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ACADIA Pharmaceuticals Inc. Message Board

  • big_pharma_coming big_pharma_coming Mar 7, 2014 10:08 AM Flag

    Piper raising ACAD target from $28 to $42 - Pipeline Progress Should Enhance Conviction in PDP This Year

    Piper raising ACAD target from $28 to $42 - Pipeline Progress Should Enhance Conviction in PDP This Year


    ACADIA Pharmaceuticals (ACAD) Overweight


    ACADIA recently reported 4Q13 results and provided pipeline updates, as well as completed an equity raise netting ~$197mn. Guidance for a "near YE" NDA filing for pimavanserin (pima') in PDP remain intact. Management indicated NDA preparatory activities, stability testing and drug-drug interaction studies are progressing well, and we believe these timelines may accelerate. ACADIA ended the year with $186mn. With the recent raise and despite anticipated expenses for establishing a US commercial infrastructure, we see current cash as sufficient to fund to profitability, contingent on our revenue projections being met.

    • ADP thoughts. The company is constructive on the conduct of the Alzheimer's dependent psychosis (ADP) Phase II study, however, will not provide enrollment updates (we suspect it may be ahead of schedule given the trial design and patientcohort). Based on our diligence on pima’s potential beyond PDP, we are moving to a DCF-based valuation (Exhibit 1 vs. prior sales multiple in Exhibit 2) of the PDP and ADP indications to better capture ACADIA's intrinsic value, resulting in an increase of price target to $42 from $28, while use in schizophrenia remains as upside to our model.
    • Measured progress. ACADIA provided updates to the pima' clinical program, with everything conservatively remaining on track to previously guided timelines. That said, we have enhanced conviction on the ability of this team to execute as a result of recent hiring of management with commercial experience. As a result of ongoing diligence on pima’ and the ADP study design, we are increasingly optimistic for the
    prospects in ADP, the company outlined some of the advantages

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    • Aren't they one of the underwriters?

    • yep, great, but shouldn't the stock be bouncing up a little?

      ACADIA is focused on neurological and psychiatric diseases.
      European filing, approval, and partnering in 2H14. We would also look for additional studies to start in schizophrenia. Options outlined on the call included a study with low dose atypical antipsychotic (recall pima' has a prior Phase II success in this indication with low dose risperidone), or possibly as a monotherapy. The ADP study should provide insights on potential to improve cognitive outcomes, which are currently an issue with atypical antipsychotics. Although we have seen earlier data in schizophrenia that we would characterize as provocative (see Meltzer HY, et al., Schizophr Res. 2012 Nov;141(2-3):144-52), use in schizophrenia as either a fixed dose combo or stand-alone drug to be administered with any atypical antipsychotic remains as upside to our model pending additional clarity on next steps forward with the clinical program.

      DCF models. We model sales and royalties for PDP and ADP through 2025 (Exhibits 3 and
      4) as the PDP treatment patent expires in 2026. However there is a pimavanserin composition patent issued in the U.S. that expires in mid-2027. Our PDP model remains unchanged from the prior version. For ADP, we model ~5.3mn and ~5.7mn Alzheimer's patients in the U.S. and Europe, respectively, in 2014. We project that 41% have psychosis or psychotic episodes (Am J Psychiatry. 2005 Nov; 162(11): 2022-30). Our peak revenues in 2025 are ~$700mn for PDP in the U.S., $170mn for PDP in Europe, ~3.2bn for ADP in the U.S., and ~$500mn for ADP in Europe. We discount PDP revenues in the U.S. at 20% given a limited amount of uncertainty for approval and commercialization, in our view. Our discount rate for PDP in Europe is 25%, given greater regulatory and commercial uncertainty, and for ADP we use 25% and 30% in the U.S. and Europe, respectively, to account for clinical risk in addition to regulatory and commercial risk. We discount costs at 15% due to the greater likelihood these costs are realized regardless of the outcome of the potential revenue generating programs. Any life-cycle extension efforts for pima’ that could emerge over the next 12-18 months remain as
      upside beyond the current IP-based duration of the franchise.

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