Acadia Pharmaceuticals: A Mid-Cap Biotech Making Large Moves

Key Points

• Acadia shares jumped nearly 25% last week after it announced preliminary second quarter results and a pivotal acquisition.
• Management's guidance pushed Wall Street to raise its full-year revenue growth forecast to 30%.
• Acadia specializes in neuroscience and has two commercialized products plus prospects for more bullish pipeline developments.
• Friday's high volume gapper, promising future developments, and bullish chart patterns all point to an extended run. 

Shares of ACADIA Pharmaceuticals Inc. NASDAQ: ACAD jumped nearly 25% on Friday after the San Diego-based company announced preliminary second-quarter results and a pivotal acquisition. The gain was the biggest among all mid- and large cap stocks on the day and more than double that of the next closest winner.  

A neuroscience specialist, Acadia reported preliminary Q2 sales of its two commercialized products — Parkinson’s disease psychosis therapy Nuplazid and Rett syndrome treatment Daybue. Together the drugs generated $161 million to $167 million in revenue, which at the midpoint represents 22% year-over-year growth — a sharp improvement over the first quarter’s 3% growth. 

Better yet, management projected that Daybue sales will more than double from Q2 to Q3 and that Nuplazid sales will be $530 million to $545 million for 2023. The guidance pushed Wall Street to raise its full-year revenue growth forecast to 30% (note: this is a number Acadia achieved in 2020 when its stock reached an all-time high of $58.72).

Acadia also revealed that it acquired the rights to Daybue outside of North America following a successful April 2023 U.S. launch. Since Daybue is the only FDA-approved Rett syndrome drug on the market, international expansion will give the company a second fast-growing product to complement its lead Nuplazid platform. Gaining Daybue’s North American rights was part of a licensing agreement extension with Australia-based Neuren Pharmaceuticals.

In addition, Acadia obtained the global rights to Neuren’s NNZ-2591 candidate for both Rett syndrome and Fragile X syndrome. If the therapy is commercialized, this would help strengthen Acadia’s market leadership in Rett syndrome and help it enter a new market in Fragile X, the most common cause of autism. NNZ-2591 is also being evaluated by Neuren for four other rare neurodevelopmental syndromes.

Under the terms of the deal, Acadia will make a $100 million upfront payment to Neuren along with possible milestones and royalty payments over time. Milestone payments could be as much as $364 million. This may seem like a steep price to pay but if these payments are made, it means physician adoption of one or both of the drugs is strong.  

What Is Acadia’s Growth Pipeline?

Thursday’s release continued the steady news flow that has helped Acadia’s stock climb well off last summer’s $12.24 low. Last month, the company announced that its ACP-101 candidate for Prader-Willi syndrome will enter a Phase 3 study in the fourth quarter of 2023 following a positive FDA meeting.  In what’s become a hallmark of Acadia’s success, ACP-101 was acquired from Levo Therapeutics in June 2022.  

Acadia is also developing treatments for symptoms associated with schizophrenia, Alzheimer’s disease and various central nervous system disorders. Its Pimavanserin candidate for schizophrenia is currently in a Phase 3 study with results anticipated later this year. There is no FDA-approved therapy for negative symptoms of schizophrenia (NSS), so like Daybue, Pimavanserin could be a major breakthrough.

Is Acadia Stock in a Long-Term Uptrend?

Friday’s surge has Acadia on pace to string together its first four-month winning streak since 2019 — and yet it remains 45% below its record peak. This has some on the Street calling for more upside over the next 12 months. Since the bullish press release, five analysts have called the stock a Buy, with price targets ranging from $33 to $42. Two firms have reiterated Hold ratings.

Although Acadia may experience a profit-taking pullback near-term, Friday’s high volume gapper (and prospects for more bullish pipeline developments) bode well for a long-term uptrend. The 9.3 million shares traded were roughly six times the stock’s daily average. A pair of bullish chart patterns — a symmetrical continuation triangle and an upside breakout — that preceded Friday’s surge also support an extended run. 

In terms of valuation, Acadia is less expensive than most revenue-generating mid-cap biotechs. It trades at 10x trailing 12 months sales, whereas several peers have price-to-sales multiples well over 100x. And based on management’s bright outlook for 2023 revenue, Acadia’s 8x P/S ratio for 2023 looks even more compelling.