There may be NDA related news that could significantly increase the price target. For instance, the FDA could grant Acadia "Priority Review" status which would cut the timeline to approval considerably (6 months). The FDA will typically inform the company of a Priority Review designation within 60 days of receiving the NDA. Incidentally, the first 60 days is the filing review period and this is when the FDA will decide things like priority review. The official approval clock starts ticking at the end of this first 60 days. We could be talking about approval next summer if they get a priority review.
It's definitely a valid thought and one that I have also considered. Botox can be used for dystonia and spasticity relating to a number of CNS conditions. However, this isn't their specialty of course.
Having said this, Allergan was caught off-guard by Valeant and doesn't have a lot of time to mount a counterattack. What I read was that they were eyeing two M&A deals. The first has been discussed which is Salix. Salix makes sense for Allergan since they are both specialty pharma focused on highly selective areas. The second company hasn't been announced, but the way to get rid of Valeant is to make the deal more expensive and to use some of the cash on the balance sheet.
I don't think the fit is obvious, but they've had a long term relationship (which always helps) and I don't think any group would be considered stupid for bringing Pimavanserin into the pipeline. Allergan could even spin-off a separate entity focused on CNS with Botox as the anchor and Pimavanserin as the future.
This is all wild speculation, but I have to admit to considering the same exact possibility.
I of course was not holding TRGT, but I am troubled by the execution of this urinary incontinence trial. This isn't to point fingers or slam any employee. I just wonder why they didn't take this program through a small well-controlled Phase 2a proof of concept before wasting so much time/money on a huge Phase 2.
It will be interesting to see where the price goes.
I would agree with this. However, I rarely see biotech trade at cash because future burn will be taken into consideration. The problem is that the cash isn't stable cash that will hold..it's going to dwindle. However, the good thing with Targacept is that they are lean in terms of employees and they don't have any major cash burning programs. I think 3.00 to 3.50 is about right.
I don't believe they'll bring in a new program as Targacept is a beautiful candidate for a reverse merger. You have a shell...really good cash...a potential management team (though these teams are often replaced) and the AZ asset + the gastroparesis candidate (though very early and without value at this stage..it's still a liability). I would see off the nicotinic platform if possible and load the balance sheet with cash. I actually went through this when I owned Neotherapeutics way way back when and SPPI reversed into them. I held for a number of years and actually ended up making money. TRGT is probably a good bet at these levels, but I'm not playing it. I do have one concern..not sure how others feel. I'm paraphrasing but Hill said that the trial was scheduled to readout around 6/30 and that we should give or take a month. He then briefly mentioned that these trials don't tend to read out early. I was thinking we would see data around the end of June. We should hear next week, but I'm intrigued that it has taken the full amount of time for the results. I'm not sure if that's a good sign or a bad sign! Impossible to read into it but it's something to ponder anyway!
Definitely a great deal for Shire or Lilly. Keep in mind that Acadia's Chief Commercial Officer worked closely with both Prozac and Zyprexa. Both are of course Lilly drugs.
Shire needs a new horse after Adderall. Abbvie does have some interesting CNS assets.
J&J or Roche are both obvious choices also. So is AstraZeneca.
I agree about Allergan, but Allergan needs to hold off Biovail and they already have a collobation with Acadia. Definitely a long shot and not an obvious fit, but if they decide to enter CNS this would be a great way to do it. However, I prefer a company with an infrastructure in place. I also think a potential suitor will have an atypical antipsychotic in their back pocket as they can reformulate a 5HT2A/D2 atypical candidate with pimavanserin for a much improved product for schizophrenia. Lilly and J&J become very obvious on that front. Acadia already has data from a study with risperidone so J&J looks very good from that perspective. However, it stands to reason it would work with all the atypicals that cause serious weight gain. Zyprexa from Lilly definitely has that problem.
