) (Apr.

29, 2015) at 20. Record owners and other members of the Class may be identified

from records maintained by ACADIA or its transfer agent and may be notified of

the pendency of this action by mail, using the form of notice similar to that

customarily used in securities class actions.

136. Lead Plaintiffs' claims are typical of the other members of the Class

I because Lead Plaintiffs and all of the Class members sustained damages that arose

out of the Defendants' unlawful conduct complained of herein.

137. Lead Plaintiffs will fairly and adequately protect the interests of the

I members of the Class, and Lead Plaintiffs have no interests that are contrary to, or

in conflict with, the interests of the Class members that they seek to represent.

Lead Plaintiffs have retained competent counsel experienced in class action

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litigation under the federal securities laws to ensure such protection and intends to

I prosecute this action vigorously.

138. The prosecution of separate actions by individual Class members

would create a risk of inconsistent and varying adjudications, which could

establish incompatible standards of conduct for Defendants. Questions of law and

fact common to members of the Class predominate over any questions that may

affect only individual members in that Defendants have acted on grounds generally

applicable to the entire Class. The questions of law and fact common to the Class

include, but are not limited to, the following:

a. whether Defendants' acts violated the federal securities laws as alleged

herein;

b. whether Defendants' publicly disseminated statements during the Class

Period omitted and/or misrepresented material facts;

c whether Defendants acted with scienter in omitting and/or

misrepresenting material facts;

d. whether the price of ACADIA common stock and call options was

artificially inflated during the Class Period as a result of the material

misrepresentations and omissions complained of herein;

whether the Individual Defendants were controlling persons as alleged

herein; and

f

whether members of the Class sustained damages and, if so, the proper

measure of such damages.

139 A class action is superior to other methods for the fair and efficient

I adjudication of this controversy since joinder of all members of the Class is

I impracticable. Furthermore, as the damages suffered by individual members of the

Class may be relatively small, the expense and burden of individual litigation make

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lit impossible for members of the Class to individually seek redress for wrongs

I done to them. There will be no difficulty in the management of this action as a

I class action.

LOSS CAUSATION

140. During the Class Period, as detailed herein, Defendants engaged in a

scheme to deceive the market and a course of conduct that artificially inflated

ACADIA's stock price and operated as a fraud or deceit on Class Period

purchasers of ACADIA common stock and call options by misrepresenting the

Company's business and prospects. During the Class Period, Defendants

misrepresented and concealed the true facts regarding the timing of its submission

of its NDA to the FDA. Later, however, as Defendants' prior misrepresentations,

omissions, and scheme were disclosed and became apparent to the market, the

price of ACADIA common stock and call options fell precipitously. As a result of

their purchases of ACADIA common stock and call options during the Class

Period at artificially inflated prices, Lead Plaintiffs and other Class Members

suffered damages as the truth was revealed.

141. Defendants' wrongful conduct, as alleged herein, directly and

proximately caused the damages suffered by Lead Plaintiffs and the Class.

Defendants' false and misleading statements and omissions in their SEC filings

and other public statements during the Class Period directly caused losses to Lead

Plaintiffs and the Class. On the strength of these statements, the Company's stock

price was artificially inflated to a Class period high of $45.88 per share on March

10, 2015. Those misrepresentations and omissions that were not immediately

followed by an upward movement in the Company's stock price sewed to maintain

the share price at artificially inflated levels by maintaining and supporting a false

positive perception of ACADIA's business, operations, performance, and

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prospects. The allegations herein suffice under a corrective disclosure or

I materialization of the risk theory of loss causation.

142. When the truth emerged regarding the Second Delay in the timing of

ACADIA' s submission of its NDA for NUPLAZID, the price of ACADIA' s stock

and call options declined as the market processed this previously undisclosed fact.

This disclosure removed a portion of the artificial inflation in the price of

ACADIA' s common stock and call options and directly and proximately caused

Lead Plaintiffs and other Class members to suffer damages. For example, on

March 11, 2015, when ACADIA announced inter a/ia that the NDA would not be

filed by March 31, 2015, ACADIA stock declined $9.94 per share to close at

$34.82 per share on March 12, 2015, a one-day decline of 22% on unusually high

volume of 15 million shares.

143. Until shortly before Lead Plaintiffs filed this Complaint, they were

unaware of the facts alleged herein and could not have reasonably discovered

Defendants' misrepresentations and omissions by the exercise of reasonable

diligence.

