"If we would learn what the human race really is at bottom, we need only observe it in election times."
― Mark Twain
Acadia Pharmaceuticals (NASDAQ:ACAD) popped some 6% in late trading on Friday thanks to unconfirmed and very vague rumors of a possible buyout. The rumored acquirer was Biogen (NASDAQ:BIIB). So is this latest rumor just more "smoke" or does it contain some "fire"? We take a look on the likelihood of a rumored bid, both in the short and longer term. We also provide two cheap RB options in NFL Week 7 for those Fan Duel or Draft King players looking to get one more lineup in before this weekend's action commences.
To recap the past couple of months for those not intimately familiar with Acadia's story, the company had its first drug "Nuplazid" approved in the second quarter of this year. The drug is first approved treatment for the psychosis that affects 40% of patients with Parkinson's Disease. Parkinson's afflicts some one million people in the United States with some 60,000 new patients being diagnosed annually. Most analysts believe this indication alone will eventually rack up some $1 billion in annual peak sales. The compound is also in late stage testing to treat the same indication within the Alzheimer's population. Nuplazid just started to be marketed in late May and is wholly owned by Acadia.
Acadia is one of my favorite takeout candidates for myriad reasons. It has an important niche drug that could benefit greatly from an established sales force. In addition, the Baker Bros. own over 20% of the firm and their game plan is almost always to engineer a sale. In addition, Biogen is the most logical suitor. The company is spinning off its hemophilia business which should be worth $5 billion to $7 billion. The company has also publicly stated it wants to expand its footprint in neurology, making Acadia the perfect fit.
However, the factors do not seem to be in place to have these "rumors" to be any more than smoke at this time for myriad reasons.
1. I can not find a single thread of tangible buyout interest on Reuters, Bloomberg, AP, etc...at this time.
2. The stock would have popped more than six percent if there was some fire behind this scant chatter. Holders of Relypsa (NASDAQ:RLYP) might recall, the stock regularly shot up 15% to 30% anytime there was a substantial buyout rumor until ultimately it was taken out by Galencia in July for a 60% premium.
3. Biogen is in the process of searching for and putting in place a new CEO. I doubt it would green light a $4 billion to $5 billion purchase without the new leader's authorization.
4. Finally, critical Phase II trial data for Nuplazid as a possible treatment for the psychosis in Alzheimer's is due out by the end of the year. Success here would greatly expand the drug's potential peak sales. Neither Acadia or any acquirer probably would want to get into serious discussions about the value of the company in any acquisition until that data is available.
In conclusion, I hate to throw cold water on the buyout rumors that triggered a decent rally in Acadia on Friday. I also would love to be wrong. Unfortunately, my view that a purchase will probably not occur until the second quarter of 2017 remains my most likely scenario at this time.
Note: The 15 stock Insiders Forum portfolio continues to deliver superior performance. This offering was launched in late June aims to build, modify and maintain a 15 stock optimized portfolio of attractive small & mid-cap stocks insiders are currently buying across numerous industries including biotech. Our next recommendation will be issued before the market opens again on Monday.
As of the market close yesterday, the portfolio as a whole is up 17.92% compared to a slight gain of .44% our benchmark the Russell 2000 has produced. Given we want to grow the Insiders Forum community to at least 500 members by the end of the year, we are still giving away two-week free trials to this new service that has delivered stellar returns to date.
Last Minute Fantasy Football Advice:
There are some big time names in Week 7 in ideal match ups this week including wideouts Julio Jones ($9,200), AJ Green ($8,500) and Allen Robinson ($8,400) as well as running back Demarco Murray ($8,700) who has the porous Colts D at home while other top RBs are in unfavorable situations this week or are off on a bye week. In order to afford these heavy hitters, you are going to have to find some cheap options to shore up your salary cap elsewhere. Luckily two solid RB options are there for next to nothing.
Mike Gillisee ($5,300) - With "Shady" McCoy nursing a hamstring injury and a game-time decision, backup Gillisee could get additional carries or even start against the second worst run defense in the NFL on the road in Miami. He is more than a capable backup and has averaged over five and a half yards a carry and decent fantasy numbers spelling McCoy as part of the top running team in the NFL. An ideal match up and one that could produce huge numbers if McCoy doesn't start and decent ones if he does. This is especially true if the Bills have a lead late and rest their star running back, provided he even plays or doesn't reinjure himself early in the game.
Jacquizz Rogers ($5,600) - The journeyman ran the ball 30 times last week and was targeted a half dozen times out of the backfield. With Doug Martin and Charlie Sims still injured, look for Mr. Rogers to do well in San Francisco's neighborhood as Tampa Bay would like to have more balance in the offensive attack and mitigate the turnovers coming from their star, but error prone quarterback, Jamis Winston. The Niners also happen to have the only defense worse against the run than the Dolphins.
And with that, I bid all a relaxing Sunday before trading opens up again manana.
Thank You & Happy Hunting
Disclosure: I am/we are long ACAD.