I think your price target is a bit low because we have progressed over the past 12 months. I thought $35 roughly one year ago. As you said, there would be funds coming in after the deal as well. There would need to be some contingent value rights if Pimavanserin A) gets to market (which is highly likely, IMO), B) pimvanserin shows efficacy in Alzheimer's psychosis (huge milestone if this happens should be due, C) some value for the pipeline and D) some type of sales milestones as Pimavanserin could be a mega-blockbuster. Of course, we are all seeing this is a somewhat black and white deal, but it's just as possible that a large pharma enters into a JV with Acadia that values Acadia much higher than it is today. There are a lot of pathways forward here and the price should go much higher if/when a value driving deal is completed. Do own DD and IMO
I agree. I was making a similar point in my recent post. Recent M&A actively isn't going to hurt either. Acadia could potentially become a defensive play for some of these groups to fend off unwanted M&A attempts (Allergan, Shire, AZ, etc).
Also, Acadia still hasn't named a CFO to replace Aasen. I find that beyond interesting. Maybe that changes soon, but to me it's an auspicious indication for now in terms of potential M&A interest. If an M&A attempt appears it will put a much better value on this stock.
Without a defined pathway in Europe it's not part of the picture right now. Once approved in the US it's going to be very easy to attract funds and/or partners (for Europe) on excellent terms. Also, this isn't like a me-too improved antipsychotic or antidepressant. When Pima hits the market it's going to be embraced by neurologists and psychiatrists alike. It won't take long for off-label prescribing. Revenues could be impressive early.
We need to start a discussion about the last time a potential CNS blockbuster with multi-indication potential was brought to market. It's not like this is treating one large indication...it has the potential to treat multiple large indications. All my opinion of course, but the start to any discussion is looking at the history of CNS and the history of approvals. When I think of Pima I find myself thinking risperidone, fluoxetine and gabapentin. Potential for off-label is massive.
aecooter33...I was thinking the exact same thing since BIND also didn't exercise their option in this deal. Could be a good buy right now.
It's not like the Amgen candidate was a clear cut winner. The problem may have been the drug. I'm looking forward to seeing how BIND performs when we're looking at reformulations of existing drugs. I don't own shares yet, but may buy next week. Looks like a good entry point.
Your style of investing is fine and valid, but it's not my style. I won't put words in your mouth, but I personally don't see it as two solid shots on goal. I see it as two very risky shots on goal. That most certainly doesn't mean they won't go in! It's just that the risk/reward (to me) isn't that great. The problem with the cash is that they're spending it...they're also committing it to future programs (diabetic gastroparesis) and those programs will eat the cash. That was what I didn't like about the last press release. I want them to return the cash to shareholders if they don't have success..that will stop a steep decline IMO.
It's hard to know the downside here....it could be $1, but I wouldn't be shocked if it was more like $1.50. Upside is equally difficult to gauge...success in one or both programs would take it up a lot most likely.
I suppose what this comes down to is that I'm not willing to risk anything on these pipeline candidates. That may turn out to be a painful mistake, but it's one I can live with.
Wish you luck with your investment. I hope it turns out good for you.
Great to hear from you. We definitely called the buyout of YMI and benefited accordingly.
I don't follow IDRA so can't give any comments. Sorry about that.
Acadia is perfectly setup for a buyout IMO. I know it's not what shareholders want, but you have to think that large pharma has a lot of interest. We'll see. I think Acadia has the shareholder support to fend off any weak attempts but a buyout offer would work wonders for the stock price even if thwarted. All my opinion of course.
I think the ticking clock is getting so loud for the shorts that they are going to go into desperation mode soon. There are a number of factors working against them here. The NDA filing is getting close and once filed we might get a priority review designation. However, the x-factor here in my opinion is that Acadia is sitting on a potential mega-blockbuster and they are not partnered. Meanwhile, M&A is swirling around the industry and especially on the larger pharma side. Not all of the companies being courted actually want to be acquired and one way to avoid being acquired is to grow through their own M&A efforts. Allergan , Astra-Zeneca and Shire have all discussed their own deal pursuits over the past several weeks/months. The obvious targets for these groups are companies that have marketed products generating signification revenue or smaller outfits sitting on potential blockbusters. I haven't heard Acadia mentioned specifically, but it's an obvious target from my perspective. That does not mean that Acadia wants to be taken out and I'm not sure that they do. However, the flavor of deals lately is more hostile and a $50 bid for Acadia will be nothing but good for shareholders and it would quite literally bury the shorts who are really stupid for shorting this. I'm on the side of others who want to see this play out due to the huge potential in Alzheimer's and for all the other potential indications. Based on method of action, we could be taking about all indications where psychosis is an issue such as PDP, ADP, schizophrenia and others such as lewy body dementia. Lewy body dementia isn't talked about much but this impact over one million people so not a small indications. And bipolar and depression are of course going to be explored.