CONTROL PERSON LIABILITY

144. The Individual Defendants are liable as direct participants with

respect to the wrongs complained of herein. In addition, the Individual

Defendants, by reason of their status as senior executive officers, were "controlling

persons" within the meaning of Section 20(a) of the Exchange Act, and each had

the power and influence to cause the Company to engage in the unlawful conduct

complained of herein. Because of their positions of control, the Individual

Defendants were able to and did, directly or indirectly, control the conduct of

ACADIA's business and the disclosures made by ACADIA and themselves.

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145. Specifically, because of their positions within the Company, the

Individual Defendants possessed the power and authority to control the contents of

ACADIA's annual and quarterly reports, press releases, and presentations to

securities analysts, money and portfolio managers, and institutional investors, i.e.,

the market, including those containing the materially misleading statements and

omissions of material fact alleged herein. Each of the Individual Defendants, by

reason of his respective management position, had the ability and opportunity to

review copies of the Company's SEC filings, reports, press releases, and other

public statements alleged herein to be false and misleading, prior to, or shortly

after their issuance or to cause them to be corrected.

146. By virtue of their positions, the Individual Defendants had access to

material nonpublic information. Each of the Individual Defendants knew or

recklessly disregarded the fact that the adverse facts specified herein had not been

disclosed and were being concealed from the public, and that the positive

representations which were being made were then materially false and misleading.

ii; i a tate ixsx• u; u a r ti ti iun usu wi

147. At all relevant times, the market for ACADIA' s publicly traded

common stock and call options was an efficient market for the following reasons,

among others:

a. ACADIA' s common stock was listed and actively traded on the

NASDAQ Global Select Market (symbol ACAD), a highly efficient

market;

[I,

As a registered and regulated issuer of securities, ACADIA filed

periodic reports with the SEC, in addition to the frequent voluntary

dissemination of information;

RK 3:15-cv-00575-BTM-DHB 28 CONSOLIDATED CLASS ACTION COMPLAINT


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C

ACADIA regularly communicated with public investors through

established market communication mechanisms, including through

regular dissemination of press releases on the national circuits of

major newswire services and through other wide-ranging public

disclosures such as communications with the financial press and other

similar reporting services;

d. The market reacted to public information disseminated by ACADIA;

e. At least 7 analysts followed ACADIA' s business and wrote reports

which were publicly available and affected the public marketplace;

f. The material misrepresentations and omissions alleged herein would tend

to induce a reasonable investor to overvalue ACADIA' s stock; and

g. Without knowledge of the misrepresented or omitted facts, Lead

Plaintiffs and other members of the Class purchased or otherwise

acquired publicly traded ACADIA stock between the time that the

truth was revealed, during which time the price of ACADIA stock was

artificially inflated by Defendants' misrepresentations and omissions.

148. As a result of the above, the market for ACADIA securities promptly

digested current information with respect to the Company from all publicly

available sources and reflected such information in the common stock and call

options prices. The historical daily trading prices and volumes of ACADIA

publicly traded stock and call options are incorporated herein by reference. Under

these circumstances, all purchasers of ACADIA common stock during the Class

Period suffered similar injuries through their purchases of shares at prices which

were artificially inflated by Defendants' misrepresentations and omissions. Thus,

a presumption of reliance applies.


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THE AFFILIATED UTE PRESUMPTION

149. At all relevant times, Lead Plaintiffs and the Class reasonably relied

upon Defendants to disclose material information as required by law and in the

Company's SEC filings. Lead Plaintiffs and the Class would not have purchased

or otherwise acquired ACADIA common stock and/or call options at artificially

inflated prices if Defendants had disclosed all material information as required.

Thus, to the extent Defendants wrongfully failed to disclose material facts and

information concerning the timing of its submission of its NDA for NUPLAZID,

or otherwise omitted material facts and information, Lead Plaintiffs and the Class

are presumed to rely on Defendants' omissions as established by the Supreme

Court in Affiliated Ute Citizens v. U.S., 406 U.S. 128 (1972).

NO STATUTORY SAFE HARBOR

150. The safe harbor provisions for forward-looking statements under the

Private Securities Litigation Reform Act of 1995 are applicable only under certain

circumstances that do not apply to any of the materially false and misleading

statements and omissions alleged in this Complaint.

