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Why Acadia Pharmaceuticals Stock Perked Up in February

George Budwell, The Motley Fool

What happened

Acadia Pharmaceuticals (NASDAQ: ACAD), a mid-cap biopharma, continued its recent rebound last month as its stock gained a healthy 16.5%, according to data from S&P Global Market Intelligence. The drugmaker's shares perked up in late February after the release of its upbeat fourth-quarter and full-year earnings report. 

A businessman turning a red, downward pointing arrow upwards.

Image source: Getty Images.

So what

Acadia's stock collapsed last year as the result of a CNN report questioning the safety of its Parkinson's disease psychosis medication Nuplazid. Since the start of 2019, however, the stock has regained a big chunk of this lost ground, thanks to the Food and Drug Administration reaffirming Nuplazid's risk-to-reward profile last September. The big deal is that Nuplazid no longer appears to be at risk of being pulled from the market over safety issues. 

Now what

Can Acadia's stock fly even higher? The answer appears to be tied to the progress of the company's late-stage clinical pipeline. Acadia is slated to announce the top-line results for Nuplazid's late-stage schizophrenia trial by midyear. This schizophrenia study, in kind, will probably set the tone around the stock for the remainder of the year.

Investors are clearly expecting Nuplazid to branch out into multiple, high-value indications. As proof, the biopharma's shares already sport one of the richest valuations within its peer group at over 13 times this year's projected sales. The take-home point is that Acadia can arguably ill afford a clinical setback at this stage; otherwise, its top-shelf valuation may vanish in the blink of an eye.

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George Budwell 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.