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Acadia Pharmaceuticals: Targeting A Strong Return By Year End

May 04, 2020 4:12 PM ETACADIA Pharmaceuticals Inc. (ACAD)7 Comments


  • After a huge rally in April, stocks finally saw some significant profit taking last week, leaving some good stocks with lower entry levels.
  • This includes Acadia Pharmaceuticals, whose stock lost some 15% on the week despite continued good prospects for Nuplazid.
  • We take a deeper look at Acadia below and how we have an easy strategy to post a 20% return even if the shares don't even move through year end.
  • I do much more than just articles at The Biotech Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

So few want to be rebels anymore. And out of those few, most, like myself, scare easily.”― Ray Bradbury

After a massive rally through most of April, which made it the best month for equities since 1987, the market succumbed to some profit taking late last week. Given stocks' huge rise over the past month even as major uncertainties around when COVID-19 will be contained as well as how fast the economy will "restart" are still present, Thursday's and Friday's sell-off is certainly understandable, if not overdue.

Fortunately, the late week decline also provided lower entry points for numerous attractive opportunities in small- and mid-cap biotech/biopharma equities. I continue to use almost exclusively simple covered call option strategies using just out of the money long dated call strikes to put new money to work in this volatile market.

Today, we highlight one such opportunity after providing a quick investment analysis on mid-cap name with a more advantageous risk/reward profile after an approximate 15% sell-off in the stock this week.

Company Overview:

Acadia Pharmaceuticals (NASDAQ:ACAD) is a San Diego-based "Tier 3" biopharma concern. Acadia focuses on the development and commercialization of small molecule drugs that address unmet medical needs in central nervous system disorders. The firm's primary asset is Nuplazid or pimavanserin for the treatment of hallucinations and delusions associated with Parkinson's disease psychosis for which the compound was approved by the FDA for in 2016. It's also developing pimavanserin as a treatment for dementia-related psychosis and as an adjunctive treatment for schizophrenia that are in Phase III clinical trials, and pimavanserin as an adjunctive treatment for major depressive disorder. ACAD currently sports a market cap of approximately $7 billion and is a large holding of noted biotech investors, the Baker Bros.

Fourth Quarter Results:

Source: Company Presentation

On Feb. 26, Acadia posted

Live Chat on The Biotech Forum continues to be very active with new trade and the lucrative covered call ideas available thanks to the spike in market volatility throughout the trading day. If you join the The Biotech Forum today by clicking HERE you will automatically get access to our model portfolio, Live Chat, investment archives and our next 'option play of the week' . This week it involves a trading idea similar to the strategy outlined above on ACADIA.  It is coming out early this week and is targeting a potential 40% return over the next six months.

This article was written by

Bret Jensen profile picture

Finding tomorrow's big winners in the lucrative biotech sector, The Biotech Forum focuses on proprietary, breaking research on promising biotech and biopharma stocks with significant potential for outsized alpha.  Our service offers a model 12 to 20 stock portfolio as well as Live Chat, weekly research and trade idea as well as market commentary and frequent portfolio updates.  

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Specializing in profiling high beta sectors, Bret Jensen founded and also manages The Biotech Forum, The Insiders Forum, and the Busted IPO Forum model portfolios. Finding “gems” in the biotech and small-cap stock sectors, these highly volatile spaces proven hugely successful have empowered Bret Jensen's own investing portfolio.

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Analyst’s Disclosure: I am/we are long ACAD. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

I sold my stake between $48-49.... my opinion based on the technical chart is that the stock has hit a short term high and will need some time to consolidate before the next stable leg up. Insider transactions are also waving a red flag although Insider selling history for this company has been a surprisingly weak predictor of poor stock performance.
Thank you so much for this wonderful analysis, I’m buying acacia
The swimwear or the tree?
Vitamanrocks1 profile picture
Make sure you get the symbol right.
Acacia doesn't have near the upside as Acadia.
Curious if saw the recent insider stock sales and have any concerns
Vitamanrocks1 profile picture
They probably got wind of an offering.
Love the drug and we are long until the end now, but management are gluttons for offerings.
Bet they do one in late August.
Yes, right, they don't need one.
They'll do one anyway.
That being said we see $80 by year end, and that's conservative
Eugene Capital Advisors profile picture
Not concerning.....looks like these sales were made to cover taxes from vesting of restricted stock options
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