The improved nighttime sleep and daytime wakefulness finding opens up another whole slew of indications where sleep is an issue.
In other words, Acadia is a nightmare for the shorts.
I've been around biotech investing and on the yahoo message boards of multiple companies for well over a decade now. Hidden motives are not my thing and I think this is the first time I've been called paranoid. I know why you're saying that, but it's simply not the case. Not reading between the lines is what will get you killed in this game. If you want to make money you need to know every detail about a company. I've been following Targacept since they went public and I know about all of their clinical failures. I would love to see them succeed, but they frankly have never come close. I personally don't believe that the Alzheimer's program can beat placebo and I'm not at all convinced that they will see efficacy in urinary incontinence.
When you have two huge readouts coming you tend to talk these up. Not even a mention of them in the press release. My argument is that TRGT should sell off the platform if these programs fail and should distribute the cash (and proceeds from any asset sale) to shareholders. I don't want to see them waste it on a platform that isn't panning. They can of course bring in a program from the outside, but I'm not crazy about that idea.
Anyway, let's see what happens. Anyone overly bullish here is crazy because there is no data to support such a stance.
All my opinion and do own dd.
I read the press release this morning but didn't have a chance to check the message board until tonight. I share your concern. I thought 6499 sounded very played up for a Phase I asset. The trial start is basically non-news and doesn't justify a press release IMO. It's what they said in the press release that holds the importance. Under the Targacept description there was no mention of 1734 or 5214 though they did vaguely mention the overall disease areas. I share your concern. It's just my opinion but I didn't like the way this press release read.
As always, I really like reading your perspective.
Okay, the big question. If all data is negative meaning overactive bladder and Alzheimer's where will the stock trade? It seems like a good buy here based on the cash. Downside seems limited. It reminds me a bit of Rigel.
Great post. Thanks for summarizing. July is indeed the month. As you pointed out, the pipeline is essentially valued at almost nothing. Shareholder pressure to liquidate the company may mount if July readouts are negative. What do you think? I don't think a Phase 2 gastroparesis study will be able to sustain them. I was at the CEO and Investor conference in Feb and an investor asked what the plan would be with negative readouts and I thought mgmt stumbled and bumbled on this point, but I can't see them moving ahead. I personally believe that July is do or die time for this management team. If any data is positive they earn the right to exist (or be sold on better terms) and if negative I can see this company being split up. There is no way the science is worth only $10-15M. I can see the science being worth a heck of a lot closer to $100M to large pharma which could give a 2x from current levels in a break up. Look forward to getting your thoughts.
EZ…thanks for the reply. I wouldn't say it's concern as much as just unusual. I get what you're saying from the SOX perspective and that may be enough to keep the audit committee happy. It won't last much longer though.
I see two scenarios:
1. They are down to final candidates and needed more time to make the final choice. Again, Uli has no credentials on the accounting side. It sounds like you may.
2. They are deep in an M&A process with terms sheets exchanged. If this is the case they don't want to rock the boat with the addition of a new CEO or provide him/her with a stock option plan.
Let's hope for an update later today.
By the way, good to talk to someone out of industry. I spent my career in public and private biotech companies.
EZ…it's still unusual even if allowed under Sarbanes. BODs are obligated to have a CFO in place for their own protection and protection of shareholders. Uli is not qualified to assume these responsibilities even if Sarbanes allows it. He won't be able to stay much longer. They will need to name someone very soon.