Is Acadia A Buy After Jumping Over 50%?

| About: ACADIA Pharmaceuticals (ACAD)
This article is now exclusive for PRO subscribers.

On April 11, 2013, shares of Acadia Pharmaceuticals Inc. (NASDAQ:ACAD) shot up over 50% after the market heard the news that the U.S. Food and Drug Administration [FDA] decided that the data from the company's Phase 3 clinical trial and other studies of the company's lead drug product candidate, Pimavanserin, would be sufficient to support the filing of a New Drug Application [NDA]. As a result, Acadia will not have to conduct a confirmatory Phase 3 trial that would be expensive and delay the release of the drug.

The future of Acadia is dependent upon Pimavanserin, an investigational drug that is in Phase 3 development as a potential first-in-class treatment for Parkinson's disease psychosis. Acadia scientists discovered pimavanserin, and the company holds worldwide rights to this new investigational drug.

Acadia's pipeline also includes clinical-stage programs for an alpha adreneregic agonist that is a drug candidate for chronic pain in Phase 2 clinical trials, as well as a mucarinic agonist for the treatment of glaucoma, which is Phase 1 trials. Acadia is developing these investigational drugs in collaboration with Allergan, Inc. (NYSE:AGN). The company also has two preclinical programs aimed at Parkinson's disease and other neurological disorders.


Pimavanserin is a small molecule that acts selectively as an antagonist/inverse agonist on serotonin 5-HT2A receptors. Pimavanserin, a tablet that is taken once a day, is in Phase 3 development as a potential first-in-class treatment for Parkinson's disease psychosis.

According to the National Parkinson's Foundation, about one million people in the United States and from four to six million people worldwide suffer from Parkinson's disease.

Parkinson's disease [PD] belongs to a group of conditions called motor system disorders, which are the result of the loss of dopamine-producing brain cells. The four primary symptoms of PD are tremor, or trembling in hands, arms, legs, jaw, and face; rigidity, or stiffness of the limbs and trunk; bradykinesia, or slowness of movement; and postural instability, or impaired balance and coordination. As these symptoms become more pronounced, patients may have difficulty walking, talking, or completing other simple tasks.

Parkinson's disease psychosis, or PDP, is a debilitating disorder that develops in up to 30% to 80% of patients with Parkinson's disease. PDP symptoms include visual hallucinations and delusions. PDP is associated with increased caregiver stress and often necessitates skilled nursing care.

Currently, there is no FDA-approved therapy to treat PDP. Atypical antipsychotics such as Johnson & Johnson's (NYSE:JNJ) Risperdal (risperidone), Eli Lilly's (NYSE:LLY) Zyprexa (olanzapine), Bristol-Myers Squibb's (NYSE:BMY) Abilify (aripiprazole), and Pfizer's (NYSE:PFE) Geodon (ziprasidone) are used off-label to treat Parkinson's patients. The off label use of aceytlcholinesterase inhibitors, such as Eisai 's (OTCPK:ESALF) and Pfizer's Aricept (donepezil) and Forest Laboratories' (NYSE:FRX) Namenda (memantine).is also common. Unfortunately, these drugs have side effects that may decrease motor function that is already impaired in Parkinson's disease patients. Since Pimavanserin does not seem to have a meaningful effect on motor function, the drug could become the drug of choice for PDP patients. Medications relieve motor symptoms by increasing dopamine levels in the brain. Unfortunately, elevated dopamine levels can trigger psychosis. There is a large unmet medical need for new therapies that will effectively treat PDP without compromising motor control in patients with Parkinson's disease.

On March 20, 2013, Acadia stocks increased over 25% after the results from the company's Phase 3 clinical trial with Pimavanserin in patients with Parkinson's disease psychosis was presented at the Emerging Science session of the American Academy of Neurology annual meeting. The analysis of the full data set from the study showed robust and consistent efficacy of Pimavanserin across a wide array of study measures and confirmed the positive top-line results that have been previously reported.