151. First, many of the identified false and misleading statements and

omissions herein are not forward-looking statements, but instead are statements of

current or historic fact.

152. Second, to the extent there were any forward-looking statements that

were identified as such at the time made, there were no meaningful cautionary

statements identifying important factors that could cause actual results to differ

materially from those in the purportedly forward-looking statements.

153. Third, such false and misleading statements were not accompanied by

cautionary language that was meaningful because any such warnings or "risk"

factors contained in, or incorporated by reference in, the relevant press release,



SEC filings, earnings class, or other public statements described herein were

general, "boilerplate" statements of risk that would affect any pharmaceutical

development company, and misleadingly contained no factual disclosure of any of

the specific details of the endemic problems affecting the Company during the

Class Period, or similar important factors that would give investors adequate notice

of such risks.

154. Fourth, to the extent there were any forward-looking statements that

were identified as such at the time made, Defendants are liable for those false and

misleading forward-looking statements because at the time each of those forward-

looking statements was made, the particular speaker knew that the particular

forward-looking statement was false, or, by reason of what the speaker failed to

note, was materially false and/or misleading, and/or that each such statement was

authorized and/or approved by a director and/or executive officer of ACADIA who

actually knew that each such statement was false or misleading when made.

CAUSES OF ACTION

COUNT I

(For Violations of Section 10(b) of the Exchange Act and Rule lob-S Against All Defendants)

155. Lead Plaintiffs re-allege each allegation above as if fully set forth

I herein.

156. This claim is brought under Section 10(b) of the Exchange Act, 15

U.S.C. §78j(b) and Rule lob-S promulgated thereunder by the SEC, 17 C.F.R. §

1240.1 Ob-S, against ACADIA and the Individual Defendants.

157. During the Class Period, Defendants violated Section 10(b) of the

Exchange Act and Rule lOb-S(b) promulgated thereunder by disseminating and/or

approving the false and misleading statements specified herein, including

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statements in SEC filings, presentations, and press releases, and on conference

calls concerning the timing of ACADIA' s submission of its NDA for NUPLAZID

to the FDA, whose truth they knowingly or recklessly disregarded when they failed

to disclose material facts necessary to make the statements made, in light of the

circumstances under which they were made, not false and misleading.

158. During the Class Period, Defendants violated Section 10(b) of the

Exchange Act and Rule lOb-5(a) & (c) promulgated thereunder by employing

devices, schemes, and artifices to defraud and engaging in acts, practices, and a

course of conduct that operated as a fraud or deceit upon Lead Plaintiffs and other

members of the Class in that Defendants concealed the manufacturing, supply, and

quality assurance issues that would prevent the Company from submitting its NDA

to the FDA by March 31, 2015 from the investing public.

159. Defendants, individually and in concert, directly and indirectly, by the

use, means, instrumentalities of interstate commerce and/or the mails, engaged and

participated in a continuous course of conduct that operated as a fraud and deceit

upon Lead Plaintiffs and the Class; made various false and/or misleading

statements of material facts and omitted to state material facts necessary to make

their statements made, in light of the circumstances in which they were made, not

misleading; made the above statements with actual knowledge of their false and

misleading nature or a severely reckless disregard for the truth -, and employed

devices and artifices to defraud in connection with the purchase or sale of

securities, which were intended to, and did (i) deceive the investing public,

including Lead Plaintiffs and the Class, regarding, among other things, the timing

of ACADIA's submission of its NDA for NUPLAZID; (ii) artificially inflate and

maintain the market price of ACADIA common stock and/or call options; and (iii)

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cause Lead Plaintiffs and other members of the Class to purchase ACADIA

common stock and call options at artificially inflated prices.

160. Defendant ACADIA is liable for the false and misleading statements

made by its officers in press releases, during conference calls, and at conferences

with investors and analysts, and for the acts, practices, and course of conduct

employed by its officers and agents that operated as a fraud or deceit, as alleged

above, under the principle of respondeat superior. The Individual Defendants, as

top executive officers and/or directors of the Company, are liable as direct

participants in the wrongs complained of herein. Through their positions of control

and authority as officers of the Company, each of the Individual Defendants was

able to and did control the content of the communications with the FDA and the

public statements disseminated by ACADIA. The Individual Defendants had

direct involvement in the daily business of the Company and participated in the

preparation and dissemination of their and ACADIA's false and misleading

statements in addition to their and ACADIA' s fraudulent scheme, as set forth

above.

