Full Phase III Results Send Acadia Higher

8:28:34 AM EDT, Friday, March 22, 2013 · by Brian L. Wilson / Bio-Wire

Investors have been very excited about Acadia Pharmaceuticals (NASDAQ: ACAD), which moved to a new high yesterday following the release of detailed Phase III trial data for its drug pmavanserin at the 65th American Academy of Neurology (AAN) annual meeting. After the move, Acadia has moved to a lofty $649 million valuation, which is 400% higher than it was in late 2012 prior to the initial release of Phase III results.

These results were especially encouraging after two previous clinical trials for pimavanserin that weren’t able to meet their primary endpoints despite some obvious signs of efficacy of the drug in the treatment of psychotic patients and a good safety and tolerability profile.

Pimavanserin is being developed for a number of indications including schizophrenia and Alzheimer’s Disease Psychosis (ADP), but the bulk of its valuation is currently based on its market prospects in the treatment of Parkinson’s Disease Psychosis (PDP). The PDP indication is smaller than the ADP indication, but significant unmet demand in PDP is leading investors to believe that Acadia could have major potential following a possible FDA approval of pimavanserin – perhaps in mid -2014.

The -020 study, which studied pimavanserin’s effects in the treatment of PDP, was surprisingly successful and triggered the major rally in ACAD that started in late November 2012. The pimavanserin arm was able to demonstrate statistically significant outperformance of the placebo arm as measured by the SAPS-PD (the Scale for Assessment of Positive Symptoms for Parkinson’s Disease) (p=.001) and with equally good results in motoric tolerability and an encouraging lack of adverse events and side effects.

The adverse events were generally mild to moderate in nature according to the company’s statements, with urinary tract infections (in about 13.5% of patients in the pimavanserin arm) and falls (in about 10.6% of the pim arm). While we did see more serious urinary tract infections in a few patients and psychotic disorder in 2 patients of the pimavanserin arm (with 0 in the placebo arm), the numbers aren’t indicative of pimavanserin causing any adverse events and the general consensus is that pimavanserin’s safety profile is quite good.

The trial also expanded on our knowledge of pimavanserin’s efficacy by providing more detailed figures, which included a secondary endpoint of the -020 trial which was based around assessment of patient outcomes using multiple Clinical Global Impression scales (CGI-S and CGI-I, plus a CGI-I responder) which essentially provided the same results that were derived from the SAPS scale but in a different manner.

While the market has developed some pretty high expectations for pimavanserin, investors should realize that the Parkinson’s indication could be extremely profitable for Acadia due to the sheer number of patients who have PDP that have no real treatment alternatives. I think peak prescription sales 300,000-400,000 for pimavanserin is reasonable in North America alone, which provides a substantial revenue base that will be more heavily determined by the drug’s pricing power.

Even more exciting for ACAD shareholders could be the Alzheimer’s indication, which is larger and incredibly lucrative for the same reasons that PDP is. The schizophrenia indication is also immense, although competition in this space is much more fierce.

While it’s become much more clear to the market after the -020 trial results were released that pimavanserin is a high-probability winner for PDP and ADP, it seems that that Acadia will have to be bought by a larger pharmaceutical company to more effectively market to the hundreds of thousands of patients that would be eligible for the PDP indication following a potential FDA approval. This would become a bigger factor if the drug received approval for the ADP indication.

Buying stocks that are surrounded by M&A speculation can significantly heighten investors’ risks due to the increased probability of disappointment, but I’d argue that Acadia’s market cap (mentioned earlier at $649 million) isn’t too daunting considering pimavanserin’s chances at becoming a blockbuster anti-psychotic drug.

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