Jeffrey Cummings, M.D., Sc.D., Director of Cleveland Clinic Lou Ruvo Center for Brain Health stated:

The significant and consistent results observed across measures in the Phase 3 -020 Study are impressive and potentially very encouraging for Parkinson's patients who suffer from the psychosis frequently associated with this disease. Importantly, regardless of whether assessments were performed by independent blinded raters, site investigators or caregivers, clear benefits were observed and clinical measures were well aligned. The results of this study suggest that a selective, non-dopaminergic-based therapy has the potential to transform the standard of care by providing an effective, safe and well tolerated treatment for patients suffering from this large unmet medical need.

Consistent with previous studies, Pimavanserin was found to be safe and well-tolerated. Over 90% of the patients who completed the clinical phase of this trial elected to roll over into the ongoing open-label safety extension study. Patients were only eligible to participate in the extension study if the treating investigator also deemed them to be likely to benefit from continued treatment with Pimavanserin.

The Phase 3 trial, referred to as the -020 Study, was designed to evaluate the efficacy, tolerability and safety of Pimavanserin as a PDP treatment. In the study, 199 patients were randomized to receive either 40 mg of Pimavanserin or placebo once a day for six weeks. Patients also received stable doses of their existing anti-Parkinson's therapy throughout the study.

On July 9, 2012, Acadia scientists announced results from an experiment with mice that indicated that Pimavanserin may also have therapeutic benefits in the treatment of Alzheimer's disease psychosis [ADP]. Results of these studies were published in Behavioural Pharmacology.

As with PDP, there is a major unmet medical need for safe and effective ADP drugs. Physicians often resort to off-label use of antipsychotic medications in patients with ADP despite their association with increased mortality and potential worsening of cognitive disturbances.

Alzheimer's disease is a neurodegenerative disorder characterized by progressive deterioration in cognitive functioning, memory abnormalities, and a host of behavioral and neuropsychiatric symptoms.

According to the Alzheimer's Association, over five million people in the United States are living with Alzheimer's disease. An estimated 25% to 50% of Alzheimer's patients may develop ADP, which commonly consists of hallucinations and delusions. Patients with ADP share many common characteristics with patients with PDP. They are typically elderly and frail, and often exhibit similar psychiatric symptoms.

In March 2007, Acadia reported positive results from a Phase 2 clinical trial that demonstrated several advantages of co-therapy with Pimavanserin and a low dose of Risperidone. These advantages included enhanced efficacy comparable to that of a higher, standard dose of Risperidone, a faster onset of antipsychotic action, and an improved side effect profile, including significantly less weight gain compared to the standard dose of Risperidone. Acadia believes that combining Pimavanserin with a low dose of Risperidone, a commonly prescribed atypical antipsychotic drug, may result in enhanced efficacy and fewer side effects relative to existing treatment, thereby providing an improved therapy for patients with schizophrenia and, potentially, related psychiatric disorders.

Alpha Adrenergic Agonists

Acadia found that its novel alpha adrenergic agonists provided pain relief in a range of preclinical models, without the side effects of current pain therapies, including sedation and cardiovascular and respiratory effects.

Allergan has conducted several Phase 2 trials in this program, and has reported preliminary results, including positive proof-of-concept in a visceral pain trial in patients that had hypersensitivity of the esophagus, and efficacy signals in two chronic pain trials in the areas of fibromyalgia and irritable bowel syndrome. Allergan has announced that it is seeking a partner for the further development and commercialization of this program.

Muscarinic Agonist

Acadia scientists identified a subtype of the muscarinic receptors that controls intraocular pressure and discovered compounds that selectively activate this target. In preclinical models, this drug product candidate demonstrated a promising preclinical profile for the treatment of glaucoma. This Phase 1 program is being developed in a collaboration with Allergan.

Glaucoma is a chronic eye disease and is the second leading cause of blindness in the world. Loss of vision is caused by degeneration of the optic nerve, which is responsible for carrying images from the eye to the brain. A frequent symptom of glaucoma is increased fluid pressure within the eye, referred to as intraocular pressure. It is estimated that over 4 million people in the United States have glaucoma but only half of those know they have it.

Preclinical Programs

Acadia also has two preclinical programs that the company believes have the potential to treat Parkinson's disease and other neurological disorders.

