Piper: ACADIA (ACAD - $6.25)
Outperform
Volatility: High
edward.a.tenthoff@pjc.com
Price Tgt -- $11.00
FY04E Rev -- $3.9
Price: $6.25
52 Week High: $7.50
52 Week Low: $5.79
Shares Out (mil): 16.8
Market Cap. (mil): $105.0
Avg Daily Vol (000): NM
Book Value/Share: $3.05
Cash Per Share: $2.91
Paper Supports ACP-104 as Potential Treatment for Schizophrenia
KEY POINTS:
* This morning, ACADIA Pharmaceuticals announced a study presented in the journal, Psychopharmacology ,linking ACP-104 to improved cognition in the treatment of schizophrenia. ACP-104 (N-desmethlyclozapine, NDMC) is the major metabolite of clozapine that ACADIA is developing as a novel therapy for schizophrenia.
* Researchers from ACADIA,Vanderbilt and Emory examined
a library of 462 neuropsychiatric drugs to determine each one's antagonistic/agonistic effect on monoaminergic G-proteinreceptors.
* Clozapine was found to be a weak partial agonist and a
competitive antagonist to m1 receptors. Conversely, ACP-104
appears to be a potent agonist to all 5 muscarinic receptors.
It is believed that the clinical benefits from clozapine therapy is likely due to the muscarinic agonist activities of ACP-104.
* Further, it is hypothesized that the agonist actions of
ACP-104 are disrupted by the competitive receptor antagonism of clozapine at the m1 receptor. Thus, efficacy and improved measures of cognition are best predicted
by a high ACP-104/clozapine ratio.
* This is parallel to a previous study by Sur et al., published November 11, 2003 in PNAS that demonstrates NDMC to preferentially activate m1 receptors and potentially confer efficacy in treating Schizophrenia.
* We believe this data validates ACADIA's development of ACP-104 for the treatment of Schizophrenia. ACP-104 therapy can avoid the highly individual and variable process of clozapine metabolism resulting in a potentially more efficacious drug.
* We look for ACADIA to initiate 4 Phase II trials of ACP-104 in the coming months and to potentially advance the drug into Phase III trials in 2005. ACADIA should be announcing its 2Q:04 results in the coming weeks.
INVESTMENT RECOMMENDATION:
We are maintaining our Outperform rating and 12-month price target of $11 per share. We project ACADIA's enterprise value should should increase to $180 million based on its clinical pipeline, supporting a market cap of $200 million. We look for ACADIA to create value by conducting three Phase II trials, filing two INDs with Allergan, and potentially entering into new collaborations. |
