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Here's Why ACADIA Pharmaceuticals Dropped 15.2% in December

Maxx Chatsko, The Motley Fool

What happened

Shares of ACADIA Pharmaceuticals (NASDAQ: ACAD) fell over 15% last month, according to data provided by S&P Global Market Intelligence. The move lower was a bookend to a forgettable year for shareholders, who saw the stock lose 46% of its value in 2018. There wasn't any company-specific news in December, but a sharp sell-off of the broader stock market made it easy for Mr. Market to adjust share prices of struggling businesses. Unfortunately for investors, ACADIA Pharmaceuticals was an easy target after struggling mightily throughout the year.

So what

Most of the headwinds encountered by ACADIA last year were caused by the company's leading commercial drug, Nuplazid. It's the only treatment for Parkinson's disease psychosis approved by the Food and Drug Administration, and generated $164 million in revenue in the first nine months of 2018. But it also was the subject of a postmarket safety review following patient deaths.

A scientist in the lab with a disappointed look on his face.

Image source: Getty Images.

The FDA concluded that the drug's safety profile was consistent with that observed in clinical trials. Although some feared the negative publicity might harm the product's reputation among prescribing doctors despite that regulatory conclusion, Nuplazid crushed the criticism and generated a record $58.3 million in revenue during the third quarter of 2018. That helped the business more than double total revenue versus the year-ago period and reduce its operating loss from $219 million in the first nine months of 2017 to an operating loss of $180 million in the same period of 2018. 

Now what

ACADIA Pharmaceuticals has been a nauseatingly volatile stock in recent years -- the five-year performance is a loss of 23%, with plenty of spikes and drops along the way. But the business appears well positioned for sustainable growth. Nuplazid is growing rapidly, and the business is finally beginning to reduce its operating losses, which could enable it to fund operations without external capital raises in a few short years.

Considering the drug could have peak sales of $1 billion by 2021, this pharma stock could be poised for a big rebound in 2019 if sales figures continue their torrid ascension -- assuming the safety concerns really are behind it. 

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.