ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is a bio-pharmaceutical company that specializes in the innovation of small-molecule drugs that are used to treat complex neurological and Central Nervous System (CNS) disorders. The biotech firm is responsible for wonder drugs such as Pimavanserin, a drug that ACADIA is developing for the treatment of Parkinson’s disease Psychosis.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)’s stock has been massively bullish in the last one year, with current share price of around $18 being a whopping 1289% higher than it was one year ago (that’s close to 13 times higher than it was a year ago). In fact, ACADIA Pharmaceuticals’ stock has been rated the best performing NASDAQ-listed stock during the past year. The biotech firm’s release of positive data on the novel drug Pimavanserin, a neurological drug in the pipeline currently in the second phase of development that is being developed for treating Parkinson’s psychosis is, to a very large extent, responsible for the bullish run.
However, I believe that ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)’s stock is overrated and due for an imminent market correction. Expect the downward slide to continue in the coming months, the optimism surrounding Pimavanserin notwithstanding.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) reported a $6.1 million net loss, translating to $0.08 per common share, in the first quarter of 2013. The cash and cash equivalent for the biotech firm stood at $101.5 million, a slight drop from the $108 million recorded in Q4 2012. Revenue in the period amounted to $417,000 compared to the previous quarter’s $450,000. Revenue was derived from the firm’s collaboration with Allergen as well as Research and Development grants. General and administrative expenses soared to $2.2 million in the quarter from $1.7 million last quarter. $328,000 was used for stock-based compensation.
The firm expects to use $28 million-$32 million to fund operations this year. A huge chunk of these funds will go toward pre-commercial activities and development of Pimavanserin. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has had a lot to crow about lately, thanks to the huge promise of Pimavanserin in the treatment of Parkinson’s psychosis. Phase III trial results released recently have shown that Pimavanserin has considerable ability to reduce psychotic episodes in people suffering from Parkinson’s Disorder without any negative effects on motor function. The drug is expected to be approved by the FDA and could hit the market anywhere between late 2014-early 2015.
Catalysts driving the share price
Expected annual sales for Pimavanserin are $300 million-$400 million. The drug is not confined to the treatment of Parkinson’s Disorder alone. There are early indications that it might also prove effective against a number of other neurological disorders such as schizophrenia, bi-polar disorder, and other related disorders. Potential sales could, therefore, be well in excess of $1 billion per year.
Although the optimism surrounding Pimavanserin is partly responsible for the bullish run, the other big catalyst that has helped push the share price to those dizzying heights is the interest by Baker Brothers. Baker Brothers is a hedge fund that mainly focuses on biotechnology firms such as ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Baker Brothers had strong positions in Seattle Genetics, Inc. (NASDAQ:SGEN) and Pharmacyclics, Inc. (NASDAQ:PCYC) during their early stages.
Both firms went on to be blockbusters. Seattle, a biotechnology company, focuses on the development and commercialization of innovative monoclonal antibody-based cancer therapies. The company, which recently entered into a new Antibody-Drug Conjugate collaboration with Bayer, makes up 18% of Baker Brothers’ portfolio which is valued at $686 million.
Pharmacyclics, Inc. (NASDAQ:PCYC), on the other hand, is a clinical-stage biopharmaceutical company with its focus on development and commercialization of small-molecule drugs for the treatment of cancer and other immune-related health conditions. At the recent International Conference on Malignant Lymphoma held in Lugano,Switzerland, the company presented its Ibrutinib Monotherapy clinical trial data in patients with Waldenstrom’s Macroglobulinemia. Ibrutinib is a BTK inhibitor currently in the company’s clinical trials pipeline. Pharmacyclics makes up 23% of Baker Brothers’ portfolio and is valued at approximately $878.4 million.