Piper: ACADIA (ACAD - $5.12)
Outperform
Volatility: High
edward.a.tenthoff@pjc.com
Price Tgt -- $11.00
FY04E Rev -- $3.9
FY05E Rev -- $5.0
52 Week High: $7.50
52 Week Low: $4.95
Price Target: $11.00
Market Cap. (mil): $86.5
Shares Out (mil): 16.9
Book Value/Share: $2.27
Cash Per Share: $2.89
2Q:04 Results In Line With Expectations
* Yesterday, August 11, after the close, ACADIA reported its first quarterly results as a public company. Revenues of $1 million were in line with ourforecast. We look for revenues to remain at this level and project 2004 revenues of $3.9million.
* In the quarter, ACADIA reduced its R&D expenditures to $5.4 million, which was below our $6.3 million estimate, and
recorded income from the participation of preferred stock. As a result, ACADIA reported a net loss of $2.8million. Because the weighted average share count was only
6.6 million in the quarter, this loss translated into
($0.42) per share.
* As of the end of 2Q:04, ACADIA has cash of $48.8 million,
which we estimate should last through the end of 2005. We
expect ACADIA to raise additional capital in the future.
* We continue to believe that ACADIA is building a leading central nervous system (CNS) disorders franchise that could potentially offer breakthrough and blockbuster therapies.
* ACADIA's lead compound, ACP-104 is the major metabolite of clozapine, providing an established safety profile and a clinically validated mechanism of action. We look for ACADIA to initiate 4 Phase II trials of ACP-104 in the coming months and potentially advance the drug into Phase III trials in 2005.
* ACP-103 is a specific inverse agonist of the 5-HT2A receptor. ACADIA is evaluating whether ACP-103 reduces side effects caused by L-dopa therapy for Parkinson's disease in a Phase II trial that should be completed this year; we look for data in 1H:05. We also look for ACP-103 to advance into Phase II trials as an adjunctive therapy for schizophrenia.
* ACADIA has entered into 3 collaborations with Allergan.
We look for Allergan to advance two neuropathic pain drugs into the clinic this year, advancing one of these into Phase II trials in 2005, and potentially a drug for glaucoma (AC-262271) in the future.
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.
RISKS TO ACHIEVEMENT OF TARGET PRICE: Among the risks associated with shares of ACAD are those typical with all drug discovery companies including developmental, clinical, and regulatory risks, particularly in CNS. ACP-103 and ACP-104 could fail in clinical trials. ACADIA may not enter into new collaborations or achieve milestones in existing alliances. The Company will require additional funding. ACADIA could face future unforeseen litigation that could adversely impact business.
COMPANY DESCRIPTION: ACADIA Pharmaceuticals is a biopharmaceutical company located in San Diego developing novel small-molecule drugs to treat CNS disorders. The Company's lead drug is ACP-103 in Phase II trials for Parkinson's disease. ACADIA should also commence Phase II trials of ACP-103 and ACP-104 for schizophrenia soon.
Partner Allergan should advance two pain drugs into the clinic this year. |
