Acadia Investors Await Clinical Trial Results For Pimavanserin

| About: ACADIA Pharmaceuticals (ACAD)

Shares of Acadia Pharmaceuticals (ACAD) have recently given back a lot of the gains that were made earlier in the year - especially those from September, to bring total YTD gains to 99%.
With the gains made this year, ACAD has reached a market capitalization of $122 million. This jump in the valuation of the company is primarily based on the implied market potential of its flagship compound Pimavanserin, which is finishing phase III trials for the treatment of Parkinson's Disease Psychosis (PDP), and phase II trials for schizophrenia and Alzheimer's Disease Psychosis (ADP).

Acadia has two other compounds in the clinical development stage, called Adrenergic and Muscarinic (for the treatment of chronic pain and glaucoma, respectively) but since collaborator Allergan has the commercialization rights to these, Acadia is limited to milestone payments and royalty fees when/if these drugs reach the market.

Pimavanserin works as an inhibitor of a specific serotonin receptor known as 5-HT2A, which has been associated with the altered brain chemistry in patients experiencing psychosis in certain studies. Contemporary studies have also noticed suppression of 5-HT2A related activity with traditional antipsychotic medications, which implies that there is an obvious link between this specific serotonin receptor and psychosis. This is why Acadia sees potential for Pimavanserin in a variety of patients that experience psychosis. There are no other 5-HT2A inhibitors being marketed or in development at this point, although there are failed compounds that targeted 5-HT2A.

A lot of investors were discouraged at the results of Pimavanserin after it failed its first phase III trial in 2009 for Parkinson's Disease Psychosis, although there seems to be a renewed hope that the upcoming phase III results (which are due before the end of the month) will finally prove the compound's efficacy and allow the drug to increase significantly in value.

The headline results from 2009 implied that pimavanserin's Parkinson's Disease Psychosis program was in big trouble (which was reflected adequately in the enormous selloff that followed the initial results of the trial), but there is some hope that the upcoming trial results will have a different outcome. The original results (from 2009) did imply that the 40 mg pimavanserin arm did outperform the placebo arm by the efficacy measure that was used - the Scale for the Assessment of Positive Symptoms SAPS, but the improvement wasn't quite good enough to achieve a statistically significant p-value. While the trial did technically fail, the results weren't completely negative or useless. According to Acadia's statements, the company also adjusted their recent phase III pimavanserin PDP trial to give the drug a better chance at achieving statistically significant improvement versus the placebo arm:

"Overall we believe that the optimized -020 study design has enabled sites to enroll patients with the desired clinical profile and should significantly improve the likelihood of achieving a successful outcome." -- Roger Mills, Acadia Pharmaceuticals Q3 Earnings Conference Call

The phase III results that are due before the end of this month (November) will be from something that the company refers to as the "-020 study", although there are two others that will prove vital data towards pimavanserin's eventual NDA submission. Acadia is planning to put pimavanserin through a trial they're referring to as the "-021" study, which will use results from the -020 study to optimize the trial design and find the best way to provide favorable results for pimavanserin's efficacy profile in PDP treatment. Another trial, known as the -015 study, will continue to build the safety profile of pimavanserin as it progresses towards an NDA submission for PDP.

Although investors may still worry about the old phase III results that the company presented in 2009 (an event that Acadia still hasn't fully recovered from), there is enormous potential given that the drug can achieve FDA approval. With no approved treatments available for an estimated pool of 150,000-400,000 PDP patients (not including the rests of the ~1 million Americans that have Parkinson's disease), there is enormous market potential for this drug given the huge number of people that could benefit from an effective treatment. Even more exciting is the unmet demand in Alzheimer's Disease (the most common neurodegenerative disease in the population). If Pimavanserin can demonstrate efficacy in PDP treatment in the upcoming results from the -020 trial, long-term investors that haven't been following ACAD should give some attention to the stock for its appreciation potential as we wait for an NDA submission and potential FDA approval.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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