In its ER-beta program, Acadia researchers discovered compounds that exhibit anti-inflammatory and neuroprotective properties in preclinical models and may have the ability to slow the progression of Parkinson's disease. These compounds also may address the symptoms of chronic, inflammatory and neuropathic pain while avoiding the side effects associated with activating ER-alpha receptors. Acadia's initial studies in the ER-beta program have been supported by grants from The Michael J. Fox Foundation and another grant from the National Institute of Neurological Disorders and Stroke.

On December 20, 2012, Acadia announced that the company would receive funding from Fast Forward, LLC, a not-for-profit organization established by the National Multiple Sclerosis Society, and EMD Serono, a subsidiary of Merck (NYSE:MRK). This funding will support Acadia research that is being conducted in collaboration with the University of California, Los Angeles (UCLA).This research is directed at using AC-186, Acadia's proprietary and selective estrogen receptor (ER)-beta agonist, as a new approach to the treatment of multiple sclerosis.

Acadia's second preclinical program comprises compounds that selectively activate Nurr1-RXR complexes and promote viability of dopamine-containing neurons. The company is conducting studies to examine the effects of these compounds on neuroprotection and neuroregeneration in preclinical models of Parkinson's disease. This program is funded by a separate grant from The Michael J. Fox Foundation.


On July 13, 2012, Acadia announced that it was discontinuing AM-831, a compound under development for schizophrenia in collaboration with Meiji Seika Pharma Co., Ltd.. AM-831 did not meet pre-determined criteria for further development in Phase I testing.


On March 12, 2013, the company announced its financial results for the fourth quarter and year ended December 31, 2012.

Acadia reported a net loss of $6.8 million, or $0.11 per common share, for the fourth quarter of 2012, compared to a net loss of $5.3 million, or $0.10 per common share, for the fourth quarter of 2011. For the year ended December 31, 2012, the company reported a net loss of $20.8 million, or $0.38 per common share, compared to a net loss of $22.8 million, or $0.44 per common share, for 2011.

At December 31, 2012, Acadia's cash, cash equivalents, and investment securities totaled $108 million compared to $31 million at December 31, 2011. This increase was primarily due to $98.2 million in net proceeds from sales of equity securities, including $80.5 million raised in an equity financing in December 2012 as well as earlier financings.

Revenues totaled $380,000 for the fourth quarter of 2012 compared to $588,000 for the fourth quarter of 2011, and were comprised of revenues from Acadia's collaborations with Allergan as well as its agreements with other parties. The decrease in revenues was primarily due to the termination of Acadia's collaboration with Meiji Seika Pharma Co., Ltd. in July 2012. This agreement contributed $199,000 of revenue during the fourth quarter of 2011.

The company expects to use between $26 million and $30 million of its cash resources to fund its operations this year.. These resources are expected to be used primarily for ongoing and planned development of Pimavanserin.

Conclusion: Hold

Most analysts recommend investing in Acadia.

On April 11, Piper Jaffray upgraded its rating of Acadia to "Overweight" from "Neutral," and placed a $19 price target on the stock. On March 28, 2013, The Street downgraded Acacia from "Hold" to Sell. On March 25, 2013, Roth Capital raised Acadia's price target to $15. The firm has a "Buy" rating on Acadia. On March 13, 2013, analysts at Ladenburg Thalmann raised their target price on shares of Acadia from $8.00 to $9.00. The firm has a "Buy" rating on the stock. In March, analysts at Cantor Fitzgerald initiated coverage on shares of Acadia with a "Buy" recommendation. On January 28, 2013, Cowen and Company started coverage of Acadia with an "Outperform" rating. On January 22, 2013. Jim Cramer ranked Acadia a "Buy." On November 27, 2012, Needham and Company rated Acadia a "Buy" with a $9 price target. On June 15, 2012, SunTrust, Robinson, Humphrey began coverage of Acadia with a $6 price target.

Prior to April 11 when Acadia's stock jumped over 50%, the stock reached a 52-week high of $8.81 on March 21,3012.Wait for a pullback when all the excitement fades a bit.

investors should consider the Pimavanserin's potential not only in PDP, but also in other indications such as Alzheimer's disease psychosis, and when administered with antipsychotics for the treatment of schizophrenia and other mental illnesses.

I see a bright future ahead for Acadia Pharmaceuticals.

Disclosure: I am long MRK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.