161. As described above, Defendants acted with scienter throughout the

Class Period in that their conduct was undertaken knowingly and intentionally, or

in such an extremely reckless manner as to constitute willful deceit and fraud upon

Lead Plaintiffs and other members of the Class who purchased ACADIA common

stock and call options during the Class Period.

162. Lead Plaintiffs and the Class purchased ACADIA common stock and

call options without knowing that Defendants had misstated or omitted material

facts about, inter a/ia, the timing of the submission of the NDA for NUPLAZID.

Lead Plaintiffs and the Class would not have purchased ACADIA common stock

and call options at the prices they paid, or at all, if they had been aware that the

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market price had been artificially and fraudulently inflated by Defendants' false

and misleading statements and deceptive devices and acts. In purchasing the stock,

Lead Plaintiffs and the Class relied directly or indirectly on false and misleading

statements made by Defendants, and/or an absence of material adverse information

that was known to Defendants or recklessly disregarded by them but not disclosed

in Defendants' public statements. Lead Plaintiffs and the Class were damaged as a

result of their reliance on Defendants' false and misleading statements and

omissions of material facts.

163. Lead Plaintiffs and the Class are filing this action within two years

after discovery of the facts constituting the violation, including facts establishing

scienter and other elements of Lead Plaintiffs' claims, and within five years after

the violations with respect to the investments of the Lead Plaintiffs and the Class.

164. By virtue of the foregoing, Defendants have violated § 10(b) of the

I Exchange Act and Rule lob-S promulgated thereunder.

165. As a direct and proximate result of Defendants' wrongful conduct,

I statements and omissions, Lead Plaintiffs and the other members of the Class

suffered damages in connection with their purchases of ACADIA common stock

and call options during the Class Period.

COUNT II

(For Violations of Section 20(a) of the Exchange Act Against the Individual Defendants)

166. Lead Plaintiffs re-allege each allegation above is if fully set forth

I herein.

167. This Count is asserted against Defendants Hacksell, Davis, and Mills,

the Individual Defendants, for violations of Section 20(a) of the Exchange Act, 15

I U.S.C. §78t(a), on behalf of Lead Plaintiffs and all members of the Class.

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168. As alleged in detail above, ACADIA committed a primary violation

of Section 10(b) of the Exchange Act by knowingly and/or recklessly

disseminating materially false and misleading statements and/or omissions

throughout the Class Period as well as by participating in a scheme to conceal the

manufacturing, supply, and quality assurance issues which would ultimately

prevent ACADIA from submitting its NDA for NUPLAZID by March 31, 2015

from the investing public.

169. During their tenures as officers and directors of ACADIA, each of the

Individual Defendants was a controlling person of ACADIA within the meaning of

Section 20(a) of the Exchange Act. By reason of their positions of control and

authority as officers and/or directors of ACADIA, these Defendants had the power

and authority to cause ACADIA not to engage in the wrongful behavior

complained of herein. As set forth in detail above, the Individual Defendants

named in this Count were able to and did control, directly and indirectly, and exert

control over ACADIA, thereby causing the dissemination of the false and

misleading statements and omissions of material facts as alleged herein.

Therefore, the Individual Defendants are jointly and severally liable for the

Company's fraud, as alleged herein.

170. In their capacities as senior corporate officers of ACADIA, and as

more fully described above, the Individual Defendants had direct involvement in

the day-to-day operations of the Company and in its financial reporting functions.

Each of the Individual Defendants was also directly involved in providing false or

misleading information and signing and/or approving the false or misleading

statements disseminated by ACADIA during the Class Period. Further, as

described above, the Individual Defendants had direct involvement in the

presentation and/or manipulation of false or misleading statements including



within the Company's press releases and statements to the SEC. Thus, the

Individual Defendants knew or recklessly disregarded the fact that ACADIA's

representations were materially false and misleading and/or omitted material facts

when made. In so doing, the Individual Defendants did not act in good faith.

171. As alleged in detail above, the Individual Defendants controlled and

I managed ACADIA's overall business and controlled and/or possessed the

authority to control the contents of the Company's reports, press releases, and

presentations to securities analysts and, through them, the investing public.

