ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)’ 1,100% gain makes it one of the best performing stocks in the market. This rally began after its Parkinson’s disease drug Pimavanserin produced a positive outcome in its Phase III trial.
In particular, Pimavanserin had no negative impact on motor function and significantly reduced psychotic episodes compared to placebo. The drug’s likelihood for approval is now all but a guarantee, and investors are buying like crazy.
Moreover, ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) does not have to complete another late-stage study, as previously expected. This fact has created much of the gains following its initial 150% pop in November 2012. Therefore, it is expected that Pimavanserin will be approved by early next year and then available in the market in late 2014 or early 2015.
In terms of upside, Pimavanserin’s expected sales for the Parkinson’s disease Psychosis indication is between $300 and $400 million annually. The real upside for Pimavanserin lies in off-label uses and its expanded use. Most believe that it will be used in schizophrenia, bipolar disorder, and other diseases where antipsychotics are necessary. Thus, ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is poised to benefit from a large $18 billion market, and many have projected that Pimavanserin’s label and off-label uses combined could generate sales north of $1 billion annually.
What To Do Next
As a long-term investment, I think ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is one of the best places to put money to work in the market. As a short-term investment, its stream of catalysts are running low.
Acadia has seen its large run-up because of how cheap it was prior to Pimavanserin’s data. Now, with a $1.25 billion market cap, the only catalyst remaining is its meeting with the FDA and the eventual launch.
While these two events are important, 16 months of inactivity and a lack of headlines can hurt a biotechnology stock. Also, during the launch and approval process, sometimes warnings and negative information is found that was previously undiscovered.
Thus, stocks that run higher before these events, often trade lower as all good news is already priced into the stock. Therefore, if you own ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) with gains of 300% plus, it might be wise to take some profits off the table – especially if you’re not planning to hold the stock for multiple years.
The Only Likely Catalyst
While the catalysts will be few and far between over the next 16 months, there is one possible catalyst remaining, and that is an acquisition.
Like I said, the antipsychotic market is massive, and one where most large pharma companies have drugs available. However, many of these antipsychotic drugs are being replaced with newer and better drugs, along with losing patent protection.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has full rights to Pimavanserin, and with it being an innovating drug with large potential sales, it seems logical that large pharma would show a considerable amount of interest. If in fact the company is for sale and the large pharma company has an antipsychotic segment.