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ACADIA Pharmaceuticals Inc. (ACAD): FDA Throws This Stock a Juicy Bone

There goes the short-term bear thesis on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).

I had recommended staying away from the company for now because it looked too risky with a long wait before the company could complete its second phase 3 trial for pimavanserin in patients with Parkinson’s disease psychosis.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)

But after talking to the Food and Drug Administration, ACADIA said today that the agency has agreed that the current data is “sufficient to support the filing of a New Drug Application.” That doesn’t guarantee the FDA is going to approve the drug, but it’s certainly a positive sign.

The FDA generally requires at least two successful phase 3 trials, but will accept a single trial in certain instances when there’s an unmet need. There aren’t any drugs approved to treat Parkinson’s disease psychosis, although atypical antipsychotics such as Johnson & Johnson (NYSE:JNJ)‘s Risperdal, Eli Lilly & Co. (NYSE:LLY)‘s Zyprexa, Bristol Myers Squibb Co. (NYSE:BMY) Squibb‘s Abilify, and Pfizer Inc. (NYSE:PFE)‘s Geodon are used off label to treat Parkinson’s patients experiencing psychotic symptoms, which affects up to 60% of Parkinson’s patients.

Shares of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) are up more than 50% as I write this. That’s well deserved.

Not having to do the study should speed things up a little — ACADIA hadn’t even started the second phase 3 trial — but not by the full length of the trial. There are still drug-drug interaction studies and chemistry and manufacturing tests that need to be completed; the company doesn’t expect to file the marketing application until near the end of next year.

So, why are shares up so much? Not having to run a confirmatory trial reduces the risk substantially.

Pimavanserin produced solid data in its most recent trial. Patients taking the drug saw their SAPS-PD score, a measurement of hallucinations and delusions, drop by 5.79 points while scores for placebo patients only dropped 2.73 points. The difference was statistically significant.

But this wasn’t the first trial testing pimavanserin, or even the second. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) ran two previous trials, which both saw patients in the placebo group improve substantially based on the assessment scale. For the latest successful trial, the company modified the scale — that’s the PD in SAPS-PD — to include the nine items most relevant to patients with psychosis associated with Parkinson’s disease.

The modification clearly worked, but there are no guarantees that it could be repeated. Patients entering the confirmatory trial would know that the drug had succeeded, which could boost the scores of the placebo patients.

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