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Why Acadia Pharmaceuticals Is Tanking Today

Brian Feroldi, The Motley Fool

What happened

Shares of Acadia Pharmaceuticals (NASDAQ: ACAD), a mid-cap biopharma focused on diseases of the central nervous system, had fallen 14% as of 11:01 a.m. EST on Tuesday. The sell-off is traceable to the release of disappointing phase 3 results from a clinical trial.

So what

Acadia shared top-line results from its phase 3 ENHANCE trial. This trial was designed to test its drug pimavanserin (Nuplazid) as a treatment for schizophrenia patients with persistent inadequate response to their current antipsychotic therapy.

Unfortunately, the results from the 396-patient trial showed that adding pimavanserin as an adjunctive treatment did not lead to a statistically significant improvement in psychotic symptoms. 

That's bummer news for investors and the medical community at large because there is currently no FDA-approved adjunctive treatment for schizophrenia.

Man with thumb pointed down

Image source: Getty Images.

Now what

Acadia has stated that it is still moving forward with its phase 2 ADVANCE study, which is evaluating pimavanserin as an adjunctive treatment for schizophrenia patients with predominantly negative symptoms. There's always a chance pimavanserin might work better in that particular schizophrenia indication, but the results from the ENHANCE trial shouldn't fill investors with hope.

Sales of Nuplazid for its approved indication continue to grow rapidly, but for Acadia to be a home run investment from here, it is going to need to win label expansion claims into other indications. The failure of the ENHANCE trial should cast doubts on Acadia's ability to do so, which is why I believe caution is warranted.

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Brian Feroldi 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.