Alluring Potential Of Acadia's Pimavanserin: First-In-Class, Next-Generation Antipsychotic

| About: ACADIA Pharmaceuticals (ACAD)
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ACADIA Pharmaceuticals (NASDAQ:ACAD) was incorporated in 1993 and is headquartered in San Diego, California. It discovered pimavanserin via their proprietary small molecule drug discovery platform. It has other product candidates in various stages of development, some with great promise of their own, but this article's focus is pimavanserin.

Physicians are uncomfortable, to say the least, prescribing currently available antipsychotics to elderly patients with dementia-related psychosis, such as Parkinson's Disease Psychosis (PDP) patients and Alzheimer's Disease Psychosis (ADP) patients. The FDA-mandated "black-box" warning required on all currently available antipsychotics explicitly warns of increased risk of death and states these medications are NOT approved for treating these patients. In spite of this, these medications are extensively prescribed for these conditions simply because the need, by both the patient and the family/care-giver, is so great.

If pimavanserin is approved for PDP, it will be the first antipsychotic to receive such approval, and I believe will be immediately embraced and extensively prescribed. I expect it to also be immediately, extensively prescribed for ADP, even while studies leading toward approval for that condition are still ongoing. Further, I expect it to also be immediately, extensively prescribed for other neurodegenerative disorders, as well as other neurological disorders, that the prescribing physician feels will benefit from usage of an antipsychotic.

Antipsychotics are extensively used off-label (for disorders other than those in which the FDA has approved their usage). Once on the market for any indication, any medication can be prescribed for any other indication the physician feels it appropriate. Antipsychotics are very widely prescribed even for non-psychotic disorders including autism spectrum disorders, OCD, anxiety disorders, aggression disorders, impulse control disorders, suicidality, agitation disorders, ADHD and dementia.

Antipsychotics are FDA approved for schizophrenia, bipolar disorder, other psychotic disorders, major depressive disorder and treatment resistant depression as an adjunct to antidepressants, irritability associated with autistic disorder, Tourette syndrome and severe childhood behavior disorders.

In 2007, ACADIA reported positive results from a Phase II clinical trial that demonstrated several advantages of co-therapy with pimavanserin and a low dose of risperidone (a blockbuster antipsychotic), to treat schizophrenia. 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. This study has been accepted for publication in the scientific journal Schizophrenia Research.

Initially, the second generation antipsychotics gained popularity because they were touted as causing fewer side effects than the first generation products. We now know the second generation products cause a plethora of serious side effects including severe weight gain which can lead to diabetes, fatigue, hypothyroidism, hyperprolactinemia, increased cholesterol and/or triglycerides, orthostatic hypotension, tardive dyskinesia, neuroleptic malignant syndrome, akathisia, parkinsonism, leukopenia, neutropenia, and agranulocytosis.

If pimavanserin proves to be safer, with fewer serious side effects, than currently available antipsychotics, I believe it will enjoy early adoption/utilization across a wide spectrum of both neurological and psychiatric disorders.

According to IMS Health, the most respected source for such data, 2011 sales of antipsychotics were $18.2B in the U.S., $28.4B globally (in their tracked countries), representing 9.4% growth over 2010.

Very importantly, per PM 360, 91% of those prescriptions in 2011 represented refills/continuing treatment. Antipsychotics, once started, are seldom discontinued, due to the chronic nature of the treated disorders.

ACADIA's stock price has been very strong ever since the company announced completion of enrollment in the -020 Study, with top-line results, widely expected to be positive, due by November. With only a $127M market capitalization and a $2.44 price per share, this stock could not only run up into the immediate catalyst, but enjoy blockbuster potential in the longer term.

Dr. Rajesh Patel has published an excellent article on ACADIA, making the point that if ACADIA enjoys a "pre-results" run-up comparable to their last one, the stock price will move up to $4.49 if no share dilution in the interim, $3.77 even if all extant warrants and options are fully exercised.

Dr. Praveen Jayarajan, a fellow physician practicing in Australia, has written an article on ACADIA, with exemplary scholarship, noting the company has "huge upside potential."

Jason Napodano, CFA, managing director & senior biotechnology analyst at Zacks Investment Research has written multiple articles, dating back to last year, about ACADIA, detailing why he expects positive results from the -020 Study.

There are, as always, numerous risks to thoroughly consider: first and foremost, negative results from the -020 Study, the need to confirm -020 Study results (if positive) with another Phase III study (the -021 Study), the existing ATM facility (up to $20M worth of stock through March 2015) as well as other possible capital raise/shareholder dilution actions, all the many inherent risks associated with a development stage/small-cap biotech company, and ultimate failure to obtain FDA approval for marketing.

ACADIA Pharmaceuticals website, under Pipeline - Pimavanserin has extensive details on the development of pimavanserin, the completed studies, the current studies and the outlook.

Disclosure: I am long ACAD. 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.