172. By reason of their positions as officers of ACADIA, and more

specifically as controlling officers—as can be seen by their corresponding ability

to influence and control ACADIA—each of the Individual Defendants is a

"controlling person" within the meaning of Section 20(a) of the Exchange Act and

had the power and influence to direct the management and activities of the

Company and its employees, and to cause the Company to engage in the unlawful

conduct complained of herein. Because of their positions, the Individual

Defendants had access to adverse nonpublic information about the Company and

acted to conceal the same, or knowingly or recklessly authorized and approved the

concealment of the same. Moreover, each of the Individual Defendants was also

involved in providing false information and certifying and/or approving the false

and misleading statements disseminated by ACADIA during the Class Period.

Each of the Individual Defendants was provided with or had access to copies of

ACADIA's reports, press releases, public filings, and other statements alleged by

Lead Plaintiffs and the Class to be misleading prior to and/or shortly after these

statements were issued and the ability to prevent the issuance of the statements or

cause the statements to be corrected.

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173. By virtue of their positions as controlling persons of ACADIA and as

a result of their own aforementioned conduct, the Individual Defendants named in

this Count are liable pursuant to Section 20(a) of the Exchange Act, jointly and

severally with, and to the same extent as the Company is liable under Section 10(b)

of the Exchange Act and Rule lob-S promulgated thereunder, to Lead Plaintiffs

and the other members of the Class who purchased or otherwise acquired

ACADIA common stock and/or call options. Moreover, as detailed above, during

the Class Period the Individual Defendants sewed as officers of ACADIA and each

of these Defendants is culpable for the material misstatements and omissions made

by ACADIA, including such misstatements in the Company's press releases and

SEC filings.

174. As a direct and proximate result of the Individual Defendants'

conduct, Lead Plaintiffs and the other members of the Class suffered damages in

connection with their purchase of ACADIA common stock and/or call options.

PRAYER FOR RELIEF

WHEREFORE, Lead Plaintiffs on behalf of themselves and the Class, pray

for relief and judgment including:

A. Determining that Counts I and II of this action are a proper class

action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Lead

Plaintiffs' counsel as Class Counsel;

B. Awarding compensatory damages in favor of Lead Plaintiffs and the

other Class members against all Defendants, jointly and severally, for all damages

sustained as a result of Defendants' wrongdoing, in an amount to be determined at

trial, including pre-judgment and post-judgment interest, as allowed by law;

C. Awarding extraordinary, equitable and/or injunctive relief as

I permitted by law (including, but not limited to, rescission);



D. Awarding Lead Plaintiffs and the Class their costs and expenses

incurred in this action, including reasonable counsel fees and expert fees; and

E. Awarding such other and further relief as may be just and proper.

JURY TRIAL DEMANDED

Lead Plaintiffs hereby demand a trial by jury on all triable claims.

Dated: November 16, 2015 By: s/Richard W. Gonnello Richard W. Gonnello

Lubna Famqi (admitted pro hac vice) Richard W. Gonnello (admitted pro hac vice) Megan. M. Sullivan (admitted pro hac vice) Katherine M. Lenahan (admitted pro hac vice) FARUQI & FARUQI, LLP 369 Lexington Avenue, 10th Floor New York, NY 10017 Telephone: 212-983-9330 Facsimile: 212-983-9331

Email: lfamqifamqilaw.com rgonnelIoçfamqilaw. com msullivanfamqilaw. com klenahanfamqi1aw. com

David E. Bower SBN 119546 FARUOI & FARUQI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: 424-256-2884 Facsimile: 424-256-2885 Email: dbowerfamqilaw. com

Attorneys for Lead Plaintiffs Paul and Sharyn Levine

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27 VH


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CERTIFICATE OF SERVICE

I hereby certify that on November 16, 2015, I authorized the electronic filing

of the foregoing with the Clerk of the Court using the CIVI/ECF system which sent

notification of such filing to counsel of record.

By: s/ Richard W. Gonnello Richard W. (Jonnello

Attorney for Lead Plaintiffs Paul and Sharyn Levine

E-mail: rgonnellofamqilaw.com


INC., DLI HACKSELL and STEPHEN Defendants.securities.stanford.edu/filings-documents/1053/API... · 20 INC., DLI HACKSELL and STEPHEN R. DAVIS, 21 Defendants. 22 23 24 (captions continue

Documents